Introduction

The AIA Smart Wealth Builder (II) is a long-term participating endowment plan designed to help you grow your wealth and plan for the future. Whether you’re saving for a specific goal or creating a legacy for your loved ones, this policy could be the solution you’ve been seeking.

In this detailed review, we’ll delve into the policy’s criteria, general features, payout options, protection benefits, key features, fund performance, optional riders, and fees and charges. By the end, you’ll have a comprehensive understanding of the AIA Smart Wealth Builder (II) and be able to determine if it’s the right policy for you.

Policy Criteria

The AIA Smart Wealth Builder (II) offers flexible premium payment terms, including single premium, 5, 10, 15, or 20 years. The minimum premium is $1,500 per year, and there is no medical underwriting required. This means you can choose the premium payment term that suits your financial situation and goals without having to undergo a medical evaluation.

General Features

This policy has a long-term maturity period, with the plan maturing when the original insured person reaches the age of 125. This means that the policy has the potential to be passed down to the next generation, allowing you to create a legacy for your loved ones. The premium payment terms vary depending on the duration you choose, with a minimum premium of $1,500 per year for a 20-year premium payment term. It’s important to note that premiums for this policy are payable in SGD.

Premium Allocation

The AIA Smart Wealth Builder (II) invests your money in a participating fund managed by AIA’s investment arm. As of December 31, 2021, the target allocation of the fund is 64% bonds and 36% risky assets such as common stocks and private equity. This allocation may provide a balance between stability and growth potential, but remember that past performance is not indicative of future results.

Payout Options

Once the original insured person reaches the age of 125, the policy will mature, and you will receive a lump sum payout comprising the guaranteed cash value and any bonuses added to your basic policy that have not been surrendered.

However, any amounts owed to AIA will be deducted from this lump sum, and your policy will be terminated. If you require a lump sum of cash before the policy matures, you also have the option to surrender your policy fully or partially. The amount you receive will depend on the terms and conditions set by AIA.

Protection Benefits

The AIA Smart Wealth Builder (II) offers death benefit, total and permanent disability (TPD) benefit, and terminal illness benefit. The death benefit provides a lump sum payout to your loved ones or beneficiaries in the event of your passing.

The TPD benefit is immediately paid out if you experience a total and permanent disability as defined by the policy. The terminal illness benefit is paid out if you are diagnosed with an illness likely to lead to your passing within 12 months. It’s important to note that certain exclusions and conditions apply to these benefits, so be sure to review the policy documents for full details.

Key Features

One key feature is the capital guarantee, which provides assurance that your capital will be guaranteed after a certain number of policy years. For example, if you purchase the policy with a 15-year premium payment term, your capital will be guaranteed at the end of the 15th policy year.

Another key feature is the option to appoint a secondary insured person, who will continue the policy in the event of your passing. This can provide a seamless transition of benefits to your loved ones and ensure the continuity of the policy.

Fund Performance

The participating fund has maintained an average investment rate of return (IRR) of more than 5% over the past 10 years, but remember that past performance is not indicative of future results. The total expense ratio (TER) has also remained consistent over the years, indicating that a larger portion of the fund’s returns is passed on to investors. However, it’s always a good idea to compare the expense ratios of participating funds across different insurers to determine if AIA is the right company for you.

Optional Riders

One optional rider is the Early Critical Protector Waiver of Premium (II), which provides coverage for early critical illnesses and includes the waiver of premiums payable for the covered and supplementary benefits if you are diagnosed with an early critical illness.

The coverage includes a range of critical illnesses, such as cancer, heart attack, stroke, and kidney failure. The premium rates for this rider are not guaranteed and may be revised occasionally, but AIA Vitality members may be eligible for premium adjustments based on their status.

Fees and Charges

All expenses incurred by the plan, such as agent fees, participating fund taxes, and other expenses, are included in the calculation of the regular premium payments. There are no extra or hidden charges that you would be liable for, ensuring transparency and simplicity.

FMS Take on AIA Smart Wealth Builder (II)

From the perspective of Ben, a certified financial planner, the AIA Smart Wealth Builder (II) offers a solid option for long-term savings and legacy planning. The policy’s flexibility, guaranteed capital, and range of protection benefits make it an attractive choice for those who want to grow their money while ensuring financial security for their loved ones.

The participating fund’s past performance and consistent total expense ratio further enhance the appeal of this policy.

However, it’s worth noting that there are other policies on the market that offer more flexibility, features, and better fund performance. Therefore, it’s important to compare different options and consider your specific needs and goals before making a decision.

However, at FMS, we feel that if clients have a horizon of more than 10 years, they should consider investing into dividend funds to create passive income.

Here are 3 compelling reasons why:

  1. Flexibility: Dividend funds provide the flexibility to invest in a variety of companies and sectors, allowing for a diversified portfolio.
  2. Regular Income: Dividend funds provide regular income through dividends, which can be reinvested or used as a source of passive income.
  3. Potential for Higher Returns: Over the long term, dividend funds have the potential to provide higher returns compared to a participating endowment plan.

Assuming a 6% investment return, a simple $2,000 per month investment for 10 years can lead to a significant amount of $349,189. You’re looking at earning almost $19,559 of passive income every year in just 10 years.

Wrapping Up

The AIA Smart Wealth Builder (II) offers a range of features and benefits to help you grow your money and plan for the future. However, it’s important to carefully consider your needs and financial capability before making any long-term commitments. Consulting with a financial advisor can also provide valuable insights and help you make an informed decision.

If you’re interested in learning more about the AIA Smart Wealth Builder (II) and other financial topics, I encourage you to subscribe to FMS Financial Insights. Our weekly newsletter provides valuable insights, tips, and resources to help you navigate the world of finance and make informed decisions.

Don’t miss out on this opportunity to stay informed and empowered on your financial journey. Subscribe today!


Benjamin Low
Benjamin Low

Benjamin is known as The Passive Income Guy. He has helped hundreds of people to build passive income. He is also a member of the Million Dollar Round Table, and Certified Financial Planner™ (CFP®) and Certified Private Banker (CPB).

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