How to Find the Best ILP in Singapore

ILPs (Investment-linked Life Insurance plans) aren’t the sexiest financial instrument around, but they’re an acceptable tool for many people who want to put their surplus savings into something that could help them grow their wealth. However, they do come with a price – fees eat into investment returns. This is why robo-advisors are so popular – they offer low management fees of less than 1% a year. ILPs also have their own costs, including sales and ongoing fees, which can add up to 2% p.a or more.

The good news is that you can find best ILP in Singapore with lower costs if you know what to look for. Typically, ILPs come with a range of underlying funds that cater to different investment objectives, risk profiles and time horizons. You can check the list of funds that an ILP offers by looking at its prospectus. If the list doesn’t appeal to you, then you can always look elsewhere.

You can also consider an ILP that is linked to a particular fund or market index, such as the Invest Flex by Manulife. This gives you the option to change the underlying funds to suit your needs over time, although it does mean you will have to pay more upfront fees to do so.

Another thing to consider is that ILPs are not guaranteed to give you better returns than other types of policies, such as endowment plans. This is because they are not structured to provide guaranteed cash values at the time of surrender, and instead rely on investment returns to generate the payouts you receive. This is why they’re best used over a long investment horizon to ride out market fluctuations.

Having said that, some ILPs offer higher cash-out benefits if you’re able to achieve certain target amounts. For example, the AIA Pro Lifetime Protector ILP allows you to build up a minimum cash value of $100,000 by accumulating units in your chosen fund over 30 years. This can be useful if you need the money for a major expense, such as your children’s education or your first home.

Aside from allowing you to build up cash-out potential, ILPs also offer other valuable features such as the ability to change coverage amounts or take premium holidays. This flexibility makes them suitable for a range of different lifestyles and financial situations. For example, young adults who are starting up their own businesses can use ILPs to accumulate wealth while still having sufficient life insurance protection in place for their family.

ILPs can also be useful for Singaporeans who are focused on a happy retirement. The earlier you start saving through an ILP, the more you can benefit from its investment bonus, which can give you up to 67% of the regular premium you’ve paid in your first policy year. This can go a long way towards kickstarting your retirement savings.

However, be careful with claims that ILPs have favourable tax treatment. These are largely exaggerated, and it’s not difficult to find low-cost diversified portfolios that will outperform your ILP investment if you choose the right funds. For example, if you are a Singaporean, you can benefit from Irish-domiciled ETFs that currently don’t require paying estate duty.