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Beware of this product sold by a bank
19 Nov 2020 (119 views)

An elderly lady went to a bank. The bank officer introduced her to a "retirement policy". It is a 16 year policy issued by a foreign company. 

The bank officer told her that she can get out her money at the end of 5 years and enjoy an interest rate of about 5% for the 5 years. The interest is about 1% a year. 

The lady invested $100,000 into this policy.

The benefit illustration showed that the surrender value during the first 5 years is as follow:

1st year $60,000
2nd to 4th year - below $100,000
5th year - $105,000.
6th to 16 years - drop by a lot 

I told the customer - can you trust this policy?
What happens if the foreign company stop operating in Singapore during the next five years?
What happens if you have to cancel your policy before the 5th year?
What happens if you forget to take out the money at the end of 5 years?

The distribution cost of this policy is $6,000. It is taken from her investment of $100,000. That is why the bank officer is keen to sell the policy to her.

She is given a 20 page PDF document that explains how the policy works. I refuse to read the PDF document. It contains information that is confusing to me.

The elderly lady decided to cancel the policy within 7 days and ask for the money to be refunded into the bank account.

Why does the Monetary Authority of Singapore allow banks to sell this kind of policy to their customers? Clearly, the customer does not understand what the policy is all about. Why does MAS allows the bank to forfeit 40% of $100,000 if the policy is canceled in the first year?

The customer only thinks that she can get the money back after 5 years and enjoy an interest rate of 1% a year. She is not aware of the other risks. The bank officer did not explain the risks fully to her.

I think the MAS should do their job and disallow banks to sell this kind of product that is so dangerous for their customers.

Tan Kin Lian


Beware of this product sold by a bank
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An elderly lady went to a bank. The bank officer introduced her to a "retirement policy". It is a 16 year policy issued by a foreign company. 

The bank officer told her that she can get out her money at the end of 5 years and enjoy an interest rate of about 5% for the 5 years. The interest is about 1% a year. 

The lady invested $100,000 into this policy.

The benefit illustration showed that the surrender value during the first 5 years is as follow:

1st year $60,000
2nd to 4th year - below $100,000
5th year - $105,000.
6th to 16 years - drop by a lot 

I told the customer - can you trust this policy?
What happens if the foreign company stop operating in Singapore during the next five years?
What happens if you have to cancel your policy before the 5th year?
What happens if you forget to take out the money at the end of 5 years?

The distribution cost of this policy is $6,000. It is taken from her investment of $100,000. That is why the bank officer is keen to sell the policy to her.

She is given a 20 page PDF document that explains how the policy works. I refuse to read the PDF document. It contains information that is confusing to me.

The elderly lady decided to cancel the policy within 7 days and ask for the money to be refunded into the bank account.

Why does the Monetary Authority of Singapore allow banks to sell this kind of policy to their customers? Clearly, the customer does not understand what the policy is all about. Why does MAS allows the bank to forfeit 40% of $100,000 if the policy is canceled in the first year?

The customer only thinks that she can get the money back after 5 years and enjoy an interest rate of 1% a year. She is not aware of the other risks. The bank officer did not explain the risks fully to her.

I think the MAS should do their job and disallow banks to sell this kind of product that is so dangerous for their customers.

Tan Kin Lian