Thanks for dropping by. I have decided to terminate my policy. $550 per year is not a big sum but still I will rather put the amount to better use. Also, I have more or less broken even.

Given the current situation now, I won’t be surprised that AIA will be reducing our bonuses, hence even 3.5% compounded till maturity might be hard to achieve.

Cheers!

To calculate the yield of your plan, you need the yearly premium, maturity value and years

Yearly premium means the amount going into the par fund, excluding any other riders fees ( except TPD)

Maturity value – you can request for an revised Benefit Illustration of your life office. The MV should be close

Using a financial calculator, you can work out the I, based on the input of -PMT, and FV (maturity value)

Unlike usual investment, you’re contributing yearly instead of a lump sum upfront. Calculation is different.

A 20 years endowment will give a yield of 3.5% compounded. It’s about there.

( Premium for riders are for protection only and not contributing to the par fund)

Yearly premium 550 for the next 5 years is not a big amount, It’ll be good to just maintain till maturity.

Can use your other spare cash, if any, for your investment.

I concur. The yield may be exceptionally high but this may be due to depressed stock prices. I will be looking at company that give out a constant stream of dividends even in bad times. Hence, I’m looking particularly at the 97 financial crisis and the recession of 85-87.

Cheers!

Thanks for your valuable input and advice.

Lion Investor,
I learnt something new from you – IRR. I calculated that my IRR for the next 5 yrs is between 1.42% – 5.25% based on the lowest and highest projected value at maturity.

LP,
This policy was bought by my parents as a form of savings for me. I already have my own form of savings every month and I guess they won’t mind if I surrender it because I’m going to use the bulk of it for my marriage.

Drizzt,
After calculating the IRR, it further reinforce my decision to terminate this policy. I’ll be way better off buying a high yield stock or just the index itself.

Adrian,
You are right. I should remove the riders. The rate of return after 15yrs should be 0.23%. If held till maturity, the average rate of return will be between 1.29%-1.73% base on the lowest and highest projected value at maturity. Still not a lot but at least I’m comforted that my policy has broke even.

I have plans to use a substantial part of the monies for marriage and invest the rest.

Cheers!

Noted that your premium seems to be different from 2007 onwards. Did you remove some Riders then? If yes, then your rate of returns should not include these riders.

Anyway, my opinion.
* If you do not have enough money for some purpose and need to take a loan, then I rather that you surrender it than to take a bank loan which can be 4-5%p.a

* If you do not need the money and want to invest for higher returns over the period of 3-5 yrs, I think its also okay to surrender the whole proceed and invest it. Your chance of getting a higher returns is very high.

But
* If you don’t really need the money and you are have no intention to grow this money for the next 5 years, I rather that you keep this in the Endowment Plan.

Its all your choice…

its like tradable endowments that people invest in the UK for 5-6% returns. you will only feel it at the last 5 years.

If it’s for savings, I’ll say it depends on what kind of saver you are. Some people need a disciplined saving plan so that they can commit a sum of money aside for future purposes. Some can put aside on their own.

Then it comes to how much returns you can get from your own investing? Well, a 0.7% pa might beat a negative returns anytime! hoho :)

Include the current cash value as the 1st cash flow.

Not the PIRR. Compare the IRR of the cash flows with the IRR you can achieve should you withdraw the money.

I don’t quite understand what you mean. How do I calculate the IRR?

In my annual statement, it is stated that my Current Projected Investment Rate of Return (PIRR) is 4.7% and projected yield at maturity date is 2.45%. So I will just look at beating the current PIRR of 4.7%?

The comparison of the 5-year returns is meaningless as it doesn’t take into account the current cash value.

It is actually quite simple to decide whether to hold or surrender.

The correct way is to re-work the IRR using the cash flow

T: -current surrender value
T+1: -550.80
T+2: -550.80
….
Maturity Date: Projected value at maturity

If you can beat the IRR, go for it. :)