Thanks EK and WT
With a fresh pair of eyes, terminating this ILP is the right thing to do.
The ILP in its true form:
About 76% of the first 18 mths (initial units). (and its promo free units) is held back as insurance premiums payable on 101% of the total unit value if I die within the 25 years. The premiums are deducted at 6% of the initial units each year (front loaded premiums). If I dont die, then this 10,300 (before free units) is the total premiums it will get. I didnt get this policy for the death benefit coz I have other life policies. In any case this 10k is sunk cost for a useless death benefit.
Basically this is like buying unit trusts, except
a) the chosen underlying fund is given a rating of “Below average” by Morningstar,
b) the fund’s total expense ratio is 2.7% (almost double of the CPFIS standard of 1.5%)
c) the fund manager has consistently underperformed his benchmark even by buying index funds
d) I think there are trailing fees (8.47%) on the value at time of redemption
e) the fund is on the Isle of Man (tax haven with shady deals) and is now denominated in GBP.
I used to play unit trusts, so based on these factors alone I already do not like the fund, it forces me to think about currency and a whole lot of indexes which I really am not interested to follow. Besides when I played unit trusts, I also do buy / sell when analyzing trends and peaks. So being locked in for 25 years with a forced outflow is really not cool.
Apart from the total expense ratio (2.7%) and 1.2% admin fee, LOLZ, seriously if I take the 750 monthly amount to buy SGX on BCIP, my cost is about 5.04 or 0.67%. Cost wise I beat this hands down as there is no annual managment fee and blah blah shit.
Even if I consider the alternative of putting the 750 monthly to SRS and buy SSB at 2% average yield, my returns are at least 11.85% (incremental tax rate) + 2% = 13.85%. For doing two very simple online transaction. I dont need the money to beat some stupid benchmark and lose 11+% in one quarter. If I put it to CPF SA or buy SGX at current yield of 4.5%, I think I won’t do too badly.
All in all, for a somewhat average investor, I think this is a waste of my $$ and time. For those who might be less learned, nah too much cost and stupid premiums for a death benefit on my cash (but reduced by these deductions and expenses).
You will need a very good fund that can consistently deliver probably 5% every year for 25 years to break even. Don’t bet on it.
I think I can salvage 26k now (before the market turns worse) or try to time the minibull, but I think running now is a safer bet.
Alas the liquidation of this policy shall be “Project Liberation”.