Investment advice - surrender ILP?

[then00b]

Here's the situation:

In 2013, when I was in my late 20s, I had SGD$87k in savings and a regular, albeit low, income. I have always lived frugally and continue to do so. I never had any financial education and was not at all interested - I just wanted to put the money away where it would be earning me a good return. I also had/have no state pension. I had no idea how to invest so I began by Googling and came across a company called BestInvest. They put me in touch with a local financial advisor who signed me up to 2 RL360 products:

• PIMS - lump sum investment
• Quantum - regular savings plan

Both are 25 year policies. I thought I was aware of the fees, and it seemed to meet my requirements - stashing my savings away for long term investment and also saving part of my salary. 5 years later, and I'm more financially savvy - my lump sum has grown to only $94k - annual return of 1.6%... that's after paying what is amount to around $1k/year in fees! The regular savings has returned 1.8% total return on premiums.

I'm now wondering whether to surrender both of these policies, take the huge sunk cost, and redeploy the cash into more reasonable, lower-cost investments such as ETFs and equities... Is this a bad idea? Should I wait a few years when the surrender penalties would be lower?

Here's my current situation:

• Salary: $130k p.a.
• Term life insurance up to $1m, also full health + critical illness coverage
• EFT investments (through robo-advisor): $20k - adding $1.5k/mo
• Dividend stocks (self-selected): $22k - averaging $2k/mo
• Lump-sum ILP: $94k
• Regular savings ILP: $51k - adding $350/mo (minimum premium)

My 2 insurance-linked policies sum to $145k, but surrendering early now would leave me with
~$114k. I'm also aware that right now - January 2019 - is a bad time to be pulling out. Alternatively, I may be able to withdraw as much as possible without incurring fees - unsure how much that would be - and redeploy that, while leaving the rest for another 5 years to reduce the surrender fees.

What do you reckon?

• leave it?
• wait and surrender later?
• surrender now?
• withdraw and surrender later?

 

[moejoseph]

Here's the situation:

In 2013, when I was in my late 20s, I had SGD$87k in savings and a regular, albeit low, income. I have always lived frugally and continue to do so. I never had any financial education and was not at all interested - I just wanted to put the money away where it would be earning me a good return. I also had/have no state pension. I had no idea how to invest so I began by Googling and came across a company called BestInvest. They put me in touch with a local financial advisor who signed me up to 2 RL360 products:

• PIMS - lump sum investment
• Quantum - regular savings plan

Both are 25 year policies. I thought I was aware of the fees, and it seemed to meet my requirements - stashing my savings away for long term investment and also saving part of my salary. 5 years later, and I'm more financially savvy - my lump sum has grown to only $94k - annual return of 1.6%... that's after paying what is amount to around $1k/year in fees! The regular savings has returned 1.8% total return on premiums.

I'm now wondering whether to surrender both of these policies, take the huge sunk cost, and redeploy the cash into more reasonable, lower-cost investments such as ETFs and equities... Is this a bad idea? Should I wait a few years when the surrender penalties would be lower?

Here's my current situation:

• Salary: $130k p.a.
• Term life insurance up to $1m, also full health + critical illness coverage
• EFT investments (through robo-advisor): $20k - adding $1.5k/mo
• Dividend stocks (self-selected): $22k - averaging $2k/mo
• Lump-sum ILP: $94k
• Regular savings ILP: $51k - adding $350/mo (minimum premium)

My 2 insurance-linked policies sum to $145k, but surrendering early now would leave me with
~$114k. I'm also aware that right now - January 2019 - is a bad time to be pulling out. Alternatively, I may be able to withdraw as much as possible without incurring fees - unsure how much that would be - and redeploy that, while leaving the rest for another 5 years to reduce the surrender fees.

What do you reckon?

• leave it?
• wait and surrender later?
• surrender now?
• withdraw and surrender later?

Never surrender any policy, unless you have confidence to recoup back your losses, and especially since you have been holding for so long.

 

[tangent314]

Without the exact numbers, it will be very hard to give you the right advise. At the minimum we need to know

1) What funds you are invested in (we can work out the fund's fees from there)
2) What the management fees are for your plan
3) The surrender fee schedule

I wouldn't worry too much about the actual returns that you have received. Of course with the market at a low now, your annualized returns will be low. That shouldn't affect your decision to surrender though because it simply means you will buy back into low-fees funds at a low price at the same time. What really matters is the fees and how to minimize all the fees.

 

[qazamy]

Here's the situation:

In 2013, when I was in my late 20s, I had SGD$87k in savings and a regular, albeit low, income. I have always lived frugally and continue to do so. I never had any financial education and was not at all interested - I just wanted to put the money away where it would be earning me a good return. I also had/have no state pension. I had no idea how to invest so I began by Googling and came across a company called BestInvest. They put me in touch with a local financial advisor who signed me up to 2 RL360 products:

• PIMS - lump sum investment
• Quantum - regular savings plan

Both are 25 year policies. I thought I was aware of the fees, and it seemed to meet my requirements - stashing my savings away for long term investment and also saving part of my salary. 5 years later, and I'm more financially savvy - my lump sum has grown to only $94k - annual return of 1.6%... that's after paying what is amount to around $1k/year in fees! The regular savings has returned 1.8% total return on premiums.

I'm now wondering whether to surrender both of these policies, take the huge sunk cost, and redeploy the cash into more reasonable, lower-cost investments such as ETFs and equities... Is this a bad idea? Should I wait a few years when the surrender penalties would be lower?

Here's my current situation:

• Salary: $130k p.a.
• Term life insurance up to $1m, also full health + critical illness coverage
• EFT investments (through robo-advisor): $20k - adding $1.5k/mo
• Dividend stocks (self-selected): $22k - averaging $2k/mo
• Lump-sum ILP: $94k
• Regular savings ILP: $51k - adding $350/mo (minimum premium)

My 2 insurance-linked policies sum to $145k, but surrendering early now would leave me with
~$114k. I'm also aware that right now - January 2019 - is a bad time to be pulling out. Alternatively, I may be able to withdraw as much as possible without incurring fees - unsure how much that would be - and redeploy that, while leaving the rest for another 5 years to reduce the surrender fees.

What do you reckon?

• leave it?
• wait and surrender later?
• surrender now?
• withdraw and surrender later?

How you get to $130k p.a. without knowing your own financial knowledge is beyond me...

Sent from Xiaomi POCOPHONE F1 using GAGT

 

[havetheveryfun]

How you get to $130k p.a. without knowing your own financial knowledge is beyond me...

Sent from Xiaomi POCOPHONE F1 using GAGT

you should get another eye-opener by checking out this thread then:
https://forums.hardwarezone.com.sg/...eople-asking-what-do-their-money-5626345.html

many people with over 2-3 millions but do not know how to start investing ...

 

[JuniorLion]

Kudos to you.

Due to my ignorance, I have not heard of this company. And you found it by googling !

 

[TabascoSauce]

How you get to $130k p.a. without knowing your own financial knowledge is beyond me...

Sent from Xiaomi POCOPHONE F1 using GAGT

Financial knowledge and income do not always go hand in hand bcos financial knowledge is not a pre-requisite for many high paying jobs.

For example, many Doctors are not financial savvy even tho they are highly paid. Of cos, It dosnt mean they don’t have the mental capacity to do so.

 

[TabascoSauce]

Never surrender any policy, unless you have confidence to recoup back your losses, and especially since you have been holding for so long.

I do not agree. This is sunk cost fallacy.

A rational decision should be based on future action (I.e should I throw away even more money going forward?). It should not be tainted by emotional investment that you have accumulated.

So, how much u alr put in or how Long u held on to it should not influence ur decision

 

[moejoseph]

I do not agree. This is sunk cost fallacy.

A rational decision should be based on future action (I.e should I throw away even more money going forward?). It should not be tainted by emotional investment that you have accumulated.

So, how much u alr put in or how Long u held on to it should not influence ur decision

Most people shld be aware that the bulk of the premiums you paid, for the first 5 years (100%), go to the company (85% - 90%) and agent (10% - 15%).

Anything after the 5 years, then it will start accumulating. Which is why some with flexible withdrawal choose to withdraw only after the 6th year, or even after the 10th year when the money has started to grow.

I personally have friends who surrender within 5 years, even when their funds are giving a constant returns, to buy crypto (due to FOMO), and now regretted.

 

[havetheveryfun]

Most people shld be aware that the bulk of the premiums you paid, for the first 5 years (100%), go to the company (85% - 90%) and agent (10% - 15%).

Anything after the 5 years, then it will start accumulating. Which is why some with flexible withdrawal choose to withdraw only after the 6th year, or even after the 10th year when the money has started to grow.

I personally have friends who surrender within 5 years, even when their funds are giving a constant returns, to buy crypto (due to FOMO), and now regretted.

thing is unless you can guarantee after the 10th year, sure got some good returns.. if not then he may also regret continuing keeping for 10 years

you already said first 5 years most of the cost goes to the company and agent, then whats there left to invest? would need like super good returns of >8% p.a. to be able to recoup the fees lost in the first 5 years

if insurance companies are good they should only start taking the fees after the 5th year after a sustainable base has been built up

 

[moejoseph]

Most ILP and/or investments are long-term based, and the results will only magnify after maturity (if continuous upward trend). If not, some allow for free fund switch, make use of those. If an ILP is properly managed by the adviser, it is not difficult to get 4% - 8% returns after maturity, or even much more.

A true advice will be to hold on till at least you get back your capital, and if you are confident in getting better returns in the long-run yourself, invest/save your extra fund at those places to earn the better returns.

 

[moejoseph]

thing is unless you can guarantee after the 10th year, sure got some good returns.. if not then he may also regret continuing keeping for 10 years

you already said first 5 years most of the cost goes to the company and agent, then whats there left to invest? would need like super good returns of >8% p.a. to be able to recoup the fees lost in the first 5 years

if insurance companies are good they should only start taking the fees after the 5th year after a sustainable base has been built up

The returns largely depends on the adviser managing your portfolio. Many people lost money because they know nothing about the funds, and their advisers don't know how/don't bother advising them to do fund switch.

Insurance companies keep the bulk of the funds for the first 5 years as operation costs as it is necessary to pay for all the expenses first. If they only keep profit after 5th years, will customers be happy if they see good returns initially, but a drop there after?

Some companies do provide a first year bonus to kickstart your investment. For these, they really do take out money from their own pocket to fund the investment/ay for the expenses first

 

[JuniorLion]

The returns largely depends on the adviser managing your portfolio. Many people lost money because they know nothing about the funds, and their advisers don't know how/don't bother advising them to do fund switch.

Insurance companies keep the bulk of the funds for the first 5 years as operation costs as it is necessary to pay for all the expenses first. If they only keep profit after 5th years, will customers be happy if they see good returns initially, but a drop there after?

Some companies do provide a first year bonus to kickstart your investment. For these, they really do take out money from their own pocket to fund the investment/ay for the expenses first

These are backloaded plans. GE SmartInvest and TM Wealth enhancers.

Regardless, you are financially better off investing your own monies. Afterall, nobody else cares about your own monies as much as yourself.

 

[moejoseph]

These are backloaded plans. GE SmartInvest and TM Wealth enhancers.

Regardless, you are financially better off investing your own monies. Afterall, nobody else cares about your own monies as much as yourself.

Agree.

But i believe that is if the person:
1) Has the Discipline to invest
2) Has Investment knowledge
3) Has got time to manage the investment portfolio on his/her own

Many a time, even for myself, it is easy to read up and try, but some prodecures are quite tedious, and not many can be consistent, and most time proscratination occurs lol

 

[Toni90]

Agree.

But i believe that is if the person:
1) Has the Discipline to invest
2) Has Investment knowledge
3) Has got time to manage the investment portfolio on his/her own

Many a time, even for myself, it is easy to read up and try, but some prodecures are quite tedious, and not many can be consistent, and most time proscratination occurs lol

Just sign up for those sti etf monthly plan lah. Manage what.

 

[tangent314]

I will say again: all the advice given above is all based on speculation without the actual numbers since we don't have the important details of your plan and so we cannot calculate the estimated final value of the various options to determine which is best.

Let me give you an example. Let's say the funds perform at 4% for the remaining 20 years of the plan, and the ILP imposes an 1% account maintenance fee on your asset value and 3% purchase fee on your monthly premium, then your final sum after 20 more years will be ~$375.6k

If you surrender your plan and get $114k, then use this money to buy back the exact same fund under a 0% fee platform like DollarDex or Poems and continue your $350/month RSP there, your final expected value assuming the fund performs at the same 4% for the next 20 years, will be $381.7k

Or perhaps you can find the equivalent ETF investing in the same thing with the same performance except with a 1% lower management fee, then your final value after 20 years will be ~$453.1k

This is all guestimation, of course.

 

[akwl88]

ILP is rubbish

you are better off without it, it only serves to enrich the sellers

 

[moejoseph]

ILP is rubbish

you are better off without it, it only serves to enrich the sellers

It depends on individuals, really. There're always 2 sides to everything.

If ILPs are bad, why are there still High-NetWorth Individuals (HNWI) taking them up, especially those policies with startup bonus and access to Accredited Investors' Fund, to grow their wealth and do legacy planning?

Ultimately it depends on individual to see what you are looking for. If you are someone who don't like long-term and need cashflow, ILPs will not be suitable for you. But if you are someone who wants the convenience and don't mind paying the fees, albeit earning lesser than if you know how to invest yourself, then you will probably think ILPs is good.

 

[akwl88]

It depends on individuals, really. There're always 2 sides to everything.

If ILPs are bad, why are there still High-NetWorth Individuals (HNWI) taking them up, especially those policies with startup bonus and access to Accredited Investors' Fund, to grow their wealth and do legacy planning?

Ultimately it depends on individual to see what you are looking for. If you are someone who don't like long-term and need cashflow, ILPs will not be suitable for you. But if you are someone who wants the convenience and don't mind paying the fees, albeit earning lesser than if you know how to invest yourself, then you will probably think ILPs is good.

who are the HNWI with ILPs? warren buffett ah? or bill gates?

got diff between earning lesser and making losses

so many better alternatives out there, if agents like you still having this kind of answers, sure cmi one....

 

[w4rdsg]

Moejoseph are you invested in ILP or do you sell them?