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Infinite VIP from Tokio Marine
23 Mar 2015 (30 views)

Dear Mr. Tan

I want to seek your independent advice about the Infinite VIP from Tokio Marine. It is recommended to me by an agent.

The plan requires me to invest a single premium of $133.350. After 5 years, it pays an annual return of between $4,000 to $6,000 (projected on an investment return of 3.25% and 4.75% respectively) for the rest of the life of my son, who is now 11 years old.  The actually payout is made monthly.

Is this a good plan, compared to investing the same sum in the STI ETF?

REPLY

The return from the Infinite VIP plan is very bad. It is better for you to invest the single premium in the STI ETF.

Based on the investment policy of Tokio Marine where only 37% is invested in equities and 63% is invested in bonds and cash, the investment return is likely to be, at the very best, 4% per annum. This is midway between the two projected returns.

The payout is likely to be $5,000 a year, instead of $6,000.

The STI ETF earned an average return of 9% per annum over the past 20 years. We should allow for a lower return in the future, but it should easily be more than 5% per annum.

To be on the conservative side, I have projected a return of 5% per annum.

Take a look at the table 1 and table 2 in the PDF.

In table 1, I simulated the situation where your single premium is invested in the STI ETF to earn 5% per annum and an annual sum of $5,000 is withdrawn from it, and assuming that the policy is surrender at age 85, the cash value of the Infinite VIP at that time is $120,015, compared to a balance of  $2,088,000 in the STI ETF!

In Table 2, I simulated the situation where the annual withdrawal is $6,000. At age 85, the cash value of the Infinite VIP is $133,350, compared to a balance of $1,470,000 in the STI ETF.

The difference is staggering.

POOR PAYOUT FROM INFINITE VIP

There are two reasons for the poor payout of the Infinite VIP.

  • The investment return is lower, as 63% is invested in lower yielding bond and cash
  • The effect of deduction (i.e. the amount deducted by Tokio Marine to pay the agent and for its profits) is staggering. This is shown in page 6 of the benefit illustration. The insurance company is taking away FAR TOO MUCH from the policyholder!

Tan Kin Lian

 

 

 

 



Infinite VIP from Tokio Marine
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Dear Mr. Tan

I want to seek your independent advice about the Infinite VIP from Tokio Marine. It is recommended to me by an agent.

The plan requires me to invest a single premium of $133.350. After 5 years, it pays an annual return of between $4,000 to $6,000 (projected on an investment return of 3.25% and 4.75% respectively) for the rest of the life of my son, who is now 11 years old.  The actually payout is made monthly.

Is this a good plan, compared to investing the same sum in the STI ETF?

REPLY

The return from the Infinite VIP plan is very bad. It is better for you to invest the single premium in the STI ETF.

Based on the investment policy of Tokio Marine where only 37% is invested in equities and 63% is invested in bonds and cash, the investment return is likely to be, at the very best, 4% per annum. This is midway between the two projected returns.

The payout is likely to be $5,000 a year, instead of $6,000.

The STI ETF earned an average return of 9% per annum over the past 20 years. We should allow for a lower return in the future, but it should easily be more than 5% per annum.

To be on the conservative side, I have projected a return of 5% per annum.

Take a look at the table 1 and table 2 in the PDF.

In table 1, I simulated the situation where your single premium is invested in the STI ETF to earn 5% per annum and an annual sum of $5,000 is withdrawn from it, and assuming that the policy is surrender at age 85, the cash value of the Infinite VIP at that time is $120,015, compared to a balance of  $2,088,000 in the STI ETF!

In Table 2, I simulated the situation where the annual withdrawal is $6,000. At age 85, the cash value of the Infinite VIP is $133,350, compared to a balance of $1,470,000 in the STI ETF.

The difference is staggering.

POOR PAYOUT FROM INFINITE VIP

There are two reasons for the poor payout of the Infinite VIP.

  • The investment return is lower, as 63% is invested in lower yielding bond and cash
  • The effect of deduction (i.e. the amount deducted by Tokio Marine to pay the agent and for its profits) is staggering. This is shown in page 6 of the benefit illustration. The insurance company is taking away FAR TOO MUCH from the policyholder!

Tan Kin Lian