PRUSelect is an investment-linked plan (ILP) that allows policyholders to choose from varying portfolios with 4 different risk types ranging from low, low to medium, medium to high, and higher.
- Minimum investment amount of $350 per month
- Minimum investment period of 10 years
- Minimum age of the life insured is 1 year old
PRUSelect offers fixed premium payment terms of 10, 15 or 20 years that has to be decided when you apply for the policy.
Over the span of your payments, 100% of these regular premiums will be channelled into purchasing units from the fund of your choice.
Annually, there is a minimum amount of $4,200 and a maximum amount of $6,000 in regular premiums to be invested by the policyholder.
Initial Account VS Accumulation Units Account
Before we get confused about these jargons, let us go through a brief summary of what the Initial Account and Accumulation Account are for. Simply put, these are accounts where your premiums will be allocated in.
|Account Type||Fund units will be allocated here if:|
|Initial Account||Received during the first 24 months from the first premium due date of the policy|
|Accumulation Account||Received any time after 24th month|
A common occurrence in ILPs, the initial and accumulation account usually exists to calculate the fees and bonuses you will incur.
Failing to pay your regular premiums on time
Should the policyholder fail to pay regular premiums punctually after the Initial Contribution Period, there are 2 possible scenarios that could occur:
- If there are still units existing in the Accumulation Account – your policy will continue operating with basic benefits as before. However, any supplementary benefits will not be made available to your plan. You can continue paying for regular premiums anytime you are ready to again.
- If there are no units in the Accumulation Account – your policy will only continue operating for the next year, starting from when the last transaction was made in the account.
After this 12-month period, your existing policy will terminate if the policyholder persistently fails to pay for regular premiums. The surrender value will then be paid out to you, and the policy will not be able to be re-instated thereafter
Reduction in Regular Premiums
With PRUSelect, you can choose to decrease your regular premiums. However, you must ensure that your reduced premium is equivalent or more than the minimum stipulated amount decided by Prudential.
This amount will be disclosed at the time you apply for a reduction.
Do note that there will be an additional charge if you choose to reduce your regular premiums during the Initial Contribution Period.
The charge will be equivalent to the value of the Initial Account, multiplied by the percentage of premium reduced.
Top-up in Regular Premiums
Unfortunately, top-ups for this product are not allowed.
This can be done, but only if your Accumulation Account has a minimum value – which is undisclosed. Partial withdrawal cannot be done through the Initial Account.
Apart from having to withdraw a minimal amount of $1,000, you will also have to ensure that the remaining units in your account have a minimum $1,000 value after withdrawing.
This minimum withdrawal value will change over time, depending on Prudential’s terms. You will receive your withdrawal within 3 working days.
In the case where you decide you want to request for full surrender, you will receive the value of units in your accounts, as well as any premiums you have paid which has yet to be invested.
Any amounts owed will be deducted alongside the surrender charge as well.
You are allowed to switch any units from one PRUSelect Fund to another, in the event that you wish to. However, you will have to transfer a minimum amount during each fund switch which will be made known during your request.
Additionally, you have to ensure there are enough units in your Initial and Accumulation accounts, depending on which you are intending to switch out from.
While there are no charges for fund switches, unless specified, do note that you are not able to switch your units from Initial Account to Accumulation Account (and vice versa).
The remaining units in the fund that you are switching out from must also have a minimum amount. This minimum amount will be made known to you upon application.
With PRUSelect, there are mainly 2 different types of payouts for your coverage, depending on whether the life assured dies from an accidental or non-accidental cause.
To define an accidental death, Prudential refers to this as any unforeseen or involuntary event which is not caused by other factors such as sicknesses or diseases.
In this case, the beneficiary will receive either amount which is higher:
- The value of all the units in the policyholder’s Initial and Accumulation account or
- 105% of the total premiums paid – excluding any premiums which were included in supplementary benefits.
Typically, this will be due to a pre-existing condition that has shown symptoms that required treatment, diagnosis, or cure.
The beneficiary will then receive either amount which is higher:
- The value of all the units in the policyholder’s account or
- Total premiums paid by the policyholder, deducting any withdrawals and outstanding amounts (e.g. admin, sales-related and medical costs).
However, these payouts will only be valid in the event that the policyholder dies within 12 months from the cover start date. In the case of a suicide, the policy will be cancelled and total premiums will be refunded, without any additional payouts.
Early Stage Crisis Waiver
This add-on feature will be helpful if the policyholder is diagnosed with any early or intermediate stage medical conditions. It will guarantee a waiver of any future premiums of covered benefits for a period of time.
Crisis Waiver III
Should the policyholder be diagnosed with any of the 35 critical illnesses, the Crisis Waiver III will waive any future premiums of all the main policy and also covers some supplementary benefits.
The payer security aims to protect the policies of your loved ones (life insured), should there be a case where the policyholder dies or is diagnosed with critical illnesses or a disability.
Payer Security III
This waiver will guarantee that your child’s remaining premiums will be paid for until she/he turns 25, or until the end of the agreed premium payment term – whichever date is earlier.
Payer Security Plus
This rider, on the other hand, waives the remaining premiums of your loved ones until you are 85 years old, or until the end of the agreed premium payment – whichever date is earlier.
Early Payer Security
This waiver is helpful for a scenario whereby the policyholder receives a diagnosis of an early or intermediate stage medical condition.
In this case, PRUSelect will waive the premium payments for a period so the policyholder can concentrate on receiving treatment.
To reward you for committing to PRUSelect, Prudential will offer loyalty bonuses if you have paid your premiums punctually and consistently over a minimum duration. The amount payable can be seen below:
The PRUSelect invests in unit trusts. You can choose to invest in any of the 20 funds under PRUSelect Funds, which are advised by Mercer.
Depending on your choice of fund, there are varying fund management charges ranging from 0.5% to 1.85%, with low to high-risk portfolios. These fund charges will be deducted from your accounts on a pro-rated basis, depending on the unit’s pricing day.
Thankfully, PRUSelect invests directly into the funds, which means that your returns are already net of the fund management charges.
To keep updated with your portfolios, Prudential will also send you regular portfolio reports so you can go ahead to make any fund switches or adjustments to your investments, if you wish to.
Policyholders can either choose to:
- Invest all regular premiums in ONE PRUSelect Fund
- Invest part of regular premiums in 2 or more PRUSelect Funds
Either way, there is a regulation that policyholders should invest minimally 5% of their regular premiums into a PRUSelect fund of choice. Afterwhich, any investments made should be done in multiples of 5% of the premium.
|Type of Charge||Rate||Where Is It Deducted From||When Is It Deducted||Who does it involve|
|Policy Establishment Charge||4% p.a. of latest Initial Account value||Initial Account||Duration of Premium Payment Term||All Policyholders|
|Administration Charge||0.7% p.a. of latest Initial Account and Accumulation Account value||Initial and Accumulation Account||Duration of Premium Payment Term||All Policyholders|
|Policy Fee||$7 per month||Accumulation Account||After Initial Contribution Period||All Policyholders|
|Surrender Charge||A percentage of Initial Account value as at Unit Sale Date||See Appendix A above||Policyholders who have requested for surrender|
|Investment Charges||Varies for respective PruSelect Fund||
If you commit to the policy from the beginning until it matures, you will basically have to incur all the charges listed above other than the surrender charge.
- Policy Establishment Charge (4% from the initial account)
- Administrative Charge (0.7% from total value)
- Policy Fees – S$84 annually (S$7 per month)
This would mean the following fees for you.
First 2 policy years (ICP):
During premium payment term after ICP:
4.7% p.a. + S$84 annually
Assuming you invest the minimum $4,200 per annum, the $84 annual policy fees make it an additional 2% of fees you will incur. This means you’re paying up to 6.7% in fees every year for this policy.
However, note that the fees above are an overestimation as the policy establishment fee is only charged on your initial account.
How much will I receive upon maturity of the PRUSelect?
Assuming that you invest S$350 monthly for 20 years, the funds perform at 10% per annum, and you made no withdrawals; you can expect the below:
Monthly premium: S$350
Premium Payment Term: 20 years (240 months)
Annual Fund Performance: 10%
Annual Fees during ICP (2 years): 4.7%
Net Fund Performance (2 years): 5.3%
Investment Value (2 years): S$9,010.68
Annual Fees during payment term after ICP (18 years): S$84 + 4.7%
Net Fund Performance after ICP(18 years): 5.3% – (S$84 x 18)
Investment Value after ICP (18 years): S$117,210.33
Total Premiums paid after 20 years: S$84,000
Total Interest Earned: S$33,210.33
The loyalty bonus has not been included in our calculations above. However, the bonuses have a role in offsetting the fees in the above computation.
Are you a Prudential advisor and have the breakeven table for the PRUSelect? Share it with us for a more accurate calculation of returns!
My Take on the PRUSelect
A unique characteristic of PRUSelect that makes it different from other ILPs (except the PRUSelect Vantage) is that it only charges a surrender fee for the initial account.
Essentially, this is a much more modest surrender charge than on most ILPs where the entire account value is charged.
As far as flexibility is concerned, it is not as flexible as other ILPs, with no top-up premiums or increase premium amounts.
The death benefit is only limited to accidental death, and non-accidental death (sickness or illness) only covers you up to 12 months from the policy start date.
If necessary, you can take a premium holiday after the ICP if you need it. However, there is no official premium holiday for PRUSelect per se.
In the event you have funds in your Accumulation Account, your basic policy will continue to be active, since units from this account will be deducted to pay for the policy. However, your policy will be terminated within 12 months if no further funds are available.
That’s a good thing in my opinion. As long as you have sufficient funds in your accumulation account, you can stay on premium holiday indefinitely (as opposed to other ILPs’ limitations).
In terms of bonuses, the PRUSelect is much lower than policies like the AXA Pulsar, Manulife InvestReady Wealth II, and Tokio Marine GoClassic. Bonuses are important to offset much of your fees.
Speaking of fees, the PRUSelect Vantage has one of the highest fees during the ICP at 4.7% p.a.
This goes even higher at 4.7% p.a. + $7/month after the ICP.
In terms of percentages, $84 is 2% a year at the minimum investment amount ($350/month). As a result, your fees will increase to 6.7% after the ICP if you’re investing lower amounts of money.
The high fees have a significant impact on even an optimistic 10% annualised returns with only a 39.53% ROI.
Despite my thoughts on the PRUSelect, I don’t think it’s a bad product. In fact, I think it’s suitable for individuals who are not well-versed financially and have a Prudential agent whom they can trust.
In fact, if you’re looking to get an ILP from Prudential, maybe the Prudential PRUSelect Vantage is a better option for you.
I am not a financial advisor, so please do not take my preference as financial advice. We can help you find a reputable financial advisor if you need assistance in financial planning.