Private Client Services by Mercer
Why Savings Plan?
Do HNWIs need savings? While there is a pervasive misconception that their substantial assets are sufficient for any and all of their needs, a lived reality can be very different. Cash flow can be a challenge. This is particularly true as:
|Volatility remains the norm in the global economy,|
|Interest rates continue to fall across the world,|
|Families grow beyond one generation, and|
|Assets, like businesses and real estate, are often illiquid and/or bound as collateral.|
So, the resounding answer is yes, it is prudent, if not necessary for HNWI to secure an alternative revenue source. A savings plan is one such option.
Top Five Benefits of Savings Plan
|1. As wealth transfer solution|
A savings plan allows you to transfer policy ownership a number of times, over a number of generations. You, therefore, have the ability to plan broadly and on a much more significant time scale. The generational timeline is crucial when you are creating a lasting tradition of success.
|2. As a death benefit settlement option|
One of the flexibilities in savings plans is that you can choose to assign beneficiary(ies) and distribute policy payment according to policy owner’s wishes. This can be done in lump sums or over a prescribed period.
|3. Guaranteed breakeven|
A savings plan can be customized to have an inbuilt breakeven point. You also have the flexibility of surrendering the policy at any time should you wish to.
|4. Tax deferral benefits|
The annual growth of a savings plan’s cash value is not treated as income and therefore subject not to tax. Moreover, the proceeds of savings plan death benefit are not subject to income tax in most jurisdictions. Proceeds of cash value withdrawal will result in the resultant gain to be treated as income and subject to tax.*
|5. Medical examination|
Medical examination is not required for applying a savings insurance.
A savings plan can guarantee income while offering many more benefits as a low-risk financial instrument. To explore how it can help you protect and grow your wealth, contact PCS by Mercer today.
* This is for reference only and cannot be considered as tax advice. Clients should externally refer to their Tax Consultants.