Asked by Anonymous
Asked on 01 Oct 2018
For myself I prefer to keep investment and insurance separate. What do u think is the best way - to continue with the plans or surrender?
Hello there, Let me add some clarification on the plan plusar. This plan has insurance charges if your boyfriend has chosen "enhanced death benefit". That is something which you should check first especially if you wish the plan to be solely focusing on investment.
Secondly, you did not highlight how long is the premium term. Just for your info, the longer the premium term, the higher the surrender charge starting from 1st year.
Thirdly, is the premium Sustainable for your boyfriend in the long term?
4thly what is the objective of having this plan & the other plan?? Gotten identify this.
So before any surrendering of a plan, you have to identify what is your main concern(s) & whether is there any step(s) to address to it?
last & not least, here is the link to summary(brochure) of pulsar; https://myaxa-singapore.cdn.axa-contento-118412.eu/myaxa-singapore%2F7a319d7d-795a-4b3e-be21-a2754c6c7c43_pulsar_brochure.pdf
however please take note that you have to refer to policy wording for the exact details & the start up bonus may be different too.
If you need any personal discussion, do feel free to approach me or you may continue on this thread. Hope these pointers are able to help you & bf to sort out the thought
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05 Oct 2018
Top Contributor (Jan)
AXA Pulsar is an ILP with no Sum Assured. He doesn't pay for any insurance component.
It's a purely invested plan that allows him to invest in a couple of Accredited Investor Funds that have been performing pretty well.
He also has the flexibility to withdraw from the policy up to the minimum required to keep inside. Plus choose to take a premium holiday of up to 60 months (depending on the premium term).
He should look to generate at least double digit returns from the invested funds to justify the costs of the policy.
You'll need to check with him if his advisor has been monitoring thr portfolio, rebalancing, or doing any fund switching when the market outlook doesn't look that good.
This ILP is just a wrapper for investing in the mutual funds AXA has on boarded.
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Your boyfriend needs to do the following:
Plot his own income statement to see his average monthly income versus average monthly expenses. Investment linked policies' (ILP) premium count as "expenses" as it is something that he needs to pay off to keep his policies in-force.
Seek financial advice from another financial advisor, preferably an IFA one (e.g. IPPFA, Providend), to determine if he is able to pay off the premiums based on his income statement.
Regardless of whether he chooses to keep 1 of both ILPs, if he has only 1 income source and it is active income (from work), then he may consider building multiple passive income sources as soon as possible, so that even if he one day lost the abilty to earn active income, he may be able to depend on passive income to pay off his expenses, including ILPs' premium. Refer to the recent Seedly article as reference: https://blog.seedly.sg/financial-independence-framework/
Hi, thanks for the question.
I definitely understand the desire to keep insurance and investments separated, but Pulsar is already a 100% invested policy. Concerns would largely revolve around fees instead.
One of those fees is the surrender charge fee - which means he may get zero back after surrender, and unless you intend to make over $20,000 through better investments, I'd advice you to do one of two things:
1) Continue the plan until the minimum surrender charge and then surrender it
2) Continue the plan until the minimum surrender charge and kind of just let it roll
Rather than deciding to surrender based on a preexisting belief, determine it based on performance and projection for future performance. I don't sell Pulsar - but there are advantages in the range of funds that you might not get from a typical fund house. Additionally, Pulsar should have had quite a generous starting bonus, so you should be able to see that with Time-Value of Money, your boyfriend's current account value (gross of surrender charge) should be ridiculous high at the moment.
It is not at all difficult to arrange for your ILP net of fees to outperform most ETFs as long as the structure doesn't have all sorts of unnecessary riders and your fund choicie is solid.
If you have any further questions, you can always reach me here:
A few things to take note of. First, how does the ILP function? What protection are there, if any? What are the unit trusts purchased? If there is a need to cancel the policy, all these things go as well, so your bf need to find a replacement insurance policy to cover it, either term, or whole life. Next, thing to take care of, is the investment part. Does your bf have any knowledge about investing? If yes, he can consider DIY investments. If not, he can either a) consider a combination of index Exchange Traded Funds(ETF), Singapore Savings Bonds(SSB) and top up CPF OA/SA. b) go and learn, either via self learning or signing up for classes. If he can generate higher returns than the ILP, then it makes sense to cancel it and switch to Buy Term Invest Rest (BITR). Lastly, whether to cancel or not, it is still up to your bf. As his gf, you can influence him, but ultimately, it is his decision. So don’t quarrel, fight over it. Ultimately, it is already a good thing that you two are discussing your finance matters.
You probably alraeady have the answer you are looking.
The answer is it's really a tough choice.
If you surrender now, for Pulsar(or Optimus), you may not get anything back and you might in fact even need to pay them extra out of your pocket.
For Optimus, early surrender fee= Startup bonus + Remaining Acc Main. Fee =
6% x Annual Premium x Term + 5.2% x Annual Premium x Remaining Terms
If you are surrendering on 4th year for $21600 premium, the surrender fee will be=
6% x 21600 x 30 + 5.2% x 21600 x 27 = $69206.4
By 4th year, you should probably have about $97041 in your account.
The maintenance/charges fees paid are estimated about $2000 every year.
After deducting the surrender fese you will only get back $27835. (You paid 64800 premium). Add up to $36965 losses.
Basically, if you want to make any profit early on, just contnuing praying that you can somehow make 30% or more profit from your stocks/funds.
Alternatively, take that 65k go to RWS or MBS, find a good roulette table, bet 5k 13 times on black. You might have a better chance of making profit this way.
already invested 10k..
surrender the plan with near 100% loss
my take is continue pulsar...dollar cost averaging all these will work well..
the other ilp u never put which type...so no comment..
never mix insurance with investment, period.
you can thank me later!
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03 Oct 2018
03 Oct 2018