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Investment Linked Policies (ILP)

A mix of investment and insurance coverage

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Hi anon, First thing would be to beef up your savings a little. Although you will only start graduate and start work in 3 years, it would be prudent to have a small emergency fund of at least 6 months expenses. Also, ensure you have at least a hospitalization policy in place, in the event of any unforeseen health issues. You may consider critical illness coverage after you start work unless you wish to get one now due to lower premiums at your age. If you have a medium to high-risk profile, then I would recommend that you can consider going 60%-75% into equities, equity funds, or ETFs, depending on the sector and risks that you prefer. This assumes that you do not have any defined timeframe with which that you need the money. The remaining allocation can be placed in fixed income or kept as a warchest for further opportunities. Property as an investment can be done as well, but capital outlay will be bigger and I do not think $50000 is quite enough to split between all the asset classes I have mentioned. However, with due consideration to the big picture, also remember to balance your risk, as well as how you will continue to add on to your investments in time to come. Some question which I will pose to you to think about include: - What do I want my money to do for me? - What is the level of risk that I will want at different stages of my life? - Will the asset class I choose give me the return I want, and with what risk? It will be advisable for you to understand all the options on the table before selecting the one(s) that you are comfortable with. If you have more specific questions, you can reply to this post and I'll weigh in with my own thoughts.

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Retirement

Investment Linked Policies (ILP)

Insurance

You have a 40 year time horizon and can invest in the global market to achieve wealth accumulation and higher returns. Your asset strategy will change with your age, slowly moving towards higher guaranteed assets at a later age when you're closer to retirement for capital preservation. Instead of looking for a product to purchase, do some retirement & investment planning. After that, then find products that will fit what you're planning to do and meet your objectives. Also retirement means very different to different people. Some want to live off dividends and coupon payments. A very passive retirement. Some would prefer to do a drawdown retirement to maximize all the wealth they've built over their years. You should speak to a trusted advisor or specialist to figure a path out for your retirement.

Insurance

Endowment Policies

Investment Linked Policies (ILP)

The short answer is, I wouldn't. Don't mix savings/investments with insurance. If I wanted protection, I would get pure protection plans. Term, Whole Life, Hospitalization, Accident, Long Term Care, all these are important and can be obtained through an insurance policy. If I had a definitive time frame with which I needed funds in future, I would get an endowment to make sure that the funds are there when I need them and not exposed to risk. If I wanted to invest, I would do so directly in stocks/UTs, etc. No need to go through a 'wrapper'. I would have the flexibility to start, stop and add on as I please. So, I can't find any reason at all to buy a protection ILP.

AXA Life Insurance

Investment Linked Policies (ILP)

Investments

I don't advocate mixing investments with insurance. Investments should always give you the flexibility to liquidate whenever, without any penalty whatsoever (other than being able to accept the market price of your investments when you liquidate, as well as transactional costs when you buy/sell). In a regular premium ILP, you are probably going to be hit by many different charges. A very quick look at the WA product summary lists the following fees: 1. Account maintenance fee 2. Investment management fee 3. Early encashment charge 4. Partial withdrawal charge 5. Bonus recovery charge 6. Redemption and Switching fee (currently 0, but they have the right to change it) That's not counting the fund charges which are priced in at the fund level. I would not think that I would want to pay so many fees, and find myself locked in without the ability to withdrawal penalty-free should I need my funds. You would have more options in terms of asset classes, availability of funds, etc and greater control if you directly invest, whether on your own or with the assistance of an independent advisor like myself. The options are very wide when it comes to the investment universe. Speak to someone to get an understanding of your risk appetite, motives, objectives, etc before you start investing. The worst thing you could do is rush into the flavour of the month without doing your research. Global markets (especially the US) may look good at this point, but when you invest, it is for the long run and you need to have a strategy to address this.

Investment Linked Policies (ILP)

Insurance

Investments

Fergus Tan
Fergus Tan
Level 4. Prodigy
Updated on 07 Sep 2019
It's not an easy answer, because ILP by itself is a category of products. Saying that ILP is bad, is similar to saying "Stocks trading is bad", or "Options writing is bad", or "Buying insurance is a waste of money" Traditional ILP came about when people were unhappy with par fund returns of whole life policies, and they wanted more flexibility and control. Insurers then flip it around and gave people full flexibility. The biggest problem with that was that cost of insurance climbed over the years, and before you know it, people were actually left with a depleted account in their old age where they needed the coverage the most. More recently, you see a lot of ILP which is primarily an investment product but sold by insurers or financial advisory firms. Typically nicknamed 101ILP, they usually provide a death coverage of 101% of total premiums paid, or in other words, not much insurance coverage. In this sense, it's really not mixing investments with insurance. In this space of wealth based ILPs, you have AXA Pulsar, Manulife InvestReady Wealth, and Tokio Marine Atlas Wealth as the top 3 most popular ones. How it usually works is that you get an upfront bonus that may be paid in the first year, or up to a few years, but you have to commit to a time horizon. I will use Manulife InvestReady Wealth as an example because it's simpler to understand. All 3 illustrations are available online. https://www.manulife.com.sg/our-solutions/invest/investment-linked-plans/investready-wealth.html https://www.axa.com.sg/our-solutions/personal/savings-investments/pulsar https://www.tokiomarine.com/sg/en/personal/wealth/wealth-planning/tm-atlas-series/tm-atlas-wealth.html In the case of Manulife InvestReady, the illustrated example shows a choice of a 20-year plan where the annual premium is $12k. You get an upfront bonus unit of $7,200 (or roughly 60%). In the case of TM and AXA, they tend to give a bonus of up to 200% but spread over a few years. The trick you will see is the annual charge. Back to InvestReady, this means you start the account with $19,200 worth of investments. You have to pay a fee of 2.5% (made up of 0.7% and 1.8%) every year, for the first 10 years. After that, it will be a fee of 0.7% subsequently. A way to think about it, is that the upfront bonus units is used to offset the 2.5% paid over the subsequent years. If you were to run your numbers, in theory the additional bonus units might put you ahead of people who buy unit trusts directly. As for AXA and TM, they give much higher bonus units, because the fee charge per annum is also much higher, up to 7% per annum. So the balance point is if you believe that over the long run, investments are uptrending or not. If so, then bonus units help, since you frontload your profits. The biggest downside I see if you are locked in for the committed time period. If you surrender or withdraw before that, you are likely to lose a large chunk of it. To be fair, I think it's quite neutral versus directly investing in unit trusts. You can probably only say for sure on hindsight. You need to understand your objectives too, because even within the unit trust space, there are many pricing models, such as wrap accounts, non wrap, etc.

Insurance

Investment Linked Policies (ILP)

Would be good if you are able to seat down with an advisor to look through your policy. It depends on your ILP. Is it heavey on the protection side or is it heavy on the investment side. If it is higher on the protection side, you should be getting quite a good coverage with it if you have started the policy early. If you are buying term and investing the difference, what are the instruments that you want to invest in? These are questions that you have to take into consideration. I have an ILP too and it was done many years ago. It has quite a high coverage and I am still holding onto it. It is already 14 years old now. Policy value almost breakeven but I treat it as a protection policy and I won't be surrendering it any time near.

Investments

Insurance

Investment Linked Policies (ILP)

Hi Anon, The subject of surrendering is rather tricky to answer, however, I would urge you to ask yourself a few questions here first: 1. Why did you get the policy in the first place? 2. What do you want to achieve from the policy? Are you ok with the risks? 3. Are you able to sustain the premiums? 4. Do you understand the conditions of the policy, especially with regards to the fees and the charges? 5. Did you look at the Benefit Illustration and calculate the real return to you? (A published 4% return will work out to be lower, the only question being what is the return to you as the investor) 6. Are you going to be managing the funds and the rebalancing, or is the advisor going to do it for you? 7. Are there better options for your money given your risk profile and time horizon? You can change the policy to monthly, but then it will only take effect from the next policy year. Without the specifics of your policy, I am not able to give a full opinion, taking into account that fund selection will have an impact on the outcome. If you'd prefer a more in-depth discussion, do drop me an email at [email protected] and we can converse there.

Insurance

Investments

Investment Linked Policies (ILP)

Savings

Yup, it's an up to 120-year annuity policy that can be bought by you and then transferred to your child. Example if you're 30, this policy will be up to 90 years long. You can transfer the policy to your child before you pass away and the policy will continue to pay until your child passes away or 90 years have passed, whichever earlier. However, ReadyLifeIncome is currently the annuity with the lowest guaranteed yield and other annuities have a higher potential total yield. Here's a quick screenshot of some of the available annuity plans that are alternatives to Manulife's policy. !
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Investment Linked Policies (ILP)

Savings

I would not mix investments with insurance. Investments should always give you flexibility to liquidate whenever, without any penalty whatsover (other than being able to accept the market price of your investments when you liquidate). You would have more options in terms of asset classes, availability of funds, etc and greater control if you directly invest, whether on your own, or with the assistance of an independent advisor like myself. The options are very wide when it comes to the investment universe. Speak to someone to get an understanding of your risk appetite, motives, objectives, etc before you start investing. The worst thing you could do is rush into the flavour of the month without doing your research.

Insurance

Investment Linked Policies (ILP)

You can increase the sum assured to the highest allowed on the policy and opt to increase the premiums as well. Do call in to Pru to get an idea of all your options. Do note that the downside of treating the policy only for it's protection element is that the increasing Cost Of Insurance has to be maintained. This means constantly topping up premiums every year after age 60 or so to maintain coverage. The point was to have your investments at this time be able to pay for your increasing Cost Of Insurance. So if you aren't going to do that within the policy, you have to make sure to do it outside the policy with your own investments.
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