Investment Linked Plans Premium Allocation
Much has been discussed on Investment Linked Plans (ILP) since 2005 when the Straits Times published articles on the subject.
Most flak has been inflicted on the regular premium ILPs where its high cost structure (see below) is often deemed inefficient for protection coverage, hence the mantra of ‘buy term invest the difference’.
1. Distribution cost via Premium allocation
2. Cost of Insurance via escalating mortality (and morbidity) charges (yearly renewable term rates differ on age, gender and smoker status)
3. Policy Fee to administer the insurance plan (typically $5 per mth)
4. Bid-Offer spread on the fund price for deduction of units (typically 5%)
5. Fund management fee (including extra layers for mirror funds/feeder funds)
As AIA has revised their ILP series to withdraw the Achiever series (backend loaded) and replace with Investment Max series (front-end loaded), it’s timely to flash the premium allocation for the various ILPs in the market.
Investment-linked Plan Premium Allocation | |||||||
Manulink Flexi | AXA Inspire | HSBC LifeMgr Plus | Prudential Prulink | AIA Invest-Max | GE Greatlink | NTUC IdealPlan | |
Yr 1 | 15% | 20% | 13% | 15% | 30% | 15% | 85% |
Yr 2 | 54% | 30% | 40% | 50% | 60% | 50% | 85% |
Yr 3 | 54% | 55% | 45% | 50% | 90% | 75% | 85% |
Yr 4 | 102% | 105% | 100% | 100% | 105% | 100% | 100% |
Yr 5 | 102% | 105% | 100% | 100% | 105% | 100% | 100% |
Yr 6 | 102% | 105% | 100% | 100% | 105% | 100% | 100% |
Yr 7 | 105% | 105% | 103% | 100% | 105% | 100% | 100% |
Yr 8 | 105% | 105% | 103% | 100% | 105% | 100% | 100% |
Yr 9 | 105% | 105% | 103% | 100% | 105% | 100% | 100% |
Yr 10 | 105% | 105% | 105% | 105% | 106% | 105% | 100% |
