Thursday, March 5, 2009

Allianz Power Saver Guaranteed 4% = 0.28%

note : updated content found at the bottom of this post 

Copy from Lowyat forum that :

Allianz Power Saver gives guaranteed 4% interest return. Every year invest certain amout of money on it and on the 5th year, the 4% return will be given out. Maturity of 30 years For example,

For RM100,000 sum asured (Every year payment of RM20,000. So total of RM100,000)

So in the 5th year, payment of RM4k will be given out for 26 years. So total collection of RM104,000 over the years.

Hmm wondering if this power saver is really the best in the market? For sure it is a lot better than the current FD rate.


If I understand it correctly, then it should be like below spreadsheet.



click here to view the spreedsheet


It is like you save into a Fix Deposit who pay you 0.28% interest rate ONLY !!

Far from 2.X % that is paid by most banks now ! Not to mention the calculation above is compounding yearly while real FD accounts compound monthly

Ofcourse they will pay you more money at the end of 30th year. That will boost up your effective interest rate but want to bet ? As shown in earlier posts in Capital guarantee plan ? and 2,400 get 800 = 33% ? Whatever the guaranteed maturity value is, the final effective rate will be less than 3%.

any kind of insurance guarantee return policy will provide you slightly less than FD return at that point of time !!

do correct any of the info here if mistake found, all confrontation welcome for the good of all.


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2009 03 13

Allianz personel showed up in the forum above and provided more info and complete picture.  First of all this is the full illustration provided :

One very important fact shared is that the life coverage in this plan is a Reducing Term Average which means the life coverage reduces as it approaches the end of 30th year.  I can safely assume the Sum Assured is $100,000 and as the SA reduces, the guarantee $4,000 pay out will eventually make up to the reduced Sum Assured.  So sum it all up, you will get back your $104,000 whether you die early or you don't die at all.

If you scroll to the right in the spreed sheet at the beginning of this article, this plan basically gives a 2.93% to 3.47% non guarantee return.  Although its NOT guarantee but looking at today's recession ( entry time ) and a period of 30 years ( exit time ), its almost no brainer this return can be easily paid out as promised.  So not exactly as FD but can be as safe as FD.

I hope this exercise benefits some people.  First of all, guarantee return is usually not able to be higher than Fix Deposit.  2nd of all, we cann't really assess a plan correctly until we get the full info and quotation.  As mentioned by this blog before, analyse the actual numbers, not the rate published by the promoter or sellers.

10 comments:

jason said...

can you tell how u get the number at 3rd column in the table?

Michael Tsen said...

click the link below the table should bring you to the spreadsheet then you can view all the formula etc.

it should be like this, simple annual rate return.

20,000 + 20,000 x 0.28% = 20,056

TheCurious said...

Can you please label the column ? What does each of them represent ?

Michael Tsen said...

edited

Anonymous said...

Hi ,
I get to know that power saver did give fix 4% + dividend. and the e4k given back on the 5th year is not deducted from the principal as what you counted in the excel spreadsheet above. Thus, at the end of 30 years, we will get back RM104k + RM270k++ (rolled up from the 100k principal + average of dividend payout every year)...what is your comment?

Michael Tsen said...

the guarantee 104k gives you an effective guarantee of 0.28% while the 270k return is using an assumption of 6% return, which is a number what a normal insurance company would use.

Relatively this plan (from Prudential I think) gives a similar guarantee of 0.75% while the 6% assumption is the same.

This post is not about how low allianz's return is. this post is about insurance companies claiming 4% guarantee rate while actually its only 0.28% effectively. They would always say their guarantee return alone is better than FD which is not.

Jimmy Lee said...

I was approached by Allianz agent about this scheme, it is not exactly what you have written here. 4% return means, after you put 100k, on the same year onwards, 4k is return to you every year while you still have 100k with them and you are entitle to get some small dividen every year because 5% of the remaining is invested in trust fund.

Michael Tsen said...

yes Jimmy, the 4k is guaranteed so that is equivalent to 0.28% rate return

your 100k capital is NOT guaranteed, and the dividen is also not guaranteed.

This article is talking about insurance companies promoting they are having higher than FD return plan with "guarantee", which is incorrect.

the guarantee they give is much more smaller than FD,

as for the overall return higher than FD is also correct, that is because you are taking more risk than FD, then ofcourse you should expect higher than FD return.

Andy_ said...

Hi Michael, sorry for digging up an old article of yours.
Kudos for the detail explanation, just want to enquire something.
Im recently approached from one of my friends who just trained and became agent for Allianz. He was telling me about this Allianz plan with guaranteed return with life coverage. I did ask for proper brouchere but was getting none. I was sceptical because for the guaranteed part, as Im actually into shares and funds prior to this, not familiar to this guaranteed plan.
I was approached more than 3 times for this plan and without the proper broucher and so on I cant actually analyze it, its called allianz powersaver. From reading this it seems Im better off having my money in FDs and another sum into higher risk unit trusts?

Maico Jen said...

I couldn't be sure about which plan you refer too. But in general most insurance comes with certain guarantee part and then certain estimated forecast part. The guarantee part could include the insurance pay out ie. if something (bad) happens you get paid certain amount. Then it could also include some 'return' part. The return from the guarantee part is usually very low. So yes if you are only looking at return part then it may not be attractive at all.

but insurance is still important as part of the personal finance; to cover the risk that you don't want to take on yourself.