First, they try to attract your attention by asking you if you have a Fixed Deposit account. Then they tell you the rate is only 2% now (July 2009). Why not save in our Etiqa Takaful product where you will get 5.5% - 8% per annum? Sounds good eh?
This will be told to you: "You only have to save a minimum of RM100 per month. You will even be covered with a life and disability insurance under the Takaful scheme. This plan's maturity is 30 years, but you can stop and withdraw your money any time."
Your money will be channelled into two accounts: Tabung Tabarru (which invests in halal products and companies) and your savings account. 80% of the profits from both accounts will be added into your savings account each year, whereas the remaining 20% is given to Etiqa under the Islamic profit-sharing concept (mudrabaha).
Some agents are trained to tell you that this is not an insurance or investment policy, and this is a pure SAVINGS plan / contract.
This is what they usually hide:
- Part of your savings is donated to the Tabung Tabarru. 1st Year: 100%, 2nd Year: 90%, 3rd Year: 50%, 4th Year and onwards: 25%. The rest goes into your savings account, which you may withdraw from at any time. So, if you decided to stop saving/cancel within the first year, you won't get anything back.
- As a huge portion of your savings is donated to the Tabung, you're left with a maximum of 75% in your savings account. Even if you get 5.5%-8% profit, it will not be much considering the minimum 25% 'used for the insurance'.
- As an Etiqa agent pointed out in a LowYat forum thread, it will take roughly 12 years before your 'investment'/savings break even! This is awfully a long time.
- Overall, for 30 years, the annualized returns is approximately 3% only. It is so much better to invest elsewhere.
So, as a savings plan, this product really SUX! 3% for 30 years, no way. Even the FD rate will increase in the near future. But you may see it differently if you were to view it as a life insurance product.