Best savings plan from Generali UAE
I am writing this article because as an independent financial advisor, I get asked frequently which plan is the Best Savings Plan in the UAE.
Types of Savings Plans in the UAE
There are mainly two types of savings plans in this market. Most providers such as Generali International, Zurich International, Friends Provident, Royal London 360, Metlife Alico etc., offer the following types of plans:
- Regular Savings plans also known as Systematic Investment Plans
- Lump-sum savings plans
In this article, I will only be talking about the best regular savings plans in UAE.
Factors to consider when selecting a regular savings plan
Term of savings plan
How long do you need to invest? This can depend on the purpose of starting the plan. If you are saving for your child’s education, select a term that is the difference between 18 and the child’s age. If you intend to start a regular savings plan for retirement planning, use the difference between the desired retirement age and your current age.
If you choose a term around 5 years then Generali Vision comes out to be the best in an apple-to-apple comparison with other provider’s products. If the chosen term is more than 15 years, Generali Vision performs very similar to Royal London 360 – Quantum.
Monthly savings amount
How much can you afford to put aside every month? The answer to this depends on the savings mentality you have.
Ask yourself this question - Do you save first and then live on the rest? or Do you spend first and save what is remaining?
Whatever be the case, the answer is simple – as much as you can without breaking the bank. Typically most savings plans in the UAE start from USD 300 per month and the most popular amount by far with expats is USD 1,250.
Generali Vision – regular savings plan performs the best at USD 1,250+ because it offers an extra fund allocation of 5% annually.
Initial Contribution Period
Initial contribution period is the number of months the policy holder needs to pay continuously, where most of the charges are taken by the savings plan provider. In other words the encashment value of the plan starts building up after this period.
So it goes without saying that the lower this period, the better it is for the policy holder.
Zurich, Friends Provident and Royal London have an initial contribution period of 18 months regardless of the term. Generali – Vision has flexible initial periods ranging from 4 months for the 5-year plan to 15 months for the 15-year plan and 23 months for the 25-year plan.
In most cases the Generali – Vision regular savings plan comes out better with the lowest initial periods.
Mirror funds vs Direct funds
This is a common question asked by investors. The best explanation on this concept is here.
My take on this is simple, if your monthly savings budget is less than USD 1,000, choose mirror funds, and if it is more than USD 1,000 per month choose direct funds. Mirror funds are designed for people with lower budgets.
Zurich international and Friends Provident International offer mirror funds only for their regular savings plans. Generali UAE and Royal London 360 offer direct funds for their regular savings products.
Credit Card charges
Ideally you shouldn’t save using a credit card, because you will be hit by the exchange rate offered by your bank if you do so. Nevertheless, if this is the only way forward, then you should check if the provider charges for using credit cards.
Zurich charges a small percentage for using credit cards with their regular savings plans while Generali, Friends Provident and Royal London 360 do not charge a fee for using credit cards with their products.
Summary and Conclusion for choosing the best savings plan
In summary, the best savings plan is as below -
Provider – Generali Vision
Term – 5 years or higher depending on purpose
Monthly amount – USD 1,250 or AED 4,600
Current offer on Generali Vision
- Applications to be submitted prior to 30th June, 2014
- Cases $500 – $999 per month or more with 10 year term and over – 1 free premium
- Cases $1000+ per month with 10 year term and over - 2 free premiums