4 Fears About Savings & ILPs (And Why They Aren't True)

byLauren Dado

Dec 08, 2023
4 mins

In a recent study, it was found that 1 in 3 Singaporeans do not invest. Although easy-to-use and understand products like Investment-Linked Plans (ILPs) exist, Singaporeans seem to prefer typical savings plans, which are perceived to be simpler and safer for a typical man on the street to kickstart his financial planning.

Committing to a savings or endowment plan, where potential returns are illustrated, is seemingly easier to grasp as opposed to investing, where one needs to understand the risks versus returns and how to diversify risk or select the right funds. To really optimise your investment, one also needs the interest and stamina to regularly monitor the funds’ performance and make changes were needed.

Unlike buying a smartphone, which you can enjoy immediately, the benefits of a financial plan is only realised after years. What if your circumstances change halfway through the payment period? What if you need the money you invested, but can’t access it?

There’s a lot to be afraid of – or so you think.

Let’s confront the most common fears about ILPs (both Single Premium ILPs and Regular Premium ILPs), and discover why committing to one as part of your financial masterpiece isn’t as terrifying as it seems.

Fear 1: I won’t be able to keep paying the high monthly premiums

Did you know that you can start saving with a Regular Premium ILP (RPILP) like AstraLink from as low as $100 a month?

It’s not true that only high-income professionals or people with massive savings can benefit from having a financial plan. Quite the opposite – RPILPs are designed to suit anyone’s ability to pay. Getting one won’t cause you to miss out on other financial obligations.

If monthly payments are too frequent for your liking, you also have the option to pay quarterly, half-yearly, or yearly.

Regardless of the amount you’re paying or your payment frequency, the important thing is that you pay your premiums regularly. Doing so lets you take advantage of market fluctuations, so in the long run your account value will be able to see an overall growth at a steady rate.

In case you have an unexpected expense and can’t afford the monthly payments, most RPILPs allow you to skip your premium payment for some time (or take a break). The best part – you’ll still get life insurance coverage as long as the account value does not run out during this period, so you remain fully prepared for the unforeseen. Once you are ready to resume paying your premiums, you simply pick up from where you left off.

If you’re considering a Single Premium ILP (SPILP), you can fund the one-time payment using your annual bonus, or an amount you have saved up, with amounts starting as low as $10,000¹. Even though you have purchased a single premium plan, you can still top up your investment with a lump sum¹ or switch² your investment into another available fund as often as you wish

Fear 2: I have to pay for insurance I don’t need

ILPs offer you both wealth accumulation and protection, with investments that can potentially offer higher returns than other plans, and insurance protection too. But what if you want to invest more money in wealth accumulation, and spend less on life insurance? Will an ILP mean being stuck with insurance you feel you don’t need?

For SPILPs, most of the insurance coverage is at no additional cost, but still remains adequate to safeguard your investment in the event of the unforeseen. In such situations, the payout you’ll receive will be either the premium invested or the total value of your fund investment, whichever is higher.

Here’s a little-known fact: most RPILPs allow you to adjust your insurance coverage as needed. When you sign up, you can choose the coverage and riders that suit your circumstances. Later, you can make adjustments to your insurance coverage so that more of your premiums goes into wealth accumulation.

Take for instance Income’s AstraLink. AstraLink provides a retirement option so you may reduce the sum assured of the policy up to zero from age 55 onwards and after your chosen MIP so you can maximise wealth accumulation to reach your retirement dreams.

Fear 3: I can’t access my money until term maturity or until I’m old

Investments and savings plans should not be treated like an emergency fund. These plans are designed to maximise your money’s growth for a fixed time frame. But what if your emergency savings get wiped out, and you only have the savings in your RSP or ILP to fall back on?

It’s easy to assume that an ILP will lock up your savings until you retire. With Income’s plans, however, you don’t need to wait until you’re old or until the term maturity to start enjoying the fruits of your investments.

Income’s WealthLink lets you withdraw amounts of at least $500 whenever you wish, as long as you hold a minimum of $1,750 worth of units under each selected fund or $3,500 worth of units across all funds under the policy.

Fear 4: Insurance savings plans are a lifelong commitment

Many people hesitate to get an ILP because it seems like such an inflexible, lifetime commitment. What if you don’t want to keep paying premiums for the next 20 or 30 years where you desire more freedom?

Income offers the choice of SPILPs which is a one-time commitment with the option to top-up, and flexible RPILPs for you to adjust your premium commitment whenever you want

Need Help Crafting Your Financial Masterpiece?

Now that you know there’s nothing to fear about ILPs, it’s time to act! Keeping all your money in the bank won’t make it grow.

Discover which financial plan can best help you achieve your financial goals by reaching out to an Income advisor online.

Important Notes:

¹ A premium charge of 3.5% will be deducted from both the initial single premium and top ups (if any).

²Minimum switch amount is currently set as $1,000 each time. There is no limit to the number of switches per year. There are currently no charges for fund switching.

Investments are subject to investment risks including the possible loss of the principal amount invested. Before committing to the minimum investment period, you may want to consider how long is your investment expectations or needs and whether you are able to keep up with the premium payment should your financial situation changed. Past performance, as well as the prediction, projection or forecast on the economy, securities markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of the ILP sub-fund. The performance of the ILP sub-fund is not guaranteed and the value of the units in the ILP sub-fund and the income accruing to the units, if any, may fall or rise. A product summary and product highlights sheet(s) relating to the ILP sub-fund are available and can be obtained from your insurance advisor or online at www.income.com.sg/funds. A potential investor should read the product summary and product highlights sheet(s) before deciding whether to subscribe for units in the ILP sub-fund.

This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income Insurance products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income Insurance advisor. This advertisement has not been reviewed by the Monetary Authority of Singapore.

These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact Income Insurance or visit the GIA/LIA or SDIC websites (www.gia.org.sg or www.lia.org.sg or www.sdic.org. sg).