Monday, March 30, 2009

Restructuring of the bonus

Dear Mr. Tan
NTUC said that the restructuring of the bonus allowed them to maintain the bonus last year. What does this mean? How does the restructuring help the policyholders get a better return?

I do not understand their statement. I suggest that you attend the annual general meeting of NTUC Income and ask the chairman to explain this statement. 

Here is my guess. As Income has reduced the bonus sharply last year, perhaps there is no need for them to make a further reduction.  But, I suspect that the special bonus will be cut this time, quite drastically.

But, for the older series which was not affected  last year, I read that the bonus will be restructured this year, i.e. the bonus will be cut as well. 

Generally, it is fair for bonus to be reduced in a bad year, provided that the reduction is done fairly. I did not like the approach taken in the bonus restructuring, as it is difficult to maintain transparency and fairness. Some policies were cut, and others were not. Some were cut more than others. I also do not like the high expenses that were incurred and paid out of the insurance fund.

This is why I decided to terminate two of my policies where the bonus were cut, even though I had to suffer a penalty. I am now considering to terminate my remaining life insurance policies.  

1 comment:

zhummmeng said...

N0 need to cut , already cut last year.
If the ntuc 's argument that the restructuring of bonus made them more flexible why not remove the bonus completely to make it even more flexible.Like the Equitable Life of UK without the fixed bonus, they can play plum pudding with the bonus,to maintain yield and payout. Good time or bad time still pay. Who is there to check whether the money is borrowed from the life fund or fund from the sale of more revosave or capital plus to pay the old matured ones.
Now it is going to restructure more policies. Old policies have even higher bonus and cutting them will allow the management the flexibility to cut or not to cut in bad times.In good times no need to declare more; keep some for smoothing.This is called flexibility and to maintain resilience.
Another AGM is coming. Grill the board until 'chowtah'

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