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POSB ManuRegular Payout better than CPF?

Thursday, September 15, 2016

Reader says...

I am a new reader to your blog and was awestruck by the tons of wisdom and knowledge contain in your blog. 

How I wish I could have come across your blog sooner.

I have a question which I wish to seek your advice. 

I chanced upon a POSB roadshow that is selling this product: ManuRegular Payout


As seen on the website, the relationship manager claimed that the total GUARANTEED (yes, he used that word) benefits is S$98,352. 

This is more than the premiums that I will pay (assuming if I sign up the plan). 

Moreover, the premiums I paid will be capital GUARANTEED as well! 

I will also be eligible for higher bonus if I put back the annual fixed cash benefits rather than withdrawing them.

I did a simple maths and compared it with putting the money in my CPF's SA. 

For a period of 13 years, with interest rate at 5%  and that I deposit an annual amount of $7834, the benefits I get for these 13 years is only S$36,038. 

This is much less than what the benefits that the bank GUARANTEE me through the above product.

Sensing all these to be too good to be true, I asked the manger what is the catch? 

He replied that the only catch is that I cannot surrender the policy within the next 15 years, but I will get back less than the premiums I paid. 

Furthermore, there is no "premium holiday" available and I will have to pay the premium every year without fail.

However, I feel that there is more to this than what the manager simply claims. 

As such, I wish to seek your wise advice. 

Is there anything I should watch out for? 

Should I buy this product?

P.S: I am a fresh graduate earning S$3500/month (before CPF).

AK says...

I clicked on the link you provided and read the footnotes:

"1. You can accumulate the Fixed Cash Benefits with Manulife at a non-guaranteed rate of 3% per annum (at the projected rate of return of 4.75% per annum). 

"The interest rate is subject to change with 30 days’ advance notice to policy owner."

See the words "non-guaranteed" and "projected"?

"4c. ... As bonus rates are not guaranteed, the actual payout may vary according to the future performance of the Participating Fund..."

Again and "actual payout may vary".

Remember, don't ask barbers if we need a haircut. 

No one cares more about our money than we do.

(Alamak! I am a DBS shareholder now. I should have kept quiet...)

Related post:
Sumiko Tan's expensive lesson.


Philip said...

On a non-related note, the ABC shop @ Bedok has brought in the jap pringles in the regular big size cans @ $1 each :PPP

Kevin said...

Hi AK and JJ,

You should ask the relationship manager how many percent commission does he or she stand to gain from this product? :P

By the way, DBS Bank and Manulife agreed on a 15-year regional distribution(which takes effect on Jan 1, 2016) deal whereby Manulife will pay DBS an initial payment of US$1.2 billion for this bancassurance partnership.

It looks like this endowment plan will fit nicely till the tail end of the 15-year deal to provide recurring income for Manulife.

(Alamak! I am a DBS shareholder now. I should have kept quiet...) <---- I think AK is hinting you to join the DBS retail investor family instead. :P

AK71 said...

Er.... ahem... archoo... sniff... -.-"

Sillyinvestor said...

Hmm... Why is blatant mis-selling still happening.

AK71 said...

Hi Mike,

Human beings have a short memory...

Art Collector in SG said...

Hi AK,

I'm also looking at endowment plan but after looking at 10+ companies here, I think non is comparable to CPF SA 4% risk free interest.
I'm actually planning to put cash into SA to get 4% and withdraw after 55 as an endowment plan. Asked CPF but they didn't answer me directly whether it's feasible. Any comment on such plan? Thanks.


AK71 said...

Hi Tony,

I think this blog post might be relevant to you:
He did CPF Top Ups but is denied lump sum payment.

MS Top Ups to the CPF-SA is for retirement funding and will go into your CPF-RA at age 55. This will then pay you a monthly income for life from age 65. Top Ups to the SA is not an endowment but an annuity.

If the Top Ups and interest earned should hit the prevailing MS or FRS, then, you can withdraw all the mandatory contributions and voluntary contributions you have made plus interest earned at age 55.

If you want to use the CPF as an endowment (or bond), then, you want to max out the annual contribution limit (annual mandatory + voluntary contributions = annual limit). You can withdraw anything in excess of the MS or FRS at age 55.

AK71 said...

"Top-up monies are set aside specifically for retirement needs and will be used to increase the recipient’s payout level and/or payout duration. Hence it cannot be used for other purposes such as education, investment, insurance premium payments, housing, pledging and/or exemption.

"If you had received top-ups before age 55, the top-ups and accrued interest in your Special Account (SA) will be transferred to your Retirement Account (RA) when you turn 55. Any excess, above the Full Retirement Sum applicable to you, can be withdrawn when you apply for withdrawal at age 55."

Source: CPF FAQ.

AK71 said...

Reader says...
can I ask your opinion on this?
my banker tried to sell me this (XXXX policy).
looks like a catch somewhere.
dbs is selling this on behalf of manulife.

AK says...
I dun like.

Readers says...
care to elaborate?

AK says...
Reminds me of this.
But maybe you should buy because I am DBS shareholder.
Bad AK! Bad AK! :p

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