OCBC School Plan helps to save for tuckshop money - OCBC Bank

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OCBC
School Plan
helps to
save for
tuckshop
money
It’s never too early to start
saving for your kids, and OCBC
Bank’s new 2-1 kids’ plan will
help parents to save and protect
their kids. Smart Investor talks
to the Head Group Wealth
Management Mr Nicholas Tan
about this product.
BY HAROLD TOH
SMARTINVESTOR april 2006 | 51

{Wealth Management}
OCBC SCHOOL PLAN
There has been much
hullabaloo about kids today
not having time for recreation
because of packed learning
schedules. The typical family
in Singapore is made up of
three people including one
or two children. With a
smaller family, children would now be able to
enjoy expensive extra curriculum like ballet, piano
lessons, tennis clinics, and even professional
golfing lessons.
Almost a decade ago, it was common to have
large families as big as a dozen or more. The
significance back then for the parents was earning
enough to pay the school fees, and uniforms on
their children’s back.
Oh how times have changed so dramatically.
Bringing up a kid is an extremely expensive affair
these days. With escalating costs of education,
parents today would have to start thinking about
planning for their children’s education at an
early stage.
ESCALATING COSTS
OCBC Bank’s Head of Wealth Management
Mr Nicolas Tan said that their studies show that
takes about $800 to $900 a year just to strictly
cover the child’s education. Even after throwing
in additional activities like ballet, music, and extra
language classes. The costs could escalate rapidly
to approximately $3000 a year. He added that their
findings also showed the basic expenses increase
as the child progress to higher education. This
comes to about $2,382 a year for secondary
education, and $2,616 a year for junior
college education.
There are several educational financing packages
offered by banks such as HSBC Bank, DBS Bank,
and UOB Bank. However, these products are
primarily focused on university education.
Mr Tan said that OCBC Bank’s latest product
offering, the OCBC School Plan is distinct from the
rest of the other plans as it is the first in Singapore
that gives parents the flexibility to save and protect
their kids while they are completing primary,
secondary, and pre-university levels. He added that
this plan wasn’t easy to manufacture because of its
relatively short premium payment period, whereby
premiums are paid only for the first six years,
Mr Nicholas Tan
Head Group Wealth Management
OCBC BANK
after which parents will then start receiving
annual payouts.
The OCBC School Plan comprises of the School
Protection Plan and OCBC School Savings Account.
The School Protection Plan is underwritten by OAC
Insurance and designed to offset children’s basic
expenses. The OCBC School Savings is primarily a
trust savings account that names the child as the
beneficiary of the account, and just requires an
initial deposit of $100 and no monthly account fees.
The interest rate for the OCBC School Savings
Account is pegged to the highest tier of the
prevailing OCBC Statement Savings Account for
amounts above $250,000, at 0.48 per cent.
PLANNING IN ADVANCE
There are three schemes for the School Protection
Plan. The lowest package starts at $218 monthly
savings. How it works is, suppose you start your
savings when your child is 3 months old, and you
start saving for the next 6 years. At the end of sixth
year, the plan starts to pay you back for the next six
years (starting in the seventh year) at $1,200 per
year. In addition, at the end of the 12th year, the plan
Seminar introducing
the OCBC School Plan
52 | SMARTINVESTOR april 2006

OCBC SCHOOL PLAN
will also pay out a guaranteed amount of $4,800,
and together with a non-guaranteed bonus. The
total projected return of the plan is 2.39 per cent
per annum. This gives an estimated benefit of
$18,300 over the 12 years’ period.
Another plan starts $530 per month premium.
Over the 12 years, the total projected amount is
$44,300. The six annual cash-payouts at the end of
the sixth year is $4,800. For those looking for higher
payouts, this is worth looking at.
Finally, the 18 years scheme starts monthly
premium at $676.24, and total benefit payout is
estimated at $74,321 which includes 12 annual
cash payouts.
ACCOMMODATING CHANGES
Mr Tan said that the plan does not allow the parent
to accelerate the plan to get the payment earlier and
paying a higher premium. He added that if the child
starts the plan at age three, the cash payout would
start when he is 10 years old.
There’s also a premium waiver in the event of
death or disability of the participatory parent. The
“
OCBC SCHOOL PLAN IS THE FIRST
IN SINGAPORE THAT GIVES PARENTS THE
FLEXIBILIT TO SAVE AND PROTECT THEIR
KIDS WHEN THEY ARE COMPLETING
THEIR PRIMARY, SECONDARY AND
PRE-UNIVERSITY EDUCATION.”
MR NICHOLAS TAN
HEAD GROUP WEALTH MANAGEMENT OCBC BANK
School Protection Plan will continue to pay the annual payouts and the maturity
benefits at the end of the stipulated period.
If the policyholder fails to make payments, the plan would be allowed to run
through until maturity. And subsequently, the bank will pay out a pro-rated
amount of the savings plus benefits. However, the policyholder must complete
premium payments for at least one year.
The protection component is designed for the child. For example, if the child
is insured for $12,000 and dies after the second year of the policy, the sum
assured will be paid out immediately.
Parents with more than one child seem to be motivated to buy the school plan
because they said that the payouts would defray the costs for sending all their
kids’ expenses. SI
OCBC SCHOOL PLAN
18 years at monthly premium of $676.24 (based on the assumption that the
policy was bought at age 1month)
1) Premium payment – 6 years
Year 0 – 5
2) Survival Benefits (annual cash payout)
Year 6 – 11 (3 per cent of life insurance cover) ($1,200 p.a.)
3) Survival Benefits (annual cash payout)
Year 12 – 17 (12 per cent of life insurance cover) ($4,800 p.a.)
Monthly Premium = $676.24
Annual Premium = $7,817.70
Total Premium Paid = $46,906.20 (6 years)
Survival Benefit Payout = $35,000
($1200 x 6 + $4800 x 6)
Maturity Benefit Payout = $38.321
(paid out in year 18)
Total Benefit Payout
= $74,321 (projected return is 3.58 per cent)
SMARTINVESTOR april 2006 | 53