What to take note of if you want to buy a savings plan in Singapore

Hi guys! My name is Russell, this is my first post! I really hope I am posting this in the right spot. I hope to reach as many expats as possible, as I believe many expats are looking for this information but find it hard to come by.

Many of my expat friends, have shared with me that it has been quite difficult to find information on saving plans, insurance plans, general information on financial matters, etc. So I hope to shed some light on these areas.

This post (Part 1); I will go through some basic information on saving plans (participating policies), how they work and who they are meant for.

I have met many expats that have purchased saving plans which do not suit them, and as a result they have canceled the plan and made some huge losses. That is why it is paramount that when choosing a savings plan you need proper financial planning.

Consider 3 factors when you look for your saving plans. Firstly would be the features of the plan. Everyone has different goals in life and need different features in their plans to suit their particular situation. At different points of times in your life you might realise you might need a different feature as well. There are hundreds of plans in Singapore and hundreds more features to compliment them.

Important Features of a plan to consider for expats:
1) Tenure of the plan? (When you want the plan to end)(drawing a timeline will be most beneficial to help you see when you need money during your pre retirement, retirement and post retirement)
2) How Long can you commit for premium payment? (How Long do you want to save for e.g. 5years,10years,20years)
3) Do you intend to stay in Singapore and if you dont intend to stay are you willing to continue payment for the premium payment term from overseas?
4) Liquidity of the plan (How easy it is to take out your savings)

*take note: generally there is a trade off between liquidity and returns OR risk and returns. E.g. higher liquidity = lower returns OR lower risk = lower returns
*saving plans are generally Low risked products
*also the longer you keep your money in a savings plan, the more returns you will receive (the power of compounding interest). This is why it is always good to start saving plans as early as possible.

From my chats with my expat clients (work permit, Spass, Epass and permanent residents), those intending to stay in Singapore and raise a family, it is essential for them to have saving plans to help with retirement and childrens education. BUT! which plans best suit them? When it comes to what features of a plan you need it would be best to discuss it with a financial advisor who does not just push his/her product but instead helps you see what your goals are and formulate a plan to reach those goals based on your needs.

Secondly would be the past performance of the participation fund. Why this is so important, is because it shows whether the company is capable of giving you high returns or at least the returns that they have projected to you. When you choose a savings plan, there are 2 values that companies are legally bound to provide and project to you, 3.25% and 4.75%. The plan will project surrender values of your policy based on the performance of the participation fund at 3.25% and 4.75%. So for example if the company you have chosen has an average participation fund performance of 3-4% over the past 10years, I would safely assume you should look at the projected values under the 3.25% participation fund performance. If it is 4-5% then you should look at the 4.75% values.

*Never mistake the 3.25% and 4.75% values to represent the amount of interest you will be getting back. Those percentages just represent that your participation fund has done that well, the company has not taken their cut of the profits yet. Your returns would depend on what kind of plan you took and its features.

Features of a plan are the first step in choosing the right plan for you. Now we must look at the company that provides the plan. All saving plans will be tied to a participation fund of its company, for example: All Prudential saving plans returns will depend on the performance of Prudentials participation fund. We must see whether the companys participation fund is doing well and whether we can trust that company in being able to deliver on the projected returns that they state. The picture attached shows the returns of all the biggest companies participation fund. The highlighted rectangles in blue shows the companies which have the highest returns.

Thirdly would be the buffer. This basically would be to show how financially stable or well off a companys participation fund is doing. Ok, so we have checked what features you need for your saving plan and which company can make the best returns. Now we must look at the capabilities of the company to pay out our returns (non-guaranteed bonuses). These graphs attached basically show whether the company has enough surplus from fund performance to pay out our non-guaranteed benefits. You can also consider it a sort of buffer that allows the company to pay out the non-guaranteed bonuses that they project to us, even when markets/participation funds dont do well for that year or a couple of years.

Summary
These 3 factors, features of a plan, participation fund performance and the companys buffer are what you should look out for in your saving plan. But ofcourse, a trusted knowledgeable financial consultant would help you to define your plan and your goals. Honestly very few people are able to have the foresight to plan for their retirement well, it is always good to ask for advise or at least get a second opinion.

Thanks for reading to the end, I hope I gave some value or insight to whomever you are. If I was unclear about anything please let me know.

I have a degree with honours in banking and wealth management therefore if you need my help in finding a plan that suits you, feel free to contact me. I will only give you honest advise.

Edit: the attachments were too big to post. If you would like to see the comparisons between each companies participation fund performance and each companies buffer please pm me. I will send you through email or WhatsApp. OR go to this site for the fund performances ‪http://www.straitstimes.com/business/ba ... ds-in-2018‬

And this site for the buffer ‪http://www.businesstimes.com.sg/compani ... rve-ratios‬