The collapse of Equitable Life in UK was quoted as the reason to restructure the bonus of Income. The consultant recommended that the annual bonus rate was too high and supported the restructure to a lower rate of annual bonus, to be compensated by a higher rate of terminal bonus.
Tan Yew Ming, a local actuary, studied the report on the collapse of Equitable Life. He found that the problem of Equitable Life was the high rate of terminal bonus promised to policyholders that were not reserved.
When the court decided that Equitable Life had to pay the terminal bonus, Equitable Life faced financial difficulties and had to cease transacting new business. This concluson was also reported by BBC in a commentary.
If Equitable Life had declared a higher rate of annual bonus, they are required to set aside reserve for the bonus. This would have given them a stronger financial position.
I hope that Income will study this matter carefully and avoid the risk faced by Equitable Life, i.e. promise high terminal bonus rates that are not funded.
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06/08 - 06/15
- Insuring the risk of high inflation
- Civil servants and part time jobs
- Terminal bonus lead to Equitable Life's failure
- Principal Guaranteed, Principal Protected
- Can you read this?
- Another new structured product
- Public Facilities need to be improved
- New Zealand Dollar Deposit
- Comment - risk of high terminal bonus
- Danger of unfunded terminal bonus
- Heavy burden of debts
- Lessons from Equitable Life - high terminal bonus
- Money Market Fund - drop in price
- Cash value on education policy
- Personal savings to supplement our CPF
- Personal accident insurance
- Investing in Foreign Currency Deposits
- POEMS (Phillips Securities)
- Tips for Seniors on Investments
- Financial Speculators
- Life insurance up to age 65
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