Tan Kin Lian's Blog: Lower Charge on our Investment Plan

Tuesday, May 24, 2005

Lower Charge on our Investment Plan

The Straits Times printed a table to show the allocation on investment linked plans offered by various life insurers.

In the case of NTUC Income, our allocation is 85% for the first 3 years, and 100% thereafter. This means that the total charge is 45%. If you invest $1,200 per year, your total charge is $540. This goes to pay the insurance adviser and covers the expenses of issuing the policy.

Some other insurers have total charge of 100% to 150% of the premium. For an annual premium of $1,200, the charge is $1,200 to $1,800. This is much higher than NTUC Income.

Another difference is the spread on the investment. In NTUC Income's case, the spread is 3.5%. For most other insurers, the spread is 5%. A lower spread means that a larger proportion of the premium is invested.

In brief, the charges imposed by NTUC Income are quite modest. They are more than offset by the higher return earned from investing in our Combined Fund.

8 comments:

Anonymous said...: Hi, so how is it that ntuc income can charge lower?; May 25, 2005 2:49 AM
Anonymous said...: IMHO

Well...Income is a cooperative, like NTUC, help provide healthy competition in the market to bring about fair prices. Unlike commercial co, they have a social objective stronger than just societal marketing.; June 02, 2005 10:14 PM
Tan Kin Lian said...: We charge what is needed to cover our expenses. We do not aim to make a profit for shareholders.

It make sense for the investor to invest with us. You will get a better return over the long term.; June 05, 2005 8:14 AM
Anonymous said...: Recently I bought $13k of Asian Reach Management Fund with Prudential and the write-off is worth around $900. Fortunately, since the day after I have bought, the Unit Price is rising, and the $900 is being reduced to about by half, ie. $450.

I heard from the Pru Agent that most of Income's Fund is not 1 time charge, but the charge is deducted annually.

Is this true? Maybe NTUC CEO, Mr Tan can give a clearer explanation here, for all interested parties to know.; June 17, 2005 9:33 AM
Tan Kin Lian said...: All unit trusts and investment-linked funds charge the following:

- initial spread of up to 5%
- annual charge of up to 2%

NTUC Income chrages initial spread of 3.5% (compared to 5% charged by others).

Our annual charge is 1% (compared to average of 1.5% charged by others).

Over 10 years, the difference can be about 7%. So, if you invest with NTUC Income, you can get 7% more (becuase of our lower charge).

If you like to know more about how this works, you can come to the educational seminar that is conducted by NTUC Income every 2 weeks.

Call 67886616 to register.; June 26, 2005 8:25 AM
Justin Lim said...: I believe annoymous is asking about the yearly admin charge.

From reading the FAQ on NTUC's website, I understand that that there is a $30 yearly policy fee (admin charge or whatever you want to call it). However, because the cost of maintaining a policy has increased over the years, there may be an increase in the policy fee.

(http://www.income.coop/insurance/flexilink/faq.asp)

The yearly admin fee is different from the "Fund Management Fee" that pays the people who manages the funds (refering to NTUC's 1% and average of 1.5% for others).

Surprisingly, a check on Prudential's website, I found that anonymous's investment into the Asian Reach Management Fund also charges only 1%. For anonymous's lump sum investment, they also do not charge the yearly policy fee.

(http://www.prudential.com.sg/corporate_sg/products/invest/funds/ARMF.pdf); May 09, 2006 6:02 PM
hongjun said...: Mr Tan,

Do you still have the table? I saw a NTUC Income agent presenting the "table" when he was introducing IDEAL plan today. I was shocked to realize how much PruLink charges!

hongjun; May 23, 2008 12:30 AM
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