10 SRS Investments to Consider Especially if you are 40 and older Retirement

10 SRS Investments to Consider Especially if you are 40 and older

If you are reading this, you probably have an amount of money in your SRS account. As the interest in the SRS account is 0.05%, you are also probably thinking of investing that amount. In the 6 Levels Wealth Karate, one of the key pillars of your financial journey is building up your investment portfolio and that includes your SRS account.

If you are unsure what SRS is, please refer to comprehensive SRS guide that was written previously.

Start Here: The $1 SRS Strategy

Basic Knowledge: 5 things you need to know about SRS when you are 40 and older

Your SRS Overseas Retirement Guide: 3 things you need to know about SRS if you plan to leave Singapore

Today, we focus on the 10 Investments you can consider using your SRS.

(Disclaimer: We will be explaining each concept with a real life examples. Please note that, those are not buy/sell recommendations. The suitability of the investment vehicle depends on each individual. Please talk to a competent financial advisor for more details.)

 

Investment #1: Fixed Deposits

A fixed deposit is an investment vehicle that pays account holders a fixed interest in exchange for depositing a certain sum of money for a certain period of time. It is very popular among the older generation as it is virtually risk free as long as the bank doesn’t collapse. Even if it does, your deposits are still protected, up to $50,000, thanks to the Singapore Deposit Insurance Corporation.

I have pulled up an example to showcase fixed deposits. It is worth noticing that after the 13th month, the interest will become more significant. Also if you are putting your money for 6 months or less, the interest is 0.05% which is indifferent for you to not put into a fixed deposit anyway.

10 SRS Investments to Consider Especially if you are 40 and older fixed deposit

10 SRS Investments to Consider Especially if you are 40 and older fixed deposit

 

Investment #2/3/4: Singapore Government Securities

Singapore Government Securities are debt instruments that are fully backed by the Singapore Government. Singapore Government Securities includes Singapore Saving Bonds (SSB), SGS Bonds and also Treasury Bills.

For SSB and SGS Bonds, you will receive interest every 6 months. If we put the definition loosely, it means you are lending money to the Singapore Government to receive a interest.

For Treasury Bills, it does not issue interest/coupons. You will receive the face value at maturity. If we put the definition with an example loosely, you are paying $0.95 now to get $1.00 in a xxx time frame.

I have taken a screenshot of the detailed comparison of the 3 securities here. Do check out more information on the MAS Website.

DBS has also created an extremely useful step by step guide to help you in your purchase of the securities.

10 SRS Investments to Consider Especially if you are 40 and older Singapore Government Securities

10 SRS Investments to Consider Especially if you are 40 and older Singapore Government Securities

 

Investment #5: Bonds

Bonds are basically debt instruments as mentioned above. However, I have separated bonds with the above SSB/SGS bonds because bonds can issued by companies etc. In a simple nutshell, the better the credit rating of the bond issuer, the lower the returns (or the coupon rate).

There are 3 main ones that you can purchase. Firstly, individual bonds, Bond ETF Funds, and Bond Unit Trusts (more on ETF/Unit trust in a while).

A popular example of a bond is the Astra V PE Bonds Class A-1. It was popular because the bond was issued by Temasek Holding’s subsidiary, Azalea. It was offering 3.85% annual interest for it’s bonds and was 7.2x oversubscribed in 2019. In this bond, you can see their investment diversification on their website. (Again, this is not a recommendation)

10 SRS Investments to Consider Especially if you are 40 and older Astrea V Bonds

10 SRS Investments to Consider Especially if you are 40 and older Astrea V Bonds

 

Investment #6: Stocks

A stock (or equity) is a security that represents the ownership of a fraction of a corporation. Loosely define, you are a partial owner of the company when you purchase the company’s stock.

There are several methodologies that you can use to invest in stocks. Recently, the hottest topic around is whether Value Investing Is Dead Or Maybe Not. I have also written about a hidden gem in the Singapore Stock Exchange that might have short term capital appreciation in the next 6 months. If you are interested in banks, I have written about DBS business and opportunity.

The example I will be using is an evergreen stock in the Singapore Stock Exchange called Singtel. It is important to know what you are investing in. Most people only recognized Singtel for its’ mobile and data internet service, but do you know that >50% of their revenue comes from something else? Stock investing require greater skills and mental fortitude. I strongly encourage you to learn more about stock investing before dipping your toes into it.

PS: You can only invest in stocks listed in the Singapore Stock Exchange using your SRS.

10 SRS Investments to Consider Especially if you are 40 and older Singtel Business Revenue

10 SRS Investments to Consider Especially if you are 40 and older Singtel Business Revenue

 

Investment #7: Reits

Reits (real estate investment trusts) are the same as stocks except they invest only in real estate. They tend to have higher distribution yield as compared to stocks because of their consistent cashflow from rental. Similarly, you can only invest in a Reits that is listed in Singapore. At the end of 2019, Singapore has 35 REITs, six stapled trusts and two property trusts.

An example is the Mapletree Industrial Reits. Its principal investment strategy is to invest in a diversified portfolio of income-producing real estate used primarily for industrial purposes in Singapore and income-producing real estate used primarily as data centres worldwide beyond Singapore, as well as real estate-related assets.

As at 30 September 2020, MIT’s total assets under management was S$6.6 billion, which comprised 84 properties in Singapore and 27 properties in North America (including 13 data centres held through the joint venture with Mapletree Investments Pte Ltd). MIT’s property portfolio includes Data Centres, Hi-Tech Buildings, Business Park Buildings, Flatted Factories, Stack-up/Ramp-up Buildings and Light Industrial Buildings.

10 SRS Investments to Consider Especially if you are 40 and older Mapletree Industrial REITS

10 SRS Investments to Consider Especially if you are 40 and older Mapletree Industrial REITS

 

Investment #8: ETFs

ETFs are called exchanged traded funds. An ETF typically replicates a specific index (for example, the Straits Times Index or the Singapore Market). The main feature of an ETF is that it is passively managed and do not try to outperform the underlying index. They usually have lower fees and charges as compared to actively managed investment funds such as unit trust.

Currently, there are 39 ETFs listed in the Singapore Exchange.

One example is the SPDR® S&P 500® ETF Trust (S27). They are investing in the 500 companies in the S&P500. You can take a look at the top 10 holdings of this ETF.

10 SRS Investments to Consider Especially if you are 40 and older SPDR ETF

10 SRS Investments to Consider Especially if you are 40 and older SPDR ETF

 

Investment #9: Unit Trust

Unit Trust is a fund that invested in a portfolio of assets according to the fund’s stated investment objective and investment approach. It is usually more active than ETFs. Unit trust could be diverse because there could be infinite investment approaches in the world.

You could invest in a dividend fund, a growth strategy fund, a commodity fund, a growth strategy in emerging countries, a dividend strategy fund in a developed market (I think you get the point now), etc. Because unit trust is so broad, we will not be giving an example. I feel it is best to work with a financial advisor to discuss and find the most appropriate unit trust for you.

 

Investment #10: Single Premium Insurance Product

A single premium insurance are usually retirement/annuity/accumulation products. Not all insurance products can be bought using the SRS.

There are 2 strategies in general. One being a lump sum payout at maturity or a stream of income in the future, starting from a date of your choice. A portion of your investment returns are guaranteed as compared to investment #5/6/7/8/9. This appeals to those that are seeking a more conservative and steady income stream during retirement. There is also a possibility of bonuses that are non-guaranteed.

Please feel free to contact me to have more information on these.

PS: An article isn’t complete unless there is a photo of retirement with 2 loving elderly =)

10 SRS Investments to Consider Especially if you are 40 and older Retirement

10 SRS Investments to Consider Especially if you are 40 and older Retirement

 

Final thoughts by Wealthdojo

Whichever the financial vehicle that you are deciding, it is important to understand and know your risk profile, knowledge level, budget, income etc to make a good investment decision.

I wish you all the best in your investment. Do contribute to your SRS before 31 Dec if you wish to have tax benefits for your financial year.

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Fees

3 Brutal Truths about Investment Linked Policy You Wish You Knew

Investment Linked Policies or ILPs have been an ideal target to be bashed by many personal finance groups and investment gurus. In your wealth management journey, perhaps an agent might have ethically (common assumption used by those groups/gurus) told you or sold you an ILP before. Hence, you might start to think whether the ILP does make sense for you.

These Groups/Gurus’ bottom line: Cancel Your ILPs. The fees are expensive. Buy term, invest the rest. You can get better investment returns.

Wealthdojo’s bottom line: ILP is suitable if you are looking for a booster in coverage for a short period of time and plan to accumulate shares/units in a systematic way. You have a more passive approach to investment. An ILP works ideally when you are younger.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Confused

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Confused

So what now? Disclaimer aside, I hope to share with you 3 brutal truths on ILP and the current narration on ILP in the market.

 

Short Recap

Investment Linked Plans are policies that have life insurance coverage and investment components. Your premiums are used to pay for units in one or more sub-funds of your choice. Some of the units purchased are then sold to pay for insurance and other charges, while the rest remain invested. (Moneysense Definition)

In a layman structure, it looks like this.

Pay Premium > Buy units of the funds at today’s price > Some units are sold to pay for insurance > Wait for next month premium

The units accumulates every month via dollar cost averaging and will build up substantially in a long run. Let’s go on to the brutal truths for ILP.

 

Truth #1: You will pay fees.

This reminds me of a story of a man buying cake for his son’s birthday. After looking at various cakes, his eyes soon fell on a 7-inch strawberry fresh cream cake that stood at the center of the display. This shop is famous for their fresh cream and his son loves fresh cream.

Man: “This cake looks beautiful. How much is this cake?”

Baker: “It costs $97 sir”

Man started to be agitated: “That’s ridiculous. It is just a bunch of strawberries, flour, eggs and sugar. This is a rip-off!”

Baker said calmly: “Sir. You are right. Therefore, we have something just for you”

The baker brought him to the corner and showed him a bunch of strawberries, flour, eggs and sugar and said: “Those will be $13”

Man: “I don’t understand. What do I do with a bunch of strawberries, flour, eggs and sugar?”

Baker: “Well, that’s what we are paid to do.”

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Fees

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Fees: Source

The simple truth is that there will be fees. When you enroll into an ILP, you are paying for insurance, you are paying for wealth management and miscellaneous administrative fees which includes commission for the consultant. You are paying to enroll to a service which consist of insurance protection and investment accumulation.

The narration in the market is that an ILP’s charges are expensive and expensive is a subjective word. Perhaps, it is better to put things side by side with insurance and investment.

Let’s take a look at insurance. I will be comparing our National Insurance Dependent Protection Scheme (DPS), as compared to XXX company’s ILP charges per age band (I personally believe the charges are very similar across companies). We will compare using a basis of $46,000 sum assured for Death and Total Permanent Disability (TPD).

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Insurance Charges

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Insurance Charges

As you can see, the charges for XXX’s company is lower than DPS for all ages except for 55 to 59. This shows that rates are quite competitive. As you become older, you pay more for insurance as the chances of you suffering from Death and TPD increases.

You can also see an element of the popular advice buy term invest the rest here. On an ILP, we contribute a premium monthly. Part of it is used to pay insurance. In the table, we pay for the required insurance charges at that age and the rest goes into investment. If you add on other unit deducting riders like critical illness and early critical illness, you should pay more premium so that you won’t have too little going into investment.

Note: DPS is due for a change and there could be a chance the insurance companies might follow as well.

 

Let’s talk about investment now. As the strategy for an ILP is mostly passive, it might not be a fair comparison to other investment methods that might be more active. I will give an attempt to compare the fees across various personalities.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Investment Charges

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Investment Charges

The current narrative from investment gurus are that the ILP has high upfront charges of up to 50% of the premium. It is the same for investment courses as well. They do charge a high upfront course fee of around $3000 to $5000. Furthermore, I assume there are no other upsell programs after that.

Another common narrative is that the 1.25% p.a. fund management fee will reduce the investment returns in the long run. This is a true statement as any expenses will reduce your investment returns. Recently, investment courses are also changing to provide continuous support at a fee of $49 to $197 per month. This is akin to having a “fund management fee”.

For those that are self taught investors, he/she might have save on the cost. However, I can only imagine how huge the time commitment he/she dedicated into learning how to invest. One can say to invest in a passive S&P500 index fund with low expense ratio. Then again, how long will you take to reach this decision? How many mistakes might this person make before doing that?

Fees will have to be paid. It is just a matter of to who and how.

Side note: It may not be fair to compare anyway. An investment course does not have insurance coverage. Similarly, an ILP is not an active strategy as compared to some investment courses. The lessons you learn from investment courses are also priceless.

 

Truth #2: If you pay peanuts, you will get peanuts.

Whether it is an ILP, endowment or ETF, if you pay peanuts, you will get peanuts.

This is rather straightforward. I know some people who may have unrealistic expectations on the money they are saving or investing. A $100/month policy or a $100/month ETF is not going to buy you your financial freedom. If you invest $100/month for 30 years with an 10%, you will get $197,392 which is decent but definitely not enough for retirement.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Invest Small

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Invest Small

This year, I presented a few maturity cheques varying from $15,000 to $60,000 to some of my clients. I excitedly told one of my clients that his maturity cheque is coming in August 2020 and told him to look out for it. He took me out for coffee and asked me how much he was getting. After checking my portal, I told him the amount was $22,000.

He took a sip and exclaimed “Why only $22,000? I has been paying for 25 years.”

“Uncle, you were saving $50/month. In total, you saved $15,000. Personally, I think this is a decent return.”

A short while later. He confessed that he should have saved much more when he was younger.

Imagine there is an investment that can give you 100% returns. If you invest $100 in it, the maximum you will get back is $100. $100 in absolute is not a lot. Therefore, it is very important for us to save up our first pot of gold or simply increase the amount of regular contributions every month.

 

Truth #3: Not everyone you meet will be interested in investing

Sometimes, we forget that we look at others with our tinted lens. We tend to judge a decision and call foul when it is a decision that is not consistent to our own belief. In a recent viral article, a young couple in their 30s paid off their $470K HDB loans in 2 years.

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Opinions

3 Brutal Truths about Investment Linked Policy You Wish You Knew ILP Opinions

This is a feat that is not easy to many. However, this sparked off a huge debate on many personal finance groups saying how financial “Illiterate” they are. They could have made use of the low interest environment to pay off their loans and use the money to invest in other things.

First, I would like to congratulate them. They are debt-free and it is something money *ahem* can buy. If their objective in life is to live a life that is debt free, they are already successful.

Not everyone you meet will be interested in investing or willing to spend loads of time to look into investment. Therefore, the ILP gives a simple disciplined dollar-cost-averaging strategy to accumulate the units of the recommended portfolio funds.

If you are a disciplined investor, feel free to buy term and invest the rest. Please do not expect everyone else to think like you.

 

Final thoughts by Wealthdojo

I’m not advocating ILPs. At the end of the day, the ILP is a wealth accumulation and insurance tool that can fit into a certain profile of individuals. It may be suitable for certain groups of individuals. Personally, I feel that the narration of the ILP has been viewed with tinted lens. Those people are right in their own aspects and life stages.

If you are unsure if the ILP is still suitable for you, please feel free to write in to me. I would love to help you understand it together.

 

Join my Telegram Channel for a tip a day! In Wealthdojo, we dedicate a small amount of time daily for learning new things. Continuous learning is one of the greatest secrets of success.

For those of you who want to turbocharge your journey, contact me at chengkokoh@gmail.com. I would like to hear from you what your experiences are currently and from there, we develop a plan specially catered just for your journey.

We wish you all the best! Stay Safe and Take Care!

Chengkok, Sensei of Wealthdojo.

Careshield Life New Updates

Why you shouldn’t pay $200 for your Careshield Life

In 02 Sept 2019, The Singapore Parliament approved Careshield Life. This is the 3rd Shield that Singapore has to prepare our population in this aging economy. We will be covering how will Careshield Life be part of our Wealth Management journey and whether it will be enough.

Careshield Life New Updates

Careshield Life New Updates: My Letter

 

What is Careshield Life?

CareShield Life provides Singapore a Lifetime* payout of $600/month up to $1200/month** in the event of severe disability. The premiums can be fully paid by Medisave. The government ensures that no one will lose their coverage due to financial difficulties. The claim will be eligible if a person is unable to perform at least 3 out of 6 activities of daily living.

Careshield Life New Updates Activities of Daily Living

Careshield Life New Updates Activities of Daily Living

*As long as the insured remain severely disabled
**Estimated payout if increase at 2% a year

 

Why will you need it?

I hope you can agree with me that once a person is unable to perform 3 out of 6 activities of daily living, he/she probably will need help to maintain and sustain his/her life. In the 3 Lessons I Learnt From Critical Illness Survivors and Family Members, I learnt that a family member typically have to help the survivor for at least 6 months or until the treatment is over. If the disability is prolonged, most of them will choose to employ a maid to take care of them.

In recent years, the monthly recurring cost of hiring a maid (excluding the one time cost such as plane tickets, etc) is easily more than $800. This does not include other options like nursing homes, home and community care, transport, consumables and so on.

Based on AVIVA’s Long Term Care Study 2011 showed that claimants on average required about $2,150 per month to pay for a domestic helper or nursing home, transportation to and from the hospital for treatments or physiotherapy, mobility aids, as well as daily expenses and bills.

A Department of Statistics Singapore paper published in 2011 showed that, in Singapore, more than a third of caregivers had been providing care to their recipients for over a decade.

In the Eldershield Review Committee Report in 2018, 1 in 2 healthy Singaporeans aged 65 could become severely disabled in their lifetime.

With the statistics stacked against you, I personally think that the $600/month from Careshield life will not be enough.

 

Careshield Life New Updates Cost

Careshield Life New Updates Cost: Photo Source

 

I already have insurance that covers for TPD. Why make me buy this?

TPD or total permanent disability will only have a payout when it is permanent (As the name suggest. For the avoidance of doubt, please check your individual policies for the definition). If the condition is not serious enough, there may not be a claim from TPD. Careshield Life provides monthly pay outs as long as you are unable to fulfill 3/6 Activities of Daily Living either temporary or permanent. Other common severe disabilities includes the following:

  1. What if there is an amputation that is because of diabetes?
  2. What if there is an accident or degeneration of muscle?
  3. Progression of illnesses such as dementia?

 

What should you do?

If you are age 30 – 40 now, welcome to Careshield Life. It is compulsory. Those that are in eldershield (1979 and before), you can get incentive when you switch over to Careshield Life by by 31 Dec 2023. You can find out more here.

 

Final Thoughts

Personally, I think this is a great initiative by the government to address the needs of the aging population in the years to come. Those who are between 30 to 40 will probably be shocked (or pleasantly surprised) to receive this letter in the next few days.

You shouldn’t be paying only $200 for careshield. I think we should pay more for more benefits.

Long Term Care is part of your Wealth Management, speak to your financial advisors for future clarification.

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about Wealth Management, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

Please feel free to join my Telegram Channel! Or subscribe to our newsletter now!

SNACK BY INCOME NTUC REVIEW

SNACK By Income NTUC Review

I’m really excited when the insurance industry comes up with a new disruption. I believe that with disruption, there will be improvements in the overall industry. Today, I will be reviewing SNACK BY Income (NTUC) proposition to see if we can fit it inside our Wealth Management Journey.

[All opinions are my own. Please read my disclaimer section to find out more. If it matters, this is not a sponsored post]

 

SNACK BY INCOME

SNACK BY INCOME NTUC REVIEW

SNACK BY INCOME NTUC: REVIEW

SNACK By Income is a “new” insurance model by allowing customers to buy micro-insurance when one of the lifestyle triggers happens.

This means that you buy insurance (Death, TPD, Critical Illness or Accident with premium of $0.30, $0.50, $0.70 which is automatically deducted) whenever a lifestyle triggers happen (Clock Number of Steps, Take Transport, Buy Food & Drinks, Shop, Groceries, Watch Movies, Top Up Petrol, Pay for Utilities). You can decide on which triggers to allow the purchase of Insurance to happen.

There are caps at how much you can stack your micro-insurance and I believe the premiums divers depending on age of the individual. You can stop or pause the purchase as and when you want.

 

Let’s Give An Example

Example: Joanna set up his Snack By Income to deduct $0.50 for Transport and Buying Food and Drinks. During the course of the day, she takes a bus to work (first premium deducted), had lunch (second premium deducted) and then takes a bus back home (third premium deducted).

SNACK BY INCOME NTUC Example

SNACK BY INCOME NTUC: Example Normal Day Out

Each activity triggered a S$390 personal accident insurance plan with a premium of S$0.50 each. (Source: Mothership).

In total, she spent $1.50 for that day and got $1170 worth of personal accident coverage.

In a month, she would have spent $45 (30 days in a month assumption) to have $35,100 worth of personal accident coverage.

 

What I like about SNACK BY INCOME

  1. I think it is a good initiative to expose people to insurance at any age. The gamification process will attract the younger generation to look into what insurance they can have.
  2. The level of commitment of SNACK By Income is very low. The range of $0.30 to $0.70 is a very low barrier for people and they may allow the deduction to continue to take place. The premiums are also single premium in nature so the micro coverage can continue for the next 360 days without the need to continue paying for it.
  3. It is flexible. You can choose the coverage you want, start the deduction, set a weekly limit or stop the deduction at any time with no penalty.
  4. If you are afraid to approach a Financial Advisor, SNACK By Income is a APP which might be perfect.

 

What I don’t like about SNACK BY INCOME

  1. Using my example above, $45/month can get a person a comprehensive accident coverage AND (potential) pay for his hospital shield rider’s premium. If she is going to set triggers for those deduction above, I believe she is might better of with the usual insurance plans.
  2. The illusion that “They have a lot of insurance”. Snack By Income (if I may) is a bonus coverage for people to have. The micro-coverage terminates after 360 days and you have to “re-stack” up your insurance again.
  3. Commitment Issues. I worry about this most. If this creates a behaviour that they don’t have to committed to their premiums, I believe it might have a spill over effect to other things in life. (Snack by Mortgage Anyone?)
  4. Buying insurance is NOT financial planning. I think most people think that buying insurance is financial planning. In actual fact, it is just part of financial planning. There are many other things to plan for other than insurance.

 

Final Thoughts

When NTUC first launched Snack By Income, it triggered my memory of an old client of mine and I felt it may be the most suitable for them.

I first met this couple when they needed my help to do a claim. The wife works at Sheng Siong as a cashier and the husband worked as a taxi driver. They live in a HDB 3 room flat with 2 young children. The husband was down with stage 4 Colorectal cancer and had to stop working as a taxi driver.

While doing the claim, the wife showed me her bank book. I was surprised and asked her what she wanted me to see. I saw her bank balance is $1000 and she told me that she is making $1000/month as a cashier and spent around $1000/month for household expenses. With tears in her eyes, she asked me if she can purchase any insurance with that money. I knew that any insurance however good, will not be sustainable.

I believe that micro-insurance will be able to help this couple as they can choose to purchase the micro-insurance as and when they have the available budget. I believe these people will be the true beneficiaries of Snack By Income. Thank you NTUC.

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business Phew

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business?

In Wealth management, one of the major expenditure is on insurance policies to protect your downside. In the recent case for AXA, they are considering to sell of their Singapore’s business unit, this lead to some people questioning what will happen to their insurance policies when they sell away their business.

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business Worries

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business: Worries

 

Why do they want to sell away their business?

Before we explore what will happen to our insurance policies after the companies sell that business away, we need to explore why would they even want to sell that business unit away if it is profitable.

It could be any of the following reasons:

  • Business strategy has changed
  • Raise funds to divest for peripheral operations (This is AXA’s cited reason)
  • Concentrate on other business lines
  • Focusing on other geographical markets
  • Being offered a good price / Cashing out on business

The list goes on. Insurance companies also acts like normal businesses and they will probably consider the sale of that business unit when an opportunity arises.

 

Is this the first time it happened?

It happened various times in the past and I believe this will happen again in the future.

In 2003, John Hancock was bought over by Manulife.

in 2007, TM Life Asia was acquired and now known as Tokio Marine Life Insurance Singapore Ltd.

In 2010, UOB Life sold away their life insurance unit to Prudential.

In 2018, Zurich Life was bought over by Singapore Life.

Under going discussion since 2019, AVIVA is considering to sell it’s Singapore/Vietnam business unit.

Under going discussion in 2020, AXA is considering to sell Singapore’s business unit. (Special note: AXA mentioned they will not be selling their Singapore’s business unit in 28 Dec 2017)

You can see that there is a fair amount of transaction that took place in Singapore shores as well.

 

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business?

I think that’s the key to the topic today. I have contacted the Life Insurance Association of Singapore (LIA) to confirm above. This is their response. I will bold the information that is relevant to consumers.

All insurers are licensed and are regulated by the Monetary Authority of Singapore via the Insurance Act, and its subsidiary legislation, and regulations. Due to the long term nature of life insurance policies, there are provisions* in the Insurance Act which the licensed insurer has to comply with, in an event of a voluntary transfer of business or re-structure of business or business failure, to safeguard the interests of policyholders. Refer to *Part IIIAA on Transfer of Business and Shares, Restructuring of Licensed Insurer and Winding Up.

Business Transfer (Buy-Over)

Depending on the deal agreed between the two parties, the buying insurer will generally become responsible for all policies of the selling insurer. For the individual policyholder, his policy’s terms and benefits will be unchanged, and will continue to be honored by the buying insurer.

In short, suppose you hold a policy issued by Insurer A. Insurer A is sold to Insurer B, Insurer B will become your insurance company. Your policy, now under B, will be untouched and will be made good by B.

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business Phew

What Will Happen To My Insurance Policies If My Insurer Sells Away Their Business: Phew

 

Conclusion

Your policy will still be in-force and be taken care of the new insurer. The next question will then be who will be taking care of your insurance policy from then on?

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

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