If I keep the policy for another five years, the estimated cash value increases to $62,417, giving a yield of 3.9% for the next 5 years, based on the projected bonus for the next 5 years. I have decided not to take the risk of a further reduction in bonus, which will reduce the yield below 3.9%.
By surrendering the policy, I can invest the money in other investments. As the share prices are quite low, there is a good chance of earning a better high rate of return from other investments.
The calculation is based on this FAQ.
5 comments:
You are lucky to get 2.5% yield after 17 years. The vivolife doesn't give 2.5% until 30 years later..
The old living is better anytime and it is simple a product unlike vivolife which has a lot of rubbish frills to hoodwink consumers or to cover up the shy return.
Wonder why consumers so easily bluffed.
You are smart and wise to cash out before they lose them for you in the specail bonus. I also don't think you will ever get as projected. Anyway, the AGM is around the corner I wonder MR. Tan will be raising the bonus issue again.This time they must be made to bare the investment result
In the recent years the risk of whole life and endowment products has gone up enormously . First noticeable phenomenon is return is low and the breakeven is longer.
Of course for those limited pay term WL products because of more unused premium paid in the early years the breakeven point is shorter. But the trade off is these products take slower time to accumulate and by the 30th year the return is no better than those with longer paying period.
In a nut shell, WL , endowment, regular of single, and anticipated endowment are riskier, low return and expensive.
There are companies which TRY to maintain to look good or to show higher projection they are taking more risk. Example like NTUC , last year the restructuring of the bonus is actually asking the policyholders to take more risk if they want higher return or the return as projected. The problem is, NTUC didn't tell the truth to the policyholders that it was increasing risk instead they hid under the words "restructuring or reshaping" The agents are no better. Some told their policyholder there was no difference in return which is not true. The uncertainty is there.
For this , it is unfair to the old policies which were of lower risk. The old policyholders should be given the right of choice to stay in the old bonus structure and which the contract was based.The insurer has no right to force the existing policyholders to accept higher risk.
Of course again, even in uncertain time like the melt down when all investment of insurance companies suffered big losses there are companies who want to look good will not cut bonuses. But this is dangerous. The money must come from somewhere to pay the bonuses.
For companies doing this they take risk by borrowing from the life fund and hope to cover up or make good by making more sales of wholelife or endowment to make good. This is resorting to PONZI strategy.
The collapse of British Equitable Life was due to this Ponzi strategy.
WL and endowment and worse the anticipated products are looking like scam products . The insurers wrapped up the rotten return and expensiveness with so called extra features which are useless and cheap 'riders' and unlikely to happen or low probability . All these thrown in to decieve the consumers. Some insurance agents are in fact using these features to promote their WL living product. This is miss-selling and misrepresentation.
In today's situation it is better to separate protection from saving.
If you take the same risk as the insurance companies, you get higher return and protection.
You are better off.
Remember to engage a qualified adviser and not salesman to help you.
We can raise the investment issue during the forthcoming AGM. But I am very sure those clever boys in NTUC Income will blame it on the global economic blah blah blah.
We can never win these buggers since that is how they got to keep their jobs.
If we are still not convinced that par and investment-linked policies are big con-job, then we will continue to be taken for a ride down the bonus declaration years during the policy lifetime.
PLEASE AVOID PAR AND INVEST-LINKED POLICIES!!!!!
Dear Mr Tan
I wonder if you can help to enlighten on the AIA Singapore situation.
1)I heard that AIA is placed under a special entity or Trust. Are all the policies protected by MAS, should AIG wind down?
2)If protected, how much cap are the policies protected?
Thank you for your time.
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