Monday, August 31, 2009

Negative return from endowment policies

Dear Mr Tan,
Thank you for all your effort at this site and FiSCA (I just became a member). I really appreciate all that you are doing for us consumers.

Recently I have decided to give up 4 endowment policies. I have not actually terminate them but I have informed my agent of my desire. I have held them for 10 years and have another 10-15 years more to go. The current cash value is very low. I would only get back half of what I put in if I were to give them up now. Two policies were meant for my son's education and the other two are for my own savings.

I am thinking of cashing them out now and putting them in other forms of investment that would hopefully give me a better return by the time my son enters college. He is 14 now. I do not have a lot of time left as you can see. What is the best way to grow the money to meet that goal? The policies will only mature when he is 24 and 25. Are the policies worth keeping or are there better options?

I really hope to hear your advise on this.

REPLY
Please read this FAQ. I hope that it will help you to make a better decision.
You can also read other FAQs here.

14 comments:

Anonymous said...

Yours is a common phenomenon that is happening to many of us policyholders whose trust has been betrayed by the new management. Because they have loaded the dice to be heads they win, tails policyholders lose, policyholders face a situation where if they cash out now will lose and if they wait for maturity, there is no certainty that they can get back what they have put in. I have been through this and would like to share my thoughts on this.
When I first bought the policies I thought it was a good deal because I have the NTUC Income brand name of trust and reliability and my analysis of the then CEO was of an honest man with high integrity. These have been proven right over the last few decades. What I did not bargain for is the change of management and the rebranding of NTUC Income, hence being caught in the same dilemma as you.
My decision was made after much careful analysis and weighing of pros and cons. Since the fundamentals have changed and NTUC Income reputation is gone and along with the trust and reliability coupled with the view that the new management does not come with equally high honesty and integrity, I have decided to stop loss and spare myself the continuing agony and frustration of insuring with an organisation that no longer looks after my interest. It is indeed painful that we lose after so many years of investing, but better that than continuing on the slippery path of spiralling down since the fundamentals have changed. If we cannot trust them now, how can we trust them later? The new management have a track record of using high faluntin explanations for their own ends and it looked set to worsen as they get bolder and bolder to play with your money. So like in any investment, once the fundamentals change we have to act decisively to cut loss or the losses will multiply. In the case of insurance, not only financial losses but also our mental health as anger and frustration can take a toll on our mental and physical health as well. The new slogan for insurance would probably be "Insuring with NTUC Income is hazardous to your health".
So it does not make sense to be paying good money to injure your health. So the solution is to cut loss and let all your friends and relatives know so that they will not step on a trap for life.

Tan Kin Lian said...

A few readers misread that this endowment policy was from NTUC Income. It was actually from another insurance company. The return on endowment policies from NTUC Income in the past years was quite satisfactory.

Anonymous said...

The past products are okay with decent return but not now. It is because Mr. Tan kept the cost low and produced good return. But this is the past NTUC. The new NTUC is goner. Always spend and spend on themselves and the agents until the cost so high that the return is so so miserable even after 30 years. (Your money has flown away with the kites)Do you know it is only 2.7% after 30 years? What can you do when your real value is negative. You better learn how to eat grass now if you have the new products from ntuc.
One warning !!!! don't be fooled by the "well kept secret". The secret was Mr. Tan Kin Lian's and he didn't even boast it but the new management used Mr. Tan KL's backside skin for their face.By now you should know that they will stoop to anything.
The right thing to do is dump the products into the kallang river and watch how many will die of them. Don't keep them. It is rotting and it will smell.Challenge any of the agents to prove otherwise.

Anonymous said...

Don't buy par products from any company.
You should know by now that they are are products meant to enrich the insurance aagents and the insurers. Lorna Tan, Mr. TanKL , Dr.Money all have written about the scam and deception of these products. In Other countries the consumers are avoiding these products because they are scams.

Zhummmeng said...

The longer you hold on to your endowment or whole life or anticipated endowment you are accumulating more losses.What does it mean? It means you have lost the opportunities for higher gain or looking from another angle you are locked in reinvestment risk.
So it is better to cut losses and adopt a BTITR strategy.There are many reasons why BTITR is superior.
1. you seperate the insurance from the saving
2. you can afford higher coverage and therefore you can be adequately covered.
3. your return is superior and less risky than whoelife or endwoment from the start.
4.it is more liquid and you can use it when you need it WITHOUT having to borrow and PAY HIGH INTEREST. (it is madness to borrow your OWN money and pay interest. This is a WL or endowment crap, isn't it?)
5.you can take charge and decide the return and the portfolio and the risk WITHOUT BEING PUT TOGETHER WITH OTHER PEOPLE WHO MAY NOT HAVE THE SAME OBJECTIVE AND RISK AND EXPECTATION AS YOU.
To the insurer WL or endowment is a 'one size fits all portfolio'. to the insurance agents it is a cure all product'. another insurer/agent crap.
6.fear of insurance lapses? rubbish... the premium is low and affordable and it can be paid from your saving which is attracting higher return.
7.peace of mind....enough protection and it is accumulating real growth , above inflation.
Another important thing is having an honest and competent adviser with tertiary financial and investment qualification like CFP or CFA.
Please avoid insurance agents.They are salesmen who peddle products for their own interest.They are like koyok salesmen at the Waterloo Street .That is why you have only whole life and endwoemnt, and worse if you have cashback anticipated endowment. Using insurance agents is like employing a fox to take charge of your chicken house or a thief to manage your piggy bank.

Anonymous said...

It is understandable that people talked about NTUC Income as it is quite obvious that products bought from other insurance companies is clearly heads they win, tails you lose kind of products so people did not think that the writer was referring to products bought from another insurance company since it is well known that it does not give value. It is only in the last two years since the new management took over that NTUC Income has joined in the bandwagon of high falutin rhetoric but issuing toxic products. Hardly surprising, since the top management has decided to hire a foreigner cum ex-commercial ceo to replicate the toxic process, thereby destroying the good NTUC Income brand name steadily but surely.

Anonymous said...

NTUC is trying to get out of your shadow, Mr.Tan.
His rebranding is for this purpose and he wants to show that he is more capable than you. That is why he was boasting that since he took over sale was up. But ask him at what price? Is he making profit for the company or just raking in revenue using the greedy agents and then pay off all the expenses from the orphaned money account.
He even has the logo changed into a jaundiced color. From now ntuc looks jaundiced.Maybe he can continue to fly kites if the business is jaundiced too.But unlikely because his greedy agents will do anything to push the juandiced products to their unwary and trusting customers.

Anonymous said...

I wonder how life style can be associated with insurance. This crappy ceo is trying to , to reach to young generation with so called lifestyle products. How? to serve the customers in posh outfits by salesmen who don't know insurance from one end to the other? He is a crappy jerk with highfalutin idea with one aim to decieve the public.
With expensive, low return and protection products can the masses be served? Can the man in the street afford enough? With unqualified agents product pushing koyok man , how to help the poor folks?
I think he is desperate. He is confused. The man in the street will intermidated by the posh places. They need plain vanilla products and not dubious confusing products with layers of toxic. It is contradictory.

Anonymous said...

SG's inflation rate has tripled from 2007 to 2008 to 6.7%. Of course if you had decided to lock away a sum of money to achieve the financial objective of funding your child's education a few years from now, you also must consider the that the amount you get back upon maturity (assuming you're going to put the money from your 4 endowment plans to roll in a particular instrument) should be able to cover the losses you suffered, opportunity costs since the day you decided to lock away your money and also to make at least a slight profit from it upon maturity.

In Feb and March earlier this year, some of clients got back the money that they had set aside since 6 years ago and were happy that despite the current economic situation that they still would be able to achieve a positive return, and similar to your case, their kids are studying in local Unis since the 1st week of August. They told me that they were skeptical esp nearing the maturity of the program, esp when they are not rich pple and not savvy at other investment or money growing instruments, but they are happy now and I'm happy for them and their children.

Anonymous said...

I don't think he can acheive the feat of Mr.Tan KL.
He is big bullshitter. heis not sincere. he is good with his sweet talking . he means nothing. he talks cock sometimes. he says insurance for many but he is thinking of products for the young gen. He is getting out of hand.

Anonymous said...

This is the modus operandi of the wall street kind of Salesmen. With such kind of management, it is a foregone conclusion that the tactics used would include ramping up sales figures at any expense, because at the end of the day, the figures shown will be cunningly slanted to reveal only the high sales figures, to justify any bonuses and self accredited success. I worry for policyholders who are holding on the their policies as these kind of tactics usually take years to lose their value but when it does, it goes with a big bang. By the time the bang occurs, it will be too late, just like many of the investors who found out too late and now have to rely on the mercy of the financial institutions and the lame regulatory authorities.

Anonymous said...

wholelife and anticipated endwoment policyholders must wake up and cut losses now and start investing. Yes, there are initial losses but the catch up is fast and eventually will far exceed the endowment return over the same period but more importantly able to achieve the target at lower cost.
Risk? invest regularly with the right portfolio carries lower risk than endwoment. Endowment is also invested in the same instruments but of different allocation and it is also subject to the higher risk. Consumers msut think that wholelife and endwoment have no risk. The fact they give very low return is proof that they are riskier. Try to understand these products and why insurance agents push these products because of the high commission and not because they are good for you. The above is just one of many policyholders who realise it after a long time.There had been warning that you look into waht you have bought from insurance agents before it is too late.
When FISCA is ready please get a reveiw of your existing policies to check for mis-selling before it is too late.

Anonymous said...

For the sake of your family don't buy par products like wholelife and endowment. They are only sold by insurance salesmen who are only interested in the commission.
Consult FISCA if you are approached by insurance agents trying to sell you these products.

Anonymous said...

Walau eh!! *** There are Double A Insurance Company going to Ngee Ann Poly selling endowment policies. Well, since students are unlikely to buy equities, so buy endownment lor.

If that is really a lose money stuff (Read: The interest rate is way more than fixed deposit), how they can help their clients? (Of course the young gen want at least 500k - but isnt the more the merrier? , a HDB 4 - 5 room for prudent ones or condo for others and a car (Audi for not as prudent one)

And the group of agents are top performing agents of the company!!

Something must be done by MAS. My parents say it is likely that nowadays parents like themselves (Age 40+) dun buy such stuffs and therefore need to make business from the new market (Read: Students)

How can I imagine in other poly and uni as well. I bet my best bet is to study uni overseas so as to avoid these people.

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