How an Investment-linked Plan Can Bring Your Financial Dreams to Life
It’s not easy dealing with financial responsibilities as a young adult. Believe me, we’ve all been there.
Managing finances can be a daunting task, especially when there are so many adulting responsibilities – repaying student loans and saving for future milestones like getting married and owning your first home. Not only does Singapore have a high cost of living, but let’s face it – a fair number of us can be prone to spending a touch beyond our means at times.
Spending habits can also change a lot from the time of being a relatively broke first jobber to having a bit more spending power as you climb the corporate ladder.
Some words of advice: saving for the future is more important than you think, even if you don’t yet know what to do with those savings.
How to Start Saving
So let’s talk a little about your options to save some money, and ideally to grow your wealth too. While it might be easy to learn the theories of investing from the likes of YouTubers and TikTokers, actually applying those concepts or investment tips to craft an investment portfolio might not lead to the best expected outcomes.
An obvious place to start is the good ol’ Milo tin savings account. It is highly accessible and you’re able to move your money around easily, but similar to other low-risk options such as fixed deposits and Singapore Savings Bonds, it may not accumulate enough interest to cover inflation.
If you want to grow your money a little quicker, then mutual funds, exchange-traded funds (ETFs), real estate investment trusts (REITs) and stocks may provide higher returns at a higher risk. But all of that can sound a little too complicated, especially if you’re just starting out on your investment journey.
If you’re keen to invest in an extensive range of funds that are continuously monitored by experienced investment professionals while also getting additional insurance protection, then investment-linked plans (ILPs) like Income Insurance’s Invest Flex are something you can consider.
Let’s take a closer look at how ILPs can help you with your financial goals.
For Those with Little to Spare
Let’s start with a brief understanding of what an ILP is: it’s a financial tool that offers the best of both worlds – protection and investment. With an ILP, you can enjoy the benefits of insurance coverage while having the opportunity to grow your wealth. Premiums paid will go towards investing in various funds, with a wide range to choose from according to your risk appetite and investment needs.
An ILP is one of the options you can explore to kickstart your investment journey — especially if you have little time or budget to spare.
If you prefer to avoid the hassle of making periodic payments, you could opt for a single premium plan that requires only a one-time lump sum payment when you purchase the plan.
Or, if you have little budget to set aside right now, you can go for a bite-sized regular premium plan. For Income Insurance’s AstraLink, premiums start from as little as $100 per month. Regular premium plans can be customised in both premium amount and frequency, with the typical options of monthly, 3-monthly, 6-monthly, or annually. Some regular premium ILPs like AstraLink also give you the flexibility to adjust your protection coverage.
ILPs as Your First Step to Dipping Your Toes into Investing
If you're new to investing and looking for a way to ease into the world of financial markets, an ILP can be one of your starting points.
By going for an ILP, you can gain exposure to a diversified portfolio of funds, carefully managed by experienced fund managers who possess the expertise to make informed investment decisions on your behalf.
This can minimise the stress and uncertainty associated with investing, while you begin building up your wealth for the future. It’s reassuring to know that by getting an ILP, you’re also getting insurance coverage for that extra peace of mind.
Ease of Choosing Funds
Rather than going the DIY way and diving into market research for your investments, ILPs free you from the hassle by serving up a suite of options that had been curated by experts. Depending on your investment goals, you can choose from a wide range of funds– including equities, bonds, and money market instruments.
Think of it like a set lunch menu. Each ILP fund has its own mix of handpicked underlying assets. You simply need to pick your order, and a team of financial professionals will handle the rest.
ILPs Help You Live Your Best Life by Accumulating Wealth for What’s Important
There are some things in life that are necessary to save up for — your first home, a wedding, further education, and retirement.
There are also the things in life that may not really be so necessary, but help to make your life more enriching and comfortable — purchasing a car, seeking out a life overseas, or welcoming a furry companion after moving into your future home.
While we know we need to save up towards all these important things in life, it could be hard at times to find the discipline to save or invest because there will always be indulgences that tempt us. It could be staying in a nicer hotel during the next vacay, getting the next generation phone or joining your friends on an impromptu trip. But with an ILP, it can offer you a disciplined approach to keep you on track for these long-term goals.
Whether you opt for a lump sum payment or commit to investing a small portion of your income regularly, you could accumulate your wealth over time. If planned early, your investment could snowball into usable funds for your wedding, renovation of your dream home or dream car.
Besides, some ILPs might allow you to withdraw your funds, depending on policy terms. Living up to its name of “Flex” (flexibility), Income Insurance’s Invest Flex lets you withdraw some of your investments during the minimum investment period, at no charge, when you hit certain life events, such as marriage or placing a deposit for your first home6.
As with most wealth accumulation plans, starting early is usually beneficial due to the power of compounding interest. This is especially advantageous for young adults in your 20s. Think of your investment growth like rolling a snowball down a mountain – with a longer runway, your snowball can grow exponentially larger. Let’s compare what happens if you invest today versus 5 years later.
Scenario 1: You invest today for 10 years
By investing $10,000 at an assumed growth of 4% per annum, you would end up with $14,802 at the end of the tenth year. That means you would have earned $4,802 with the effect of compounding interest, or 48% of your principal amount.
Scenario 2: You only start 5 years later
Now, let’s imagine that you only start investing 5 years later, with the same principal amount of $10,000 and an assumed growth of 4% per annum. After a 5-year investment period, your investment would be worth $12,167. That equates to an earning of $2,167, or 21.6% of your principal amount.
You might notice in this example, that by procrastinating and investing later, the earning is substantially lesser.
ILPs can Adapt and Grow with You and Your Unique Financial Priorities
As a young adult, you may find yourself facing a variety of new financial situations that demand prioritisation. From getting new financial commitments such as a mortgage, to getting a pay bump or even going through the dreaded retrenchment, these significant milestones can affect your financial priorities.
This is where the flexibility of ILPs can prove invaluable.
Let’s say you start out with a lower risk appetite or are a little less financially well-off, then a minimal investment sum will do at the beginning.
But what if, after a number of years in the workforce, you’re able to set aside a bit more? That’s not a problem for ILPs. You have the freedom to tailor your investment strategy to match your new risk tolerance, financial objectives, and circumstances at different milestones of your life. And by diversifying your investments across different types of assets, you can potentially maximise your returns.
Similarly, if you experience a temporary financial setback, such as losing your job, an ILP can be tailored to meet your financial situation.
Hot tip: look out for plans that offer a premium holiday, which is a benefit that allows you to stop paying premiums for a period of time without giving up the plan.
Ready to Take The First Step? Here are Two ILPs that You can Consider:
AstraLink^
- Flexibility to customise plan to suit your needs from as low as $100 a month
- Receive protection coverage based on the applicable sum assured multiple1 of your choice with a Minimum Protection Value (MPV) of 300% of the sum assured
- Enjoy investment bonus of up to 67.0% of your regular premiums paid in the 1st policy year
- Provide up to 1.0% annual loyalty bonus from the 10th policy anniversary
- Maximise wealth accumulation with retirement option
- Increase coverage at different life events2 with Guaranteed Insurability Option
- Adapt to life’s uncertainties with premium holiday3
Invest Flex^
- Flexibility to take a premium holiday4 at no charge for up to 120 months from the 5th policy anniversary
- Enjoy an investment bonus of up to 60.0% of your regular premiums paid for the 1st policy year
- Provide 0.5% annual loyalty bonus5 starting from the 10th policy anniversary or the end of the Minimum Investment Period (MIP), whichever is later
- Maximise your investment with up to 105% of your regular premiums paid to purchase units
- Adapt to life’s uncertainties with Life Event Withdrawal Benefit6
- Continuity of wealth accumulation with a secondary insured7
If you’re keen on taking the first step into investing with an ILP, talk to us and we’ll be able to do a personalised needs analysis to help you figure out what is right for you.
^Terms and conditions apply.
1 Sum assured multiple means the factor we use to work out your sum assured for your basic policy, or for a specific rider that you attach to your basic policy, based on your regular premium when we issue the policy. The sum assured multiple cannot be changed unless the retirement option is exercised. The Minimum Protection Value (MPV) is applicable before the anniversary immediately after the insured reaches the age of 70.
2 Each time the insured experiences a life event, you may choose to take up the Guaranteed insurability option, subject to the policy’s terms and conditions. Please refer to the policy conditions for further details on the life events and the applicable terms and conditions.
3 Policyholders can stop paying regular premium temporarily during the MIP from the 2nd anniversary, provided the policy value is sufficient to cover the applicable fees and charges. Premium holiday charges apply if premium holiday is taken during MIP.
4 If the policyholder still has not paid the premium after the grace period, the policy will enter into a premium holiday. During this premium holiday, the policyholder can stop paying the premium provided the policy value is able to cover the fees and charges that continue to be due on the policy. The premium holiday charge may be payable during the premium holiday if it is within the MIP. From the 5th policy anniversary, the policyholder can take a premium holiday without any premium holiday charge up to the specified period according to the MIP selected. Please refer to the policy conditions for further details.
5 The loyalty bonus will be provided on the next working day from the 10th policy anniversary. The loyalty bonus is a percentage of the policy value based on the anniversary. It will be used to invest in the funds the policyholder has chosen. The policy must meet all the following conditions to receive the loyalty bonus: a) The policy must not have ended when the loyalty bonus is provided. b) The policyholder did not make any withdrawal, except withdrawal under life events withdrawal benefit, for the past 12 months before the date for the loyalty bonus payment.
6 During the MIP, the policyholder may choose to exercise a free partial withdrawal if the insured experiences a life event, subject to the policy’s terms and conditions. Please refer to the policy conditions for further details on the life events and the applicable terms and conditions.
7 Only you as the policyholder (before the age of 65 years old), your spouse (before the age of 65 years old), or your child/ward (before the age of 18 years old) can be the secondary insured at the time you exercise this option. You can exercise this option to appoint a secondary insured no more than three times. Terms apply for the benefit. Please refer to the policy conditions for further details.
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 products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income insurance advisor.
This information is not to be construed as an offer or solicitation for the subscription, purchase or sale of any investment-linked plan (ILP) sub-fund. The information and descriptions contained in this material are provided solely for general informational purposes and do not constitute any financial advice. It does not have regard to the specific investment objectives, financial situation and particular needs of any persons.
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.
All our products are developed to benefit our customers but not all may be suitable for your specific needs. If you are unsure if this plan is suitable for you, we strongly encourage you to speak to a qualified insurance advisor. Otherwise, you may end up buying a plan that does not meet your expectations or needs. As a result, you may not be able to afford the premiums or get the insurance protection you want. Buying a life insurance plan is a long-term commitment on your part. If you cancel your plan prematurely, the cash value you receive may be zero or less than the premiums you have paid for the plan.
Invest Flex and AstraLink 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).
This advertisement has not been reviewed by the Monetary Authority of Singapore.
Information is correct as at 19 January 2024.
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