Gain 263 Life Assurance

[nahkit]

The branch of Bangkok Bank where I bank has been trying to get me interested in a life assurance product called Gain 263.

Looking on the Bangkok Bank website they list Gain 245, 245 Plus, 255 and 500 but none of them exactly match the terms of the Gain 263 plan which runs for 10 years.

The terms are that I invest a lump sum each year for 3 years and the plan runs for 10 years.

For each year of the plan I'll receive a cash return and at the end of the 10 years I get paid a maturity sum.

I can cash it in at any time but would lose money if I cashed it in during the first 3 years.

There is a life coverage element to the plan which doesn't really interest me.

They gave me examples showing premium, cash return, life coverage, cash value and total benefit for surrender.

I asked the lady at the bank what the annualised interest rate would be if I kept the plan going for the full 10 years and she said it was 6%.

Ok, sounds great but when I try to calculate the annualised return myself I get a figure of 3%.

The products on the Bangkok Bank website whilst not mirroring this one are fairly similar and they claim annual rates of between 3-5%.

I'm wondering if the 5% rate is achieved by taken into account tax benefits for those who are employed and pay tax (I'm not).

As the payments and cash returns are irregular, I used an online calculator (which uses the Excel XIRR function) to arrive at my 3% interest figure.

The details were as follows:-

Payment premium of 208,800 per year for the first 3 years.

Cash return of 18,000 per year for first 3 years (paid at end if each year).

Cash return of 21,000 per year for next 3 years

Cash return of 24,000 per year for next 3 years

At the end of the 10th year a maturity benefit would be paid of 600,000.

Is there anyone out there who can tell me whether the 3% annual return I calculated is correct or is the 6% the bank quoted correct.

Using the online calculator http://www.free-online-calculator-use.com/xirr-calculator.html I calculated that even if I cashed in after three years I would have earned an annual rate of 2.28% which beats the Bangkok Bank fixed deposit rates.

Of course there is always the chance that rates go up over the next 10 years but given that I can cash in at any time I don't see that as too much of a problem.

[Pib]

Sounds like a Whole Life Insurance product....many say such an investment is a bad choice compared to many other investment products.

[nahkit]

Sounds like a Whole Life Insurance product....many say such an investment is a bad choice compared to many other investment products.

Well the first thing to determine is whether the investment is going to return 3% per annum or 6% which is the question I asked.

Until I know that, how can I known whether its a good or bad choice as an investment?

[Misty]

Sounds like a Whole Life Insurance product....many say such an investment is a bad choice compared to many other investment products.

Well the first thing to determine is whether the investment is going to return 3% per annum or 6% which is the question I asked.

Until I know that, how can I known whether its a good or bad choice as an investment?

OP, based on the figures you've posted I'd say your math is correct. Without a Thai tax benefit the 10 year product you've outlined is unlikely to make any sense. Ask the BBL saleslady to show you how she arrives at 6%.

For a more detailed discussion of the IRR calculation and these types of schemes, try googling "life insurance savings schemes for expats - not always what they seem" You should find at least one article online that could be helpful in making your decision.

[fletchsmile]

Yes, your estimate of 3% is closer to the mark.

The maximum tax relief you'd get is 35% on 100k for each year you make a contribution. (so max 35k tax reduction in a year - if your marginal tax rate was 35%%)

Even with that included the return wouldn't reach 6%, more like 5.5%

Edited October 27, 2015 by fletchsmile