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07 Jun 2019


Is 99% ILP or RSP better?

Recently, I've been hearing about Investment-linked Policies (ILP) which don't front-end load. For example AXA Wealth Treasure or Pulsar. versus Regular Savings Plans (RSP) which you buy from banks.

I see both as similar as both are regular and long term investments. But I cant decide between the two. ILP has higher fees but has start up and loyalty bonus if you stay for long term while RSP has lower fees.

What do you guys think? I would like to invest at least $500 a month.

Discussion (9)

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Kenneth Lou

07 Jun 2019

Co-founder at Seedly

Hello Francisco,

When you got this option... your agent most likely he/she thinks you have no time to do your own investment. To be honest, the same saying goes… you would want one financial product to do one thing well, rather than a jack-of-all-trades. Until a major technology change, there will remain a ton of middle-men: which thus drives up management fees, costs etc.

The other way is to do a RSP (or regular savings plan) investment on a monthly basis with around 1% fund mgt fees. With easy entry and exit should you decide to withdraw earlier. Most invest in index funds (eg STI ETF)

A definition: In ILPs, premiums are used to pay for units in investment–linked sub-fund(s) of your choice. Some of the units you bought are then sold to pay for insurance and other charges, while the rest remain invested.

  • Very often ILPs incur not only costs, but it becomes rather tricky at a later stage in life. You can head over to this post here in our Community where some users discussed the realities of the rising cost of insurance in the ILP eating up the investment value at a later stage.
  • Also, you can refer to this user’s blog where he/she labelled it NEVER EVER BUY AN ILP. In summary, he/she only had a return of 0.35% which is way below inflation at 2%. (in effect you lose money).
  • One of our big community contributor, Alan (Who also commented below), discussed the interesting trend of underinsuring. This is because they mix insurance with investment (aka whole life), endowments and ILPs. These investment products give mediocre insurance coverage.

Fun fact: ILPs became popular in the 2000s where the term insurance was not sexy enough. Agencies hence rebranded it to include investment components with coverage… there you go. ILP! It’s intention was to target the common person who didn’t want to look at growing their own money in their own ways (but most likely if you are asking this you should already be quite savvy, well done!)

View 1 replies

ILPs is a no go. You will only make the seller richer.

Both are not similar. Better read up more on understanding the differences.

View 2 replies

Tan Siak Lim

14 Aug 2018

CFP. Director, Financial Advisory Group at Financial Alliance

RSP is generally better because of flexibility and no lock in. The lock in is because of high commis...

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