I have extracted the above diagram off Great Eastern’s Family 3 page. When I was being introduced to this plan, it felt too good to be true. It is a whole life for my children, and a retirement plan for both myself and my children.
Let me put the numbers into perspective to see if this plan is worth the move, annual premium of $9,165 for a period of 10 years. Total invested capital is $91,650. Payout starts on 3rd year at $800 for 8 years before it increased 5 times more to $4,000 per annum.
How long does it take me to breakeven?
After paying premiums for 10 years, it would take another 21 years to breakeven. In another words, after 31st year, those are profits.
If your child didnt survive pass this milestone, there is still a death benefit of $100k. Hence no critical loss. However, let’s look at the brighter side of life, taking the average life expectancy of a Male to die at age 80. The policy will last as old as the child, hence, there will be a profit of 49 (80-31) years, accumulating the profits to $196k, taking a span of 80 years. Thereafter, a death benefit of $100k will be disbursed upon death.
Let’s break this numbers up and evaluate span
Limited Pay Whole life $100k sum assured with death benefit, TPD, CI and Early CI. Using a quote I get from NTUC Income for a newborn, it would cost $115.80 monthly premium for 20 years will sum up to $27,792.
Now we are left with $63,858 ($91,650 – $27,792) to do retirement. We have $63,858 to roll interest for 70 years (assuming 10 years premium paying of $63,858 for retirement). To get back $196k profits + $91,650 capital, it is about 2.175% pa compounding interest.
80 years is a bloody long time and 2.175% is not impossible to attain by yourself. There are other endowment / retirement plans which may have higher returns. However, this is nonetheless attractive for the early payout immediately on the 3rd year $800, following $4,000 on the 11th year.
If you do not agree with my comparison and analysis, please do comment below and let me know how would you have compared it.