Pay less for your travel insurance

NTUC Income charges the lowest premium rates for
comparable benefits.

PREMIER PLAN

Benefit                  Income  Co-A  Co-X

Death/PTD                $200k  $200k  $250k
Medical Expenses         $500k  $500k  $300k
Premium (Asia - 7 days)    $41   $66    $56
Premium (Europe -7days)    $68   $80    $76

BASIC PLAN

Death/PTD                $100k  $150k  $150k
Medical Expenses         $250k  $250k  $150k
Premium (Asia - 7 days)    $29   $46    $42
Premium (Europe -7days)    $51   $70    $61

All plans pay for 100% of emergency medical evacuation
and also cover terrorism. NTUC Income has just removed
the 15% cost-sharing.

The above is the cost per person. If the diffence is
$30, a family of 5 people will have to pay $150
to the other insurer. You can save this sum by
insuring with NTUC Income.

Call 6332 3456.

ILP vs. Unit Trust – which is best?

Editor
Business Times

I refer to the article by Genevieve Cua, “What clients are not told about ILPs” (BT, April 12).

The article does a good job of pointing out the problems of unit trusts and ILPs which are sold by two life insurance companies: Aviva and Manulife. The ILPs and unit trusts offered by these two insurers are nearly identical. Yet the ILPs cost slightly more than the unit trusts.

The conclusion of the article is give by Mr Ben Fok from IPAC financial planners. He says: “My personal opinion is, if you can avoid investing in ILPs, don't invest. Just go for a unit trust.”

Is this good advice? Are unit trusts really cheaper than ILPs?

To find out, it would be useful to compare expense ratios of unit trusts vs. ILPs.

This has been done. A study recently compiled the expense ratios of both and compared them. To standardise, the study excluded bond funds and considered only equity (stock) funds.

For ILPs, the median expense ratio was 1.8 per cent. For unit trusts, it was slightly higher at 2.1 per cent. The difference is a small one.

Of equal importance is that among the 11 insurers, the median expense ratios of their ILPs ranged from a low of 1.0 per cent to a high of 2.2. The range is important since people typically don’t buy an average fund. They buy one or more funds from a single insurer.

The study found the insurers with the lowest expense ratios for ILPs are NTUC Income (1.0 per cent), GreatEastern Life (1.4 per cent) and Prudential (1.5 per cent).

Indeed there are bargains to be found among ILPs.

Source: www.AskDrMoney.com “Best ILPs -- single premium”.

Tan Kin Lian
Chief Executive Officer
NTUC Income

Reply: What clients are not told about ILPs

Editor
Business Times

I refer to the article entitled “What clients are not told about ILPs” by Genevieve Cua (BT, 12 April).

The article does a good job of highlighting a serious problem: Funds in Singapore cost too much. More than any other insurer, NTUC Income has been fighting this problem with its low-cost funds.

The article concludes with Mr Ben Fok of IPAC saying, “…if you can avoid investing in ILPs, don’t invest. Insurance is for protection, just go for a Unit Trust".

I hold a different view.

In choosing the right investment plan, the investor should consider the following:

- the risk profile of the fund
- the distribution charges
- the fund management fees
- the charges for the insurance protection (in the case of an investment-linked plan)

Many investment plans (ie unit trusts or ILPs) have high distribution charges and fund management fees which are not properly disclosed to the investor. The advisers earn a large share of these fees, and are required to disclose this fact. In spite of it, many layman continue to be confused.

There is an independent comparision of these charges in the website, www.askdrmoney.com.

NTUC Income keeps our charges at a competitive level, so that most of the returns are given back to our investors. Our charges for our ILP funds are generally lower than the unit trusts.

Our fund management fee is about 1% per annum. This fee for most similar funds, including unit trusts, is 1.5% to 2% per annum. Some financial advisers charge a separate level of advisory fee which is additional to the fund management fees at the unit trust level.

Our distribution charges are generally lower than for similar products. Our spread is 3.5%, compared to 5% for similar funds. During our sales promotion, we give a bonus units of up to 2%, which reduces the spread to 1.5%.

Our distribution charge for a regular saving plan is about one third of the cost of similar ILP offered by other insurance plans.

Our total expense ratio is among the lowest for all funds and unit trusts in the market. As the expense ratio is an annual charge, it has the most significant impact in determining the net return to the investor, for a similar risk profile of the investments.

The insurance protection embedded in our ILP plan is offered free of charge. It is funded by the margin in our modest charges.

We provide a low-cost term assurance plan to be bought separately as a rider. The premium is extremely low, and is kept level for the duration of the rider. The cost does not increase with age.

We advise long-term investors to select our combined fund, which is a large, well diversified fund of $3,800 million. It is invested in 900 good quality equity and bond invesments. It is managed by 9 top fund managers around the world. It has earned an attractive return for our investors during the past three years. The fees are among the lowest, ie 1% per annum.

We educate consumers to make the right choice. We invite them to visit our educational website, www.knowyourinsurance.com.sg

Tan Kin Lian
Chief Executive Officer
NTUC Income

Reduced special bonus for Prime Life

Several insurers (not NTUC Income) sold large numebrs of Prime Life policies about 20 years ago. They paid a low rate of annual bonus, but promises special bonus of 300%, 400% and 500% of the accunmulated bonus on the 20th, 25th and 30th year.

They were not able to meet their projection. In reality, special bonus rates were something reduced to 100%, 150%, 200% respectively.

The policyhoholders who bought these plans suffered several cuts in their expected bonus payouts.

NTUC Income refused to issue this type of policy. We prefer to pay a higher rate of annual bonus, and to keep our special bonus at 25%. Our policyholders have enjoyed much better bonus compared to Prime Life plans.

Special bonus maintained at 25%

NTUC Income pays a special bonus on maturity and death. This is computed at 25% of the accumulated bonus.

We are probably the only insurer that maintains the special bonus even in difficult times. Other insurers has cut their special bonus on several occasions in past years. Their policyholders will suffer a big cut, if their policies matured in these years. The amount of the cut can be more than 10% of the policy proceeds. That is a lot of money.

NTUC Income prefer to adjust the annual bonus to reflect changes in our investment earnings. This ensures that the adjustment applies fairly to all policyholders and is not borne by the policyholders whose policies mature in the current year.

Our policyholders have found our method to be fairer. We are also able to give a higher return to our policyholders in the past years.