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Sunday, January 23, 2011
Poor yield from Vivo-life policy
Dear Mr. Tan
I got a quote for a Vivolife policy from an agent. I did my calculation. Apparently, the effect of deduction on the 25th yr is far from your benchmark. I also calculated the actual yield of return which is roughly 2%.
I wondered whether is the current market now offers this kind of policy to me? As in most of the company offering roughly the same amount of deductions as well, hence offering even lower yield of return?
REPLY
I have looked at the benefit illustraiton. As this policy requires the premium to be paid for 15 years, it is better to calculate the yield at the end of 15 years. The situation is worse than what you have calculated.
Taking the cash value at the end of 15 years, I found the yield to be between 0.2% to 1.1% The reduction in yield is 3.6% to 4.1% from the gross yield. My benchmark for the reduction in yield, to cover the cost of insurance and the investment service, is 1.5% for all durations. The deduction from the Vivo-life policy is far too high.
Is is better for you to invest in a low cost investment fund, such as an indexed fund or exchange traded fund, as explained in my book on financial planning. If you need insurance, you can buy insurance under the SAF group insurance scheme. Do not invest into any life insurance policy that provides a poor return.
I got a quote for a Vivolife policy from an agent. I did my calculation. Apparently, the effect of deduction on the 25th yr is far from your benchmark. I also calculated the actual yield of return which is roughly 2%.
I wondered whether is the current market now offers this kind of policy to me? As in most of the company offering roughly the same amount of deductions as well, hence offering even lower yield of return?
REPLY
I have looked at the benefit illustraiton. As this policy requires the premium to be paid for 15 years, it is better to calculate the yield at the end of 15 years. The situation is worse than what you have calculated.
Taking the cash value at the end of 15 years, I found the yield to be between 0.2% to 1.1% The reduction in yield is 3.6% to 4.1% from the gross yield. My benchmark for the reduction in yield, to cover the cost of insurance and the investment service, is 1.5% for all durations. The deduction from the Vivo-life policy is far too high.
Is is better for you to invest in a low cost investment fund, such as an indexed fund or exchange traded fund, as explained in my book on financial planning. If you need insurance, you can buy insurance under the SAF group insurance scheme. Do not invest into any life insurance policy that provides a poor return.
Guaranteed Life Annuity
Dear Mr. Tan
I am 50 years old. I do not invest in shares and keep my money in the bank to earn a low rate of interest. An agent has told me about the guaranteed life annuity from NTUC. The agent said that it gives a return of 3 – 5% per annum and I can terminate the annuity anytime and get the principal back plus interest. If you retire early U can also start the annuity payment early. Appreciate your advice.
REPLY
Please ask them to give you the benefit illustration. You can send it to me.
You should also buy my book on financial planning, to learn about better choices. See this brochure. http://projects.easyapps.sg/iShop/public/common/File.aspx?file=43
I am 50 years old. I do not invest in shares and keep my money in the bank to earn a low rate of interest. An agent has told me about the guaranteed life annuity from NTUC. The agent said that it gives a return of 3 – 5% per annum and I can terminate the annuity anytime and get the principal back plus interest. If you retire early U can also start the annuity payment early. Appreciate your advice.
REPLY
Please ask them to give you the benefit illustration. You can send it to me.
You should also buy my book on financial planning, to learn about better choices. See this brochure. http://projects.easyapps.sg/iShop/public/common/File.aspx?file=43
Potential fraud
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North South Expressway
The Government is spending $7 to $8 billion on the North South Expressway. This is a lot of money. The money is better spent to improve the feeder services, e.g. to bring commuters from their homes to the MRT station or bus terminal with a shorter waiting and journey time and capping the cost at the current level.
If the feeder service is improved, like in Hong Kong, many people will prefer to take public transport to work, rather than drive their cars. If 30% in the current cars are taken off the road, there will be no need to expand the road network and expressway for the next 10 years or more. It will be a better solution over the long term, and is environmentally sustainable.
Tan Kin Lain
If the feeder service is improved, like in Hong Kong, many people will prefer to take public transport to work, rather than drive their cars. If 30% in the current cars are taken off the road, there will be no need to expand the road network and expressway for the next 10 years or more. It will be a better solution over the long term, and is environmentally sustainable.
Tan Kin Lain
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