Investment linked policy (ILP)

Hi Mr Tan,
I bought a ILP for my son 7 years ago and have been paying $100 a month for this policy. I received a semi-annual statement recently and was surprised to see a loss on my investment (total invested $6,777, current cash value was $6,380). 
I went to their website to see the performance of their other funds but to my dismay, it only showed the last 20 pricing records for the individual funds, and no information for earlier years. Please advise if I should just terminate this ILP, as I don't have much confidence in this anymore. 


REPLY
Most ILPs do take about 10 years to break even. They give poor value for money, due to the high distribution cost and effect of deduction. I would advise people to avoid buying these high cost products.

For a policyholder who has already invested in the product, it is usually better to keep the policy, provided that the investment can yield a reasonable return over the next few years. This would depends on the charges.

I suggest that you write to the insurance company and ask them to show you the following for of the past years:

• what was the yield of the fund for each year
• what was the reduction in the yield due to the charges taken from your savings
• what are the projected charges for each of the next 5 years. If the charges are less than 2% a year, it should be all right to keep the policy.

Generally, a ILP is quite difficult for the policyholder to understand the charges. It is best to avoid investing in this type of policy.

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