For illustration purpose only. Click above image to enlarge.
1. Monthly premium/investment of $500, for a period of 10 years
2. Platform Investment – 1.5% upfront sales charge; 1.2% annual advisory and platform fees
3. ILPs – Figures taken off a Policy Illustration from a major insurer
4. As Policy Illustrations for ILPs display surrender values at 4% and 8%, we will also employ these rates for Platform Investment for comparative purposes.
5. Endowment Plan – Figures are taken off a Policy Illustration from a major insurer
Looking at this table, we can draw these observations:
1. Based purely on financial pay-offs, Platform Investment is superior to ILPs, given the same yield, over a 10-year period. This is not surprising as ILPs are structured to include some form of lock-in period (during which surrender incurs hefty charges), and that bonus/loyalty units accrue to the policyholder at a latter stage.
2. Even if Platform Investment were to perform at only 4% returns, the performance over a 10-year period will exceed that of an Endowment Plan, despite the latter performing moderately better at 4.25% (participating fund performance). Again, this is to be expected as insurance-based plans demand a long-term commitment from policyholders, with the first few years bearing the burden of expenses and deductions.
3. The variability of returns over a 10-year period is significantly wider for Platform Investment and ILPs, than for an Endowment Plan. Do bear in mind the 4% return depicted for Platform Investment/ILPs is not even the ‘floor’ or the minimum, so in reality, the variation in returns can be even larger. The returns for an Endowment Plan are much more ‘range-bound’.