Buyback of Yield 15 Policy

A policyholder was sold the Yield 15 which provided a payout of 3% per annum. During a volatile period a few months ago, the insurance company offered a 100% payback of the investment, less all the interest coupons that were paid. The policyholder, on the advice of her children, decided to accept the payback offer and to lose the interest. At that time, the market price of the investment was around 90. She was afraid that the investment could drop further and in the worst case, be worth nothing.

In the subsequent months, she found that the price of the investment had improved and there is a good chance that it would safely reach the maturity period with a 100% payback. She regretted her decision to accept the payback offer and losing the 15% interest (i.e. 3% for 5 years).

I told her that she made the right decision at that time. Some investors of certain series of Pinnacle Notes had lost the entire investment due to the failure of a certain number of entities. This could have happened to her Yield 15. It is better to be safe than sorry.

She should not think about the 15% that she had lost. Her actual loss is only 5% (i.e the fixed deposit rate of interest for 5 years). She should not count the higher rate of 3% which is for a more risky product.

My same comment will apply to policyholders who accepted the payback offer from Great Easter Life on the GreatLink Choice (which is a similar product).

Tan Kin Lian