3 Best Investment-Linked Plan or 101 Wrappers in Singapore 2024

Investment-linked Insurance Plans (ILP) provides you with the opportunity to leverage the gains in the financial markets and provide life insurance coverage to take care of your loved ones. In this article, we present some investment-linked plans or “101 Wrapper” that may help you meet your investment and savings objectives.

However, before we begin, we would like to address the social stigma of ILPs in general.

This is not a recommendation, Moneyline.SG is not an Exempt Financial Adviser and act only as an information portal. Please seek advice from a licensed financial advisor or leave your contact details below for a proper fact find by a licensed practitioner before making any decision. All information provided are public and can be found directly on the providers website or via any financial representatives that represents the product provider.

Are ILPs bad?

There is no straight forward answer to this because Investment-Linked Plans by itself is a category of life insurance products. By implying ILP is bad, is similar to saying “universal life insurance is bad”, or “whole life insurance is a scam”, or “buying term life insurance is a waste of money”

The notion of ILP came about when people were unhappy with par fund returns of life insurance policies and wanted more flexibility and control. Therefore, Insurance companies decide to give people more flexibility. The biggest problem with ILP is that the cost of insurance rises steeply in the later years of the insured’s life. Thus, if the cost of insurance continuously supersedes the returns of the underlying investments each year, the cash value may actually deplete to a stage where one may eventually lose their coverage even as they continue to pay their premium diligently.

More recently, we are starting to see the emergence of a different type of ILP which is primarily marketed as an investment product by agents, bankers and financial advisors. They are typically known as the “101 wrapper”; such plans provide a death coverage of 101% of the total premiums paid, or in other words, not much insurance coverage. Technically, such a plan does not entirely mix investments with insurance but provides a value-added preposition of capital guaranteed upon the insured’s death regardless if the price of the investments drops below the principal.

Principal Guaranteed, Upon Death

This feature can be one of the most fundamental reasons for considering an Investment Linked Policy (ILP). While an individual is alive, they can effectively manage their investments. However, when a person passes away suddenly, there is a risk of inheriting a struggling portfolio by family members who may rely on these investments for important purposes such as children’s education, retirement, or future family expenses.

Therefore, one of the key benefits of this product is the inclusion of death coverage. This means that in the unfortunate event of your demise, the principal amount will be guaranteed to your beneficiaries. Unlike investing through traditional means, an ILP ensures that your investment is protected even after your death, providing financial security for your loved ones.”

Please note that ILPs may have varying features and conditions, so it’s essential to review the specific terms and conditions of the policy you are considering.

Cost Efficiencies

This may come as a surprise, as investment-linked insurance products are often criticized for high platform charges, in addition to fund management and insurance fees. However, this article highlights plans that are cost efficient (low breakeven yield), with the inclusion of start-up and loyalty bonuses to offset costs. These plans may prove to be more cost-effective than a pure investment or robo-advisory platform over a certain holding period. Infact, one of the plans below offers 0% breakeven yield if you choose to invest over the long term.

Locked Up Portion

One must take note that such plans requires a part of your investments, usually termed as “Initial Unit Allocation” to be locked up for a selected number of years. These monies cannot be withdrawn unless you wish to surrender or terminate the policy.

We select the 3 Best Investment-Linked Insurance/101 Wrapper Plans base on 3 basic criteria:

• Provision of start-up and loyalty bonuses
• Access to Accredited Investor Funds
• Low Breakeven Yield

Best Investment-Linked Plan for No Cost Principal Protection

HSBC Life Wealth Abundance

Primary Charges

Account Maintenance Fee  – 2.1% p.a. first 10 years 0.6% p.a. 11th year onwards (Charged on Asset Under Advisory)

Charges exclude fund management fees, and early surrender fees and other partial withdrawal fees.

Few things to take note

HSBC Wealth Abundance comprehensive range of benefits allows you to optimize your investment returns, create additional income streams, and enjoy peace of mind with extensive life protection coverage. This plan is also one of the best when it comes to doing premium holiday during your Minimum investment period, e.g. you can pay for 5 years and stop investing while maintaining your investment till the 10th year without incurring any penalty or additional charges.

What we like

1. Dividend pay-out option – If dividend funds are selected, HSBC Life Wealth Abundance allows you to choose whether to receive dividends in cash or to reinvest them. This flexibility can provide you with additional liquidity and allow you to access funds in case of an emergency without incurring any additional charges.
2. Access to Accredited Investors Funds – The HSBC Life Wealth Abundance allows retail investors to access Accredited Investor (A.I) Funds such as Fundsmith SICAV. Such funds are not accessible regardless of platforms for retail investors.
3. No Cost of Insurance for Principal Death Protection – This feature is a huge benefit to cost sensitive investors who wish to annuitize by converting the plan to a dividend focus strategy while keeping principal intact till their end of life. Enjoy free protection due to accidental death for up to 200% of your total premium paid or account value.
4. Loyalty, Powered up & Upfront Bonus – Start-up bonus of up to 12% p.a., monthly power-up bonuses (0.1% p.a. from 5th year), and loyalty bonuses (0.3% p.a. from 11th year)
5. Premium Holidays – Policyholders will be eligible for premium holiday from the 37th month onwards for a period of 60 month, during the 10 year Minimum Investment Period, this effectively makes this product a 5 pay with additional 5 years lock in.

What we don’t like

1. Lowest Start Up Bonuses – One of the key benefits of insurance-linked investments (ILPs) is the extremely high start up bonuses given by some insurer. With up to 12% start up bonus, this plan is the lowest in the market.
2. Account Maintenance Fees Base on AUA – Unfortunately, even though the charges are generally low for ILP, the downside of the AUA charge is that if your investment performs well, the higher the charges will be vs each dollar invested.

Best Investment-Linked Plan Best Short Term Charge

Etiqa Invest Smart Flex

Primary Charges

Policy Charges – 2.0% p.a. (Year 1st – 10th) 1.6% (Year 11th – 20th) & 0.6% (21st year onwards)  Funds are Charged on Market Value

Charges exclude fund management fees, cost of insurance, and early surrender fees and other partial withdrawal fees.

Few things to take note

Etiqa Invest Smart Flex is a flexible, regular premium investment-linked plan starting from S$200 per month, designed to meet medium- to long-term wealth accumulation goals. With customizable premium terms (10, 15, or 20 years), it offers multiple bonuses, the flexibility to adjust premiums and withdraw funds, exclusive access to top institutional funds, and protection against disability or death. Optional riders for critical illness and premium waivers enhance coverage, and the plan features a hassle-free application with no health checks required.

Enjoy the lowest breakeven yield with the lowest investment of 800 per month for 10 years policy term @ 1% p.a. Investor will also have the option to take premium holiday from the 61st month onwards with no questions asked.

Overseas Non-Resident Investors

Investing in Etiqa Invest Smart Flex can also be done even if you’re not a Singapore Residents or are located overseas at the point of application, this feature is available to selected countries resident and nationality, for more on this feel free to make enquiry below to see if you’re eligible

Brochure

What we like

1. Low breakeven yields for medium term investment – With special bonus and upfront booster bonus, investor enjoy charges similar or lower than platform investment when they wish to meet their financial goal in the first 10-15 years
2. Life replacement option – The Etiqa Invest Smart Flex offers the flexibility of replacing the policyholder with a spouse or child. This feature allows you to pass on the benefits of the policy to a loved one if you are no longer able to make the best use of it.
3. Access to AI funds and managed portfolios – Retail investors can access AI funds through the Etiqa Investbuilder, which are typically not available to retail investors through other platforms. The plan also offers access to curated portfolio funds based on the individual’s risk profile.
4. Dividend distribution – Dividends will be distributed to the policyholder within 30 days of the dividend declaration date, subject to a minimum amount of $40, if a dividend-paying fund is chosen.”
5. Low Start Up Investment –  Invest as low as 400 per month over 5 years or 200 per month over 9 years period with the committed policy term of 10 and 20 years respectively.

What we don’t like

1. Inflexibility During Premium Payment Term – There is limited flexibility when a 10-20 year premium term is selected. While dividends can be paid out, the principal remains locked in for the full policy term
2. Highest Cost for Longer Term Investment – While Etiqa Invest Smart Flex offers the most competitive rate for short term investment and lower start up investment, policy holder may fair better elsewhere if they are looking at longer term investment time horizon.

Best Investment-Linked Plan with 0% Breakeven Yield

FWD Invest First Summit

Primary Charges

Initial Account Charge 1st 24 months – 3.95% p.a. (this is charged on the first 24 months of the initial account market value) x Committed Premium Term

Accumulation Account Charge 25th month onwards– (Lower of 1.5% p.a. on Accumulated Value) or (0.7% of Annualized Regular Premium x  Committed Premium Term)

Charges exclude fund management fees, early surrender fees and other partial withdrawal fees.

Few things to take note

How can you enjoy the best of both worlds when it comes to paying policy charges while investing? Simple. FWD Invest First Summit offers a unique charging feature where you’ll be charged based on the lower of two values: the Annualised Committed Regular Premium (ACRP) or the Accumulation Value. To put it simply, if your investment drops below your initial investment after the 25th month, charges will be based on the current market value. However, if your investment grows beyond your initial investment, the charges will be based on the premiums you’ve paid, not the higher market value. This guarantees lower charges, whether your investment is performing well or underperforming.

FWD Invest First Summit is the first of its kind, ensuring cost-efficiency no matter how the market behaves

FWD rewards policyholders generously with a Booster Bonus of up to 165% of your Annualised Regular Premium over the first three years of premium payments. In addition, you’ll start earning a Loyalty Bonus of up to 1.5% per annum (p.a.) of your Accumulation Units Account (AUA) value from the 4th policy year onwards and throughout your premium payment term. Even after your premium payments end, your investment keeps growing with a Perpetual Bonus of 1% p.a. of your AUA value for the rest of your policy term, ensuring continuous rewards and growth.

As a result of the bonuses and calibrated policy charges, investor may enjoy charges of less than 0.7% p.a. overall with a $300/mth invested for 15 years and almost 0% if you keep investing for 25%!

Overseas Non-Resident Investors

Investing in FWD Invest First Summit can also be done even if you’re not a Singapore Residents or are located overseas at the point of application, this feature is available to selected countries resident and nationality, for more on this feel free to make enquiry below to see if you’re eligible

What we like

1. Premium Flexibility & Liquidity – Premium term option of 10-30 years, with the exception of the IUA (Initial Unit Account) which is the first 24 months premium, liquidity of the product begins from the 25^th This means you may stop premium payment, make partial withdrawal, take unlimited premium holidays or even reduce your subsequent premiums to the minimum amount without any extra charges. However, this will affect the subsequent loyalty bonuses being allocated to your investment in the long run. Initial and Policy charges will continue to be levied from the funds
2. Up to 165% upfront Bonuses – When the policy is in force, an initial bonus will be paid out over three policy year
3. Support Benefits  – From Policy Year 3 onwards, you can apply for a waiver of premium shortfall and/or premium reduction charges if you stop or reduce your Regular Premium due to involuntary unemployment (up to 6 months), terminal illness, or total and permanent disability (waived indefinitely). If charges were deducted before your notification, the amount will be refunded, and in cases of policy change, a 3-month waiting period applies.
4. Access to Accredited Investors Funds – FWD Invest Summit allows retail investors to access Accredited Investor (A.I) Funds such as Fundsmith SICAV & Baillie Gifford. Such funds are not accessible regardless of platforms for retail investors. This means that as a retail investor, you will cut through the red tapes and be automatically granted access to AI funds through the wrapper functionality of the plan.
5. Capped Charging Structure  – FWD charging structure optimizes investors investment returns by capping charges based on market conditions throughout the policy term. The charge is the lower of 1.5% p.a. of the Accumulation Units Account (AUA) value or 0.7% p.a. of the total Regular Premium committed at the policy’s start, ensuring lower charges as your policy value grows over time.

What we don’t like

1. No Principal Guaranteed Upon Death – Unlike the other insurers, FWD does not provide principal guaranteed upon death. This kind of defeat the main purpose of an annuity structure where principal can be guaranteed regardless of the dividend paid over time and market value should the insure pass away.

Conclusions

Based on our analysis, if you prioritize low charges over a long investment term FWD Invest First Summit may be the most suitable option. Etiqa Invest Smart Flex and HSBC Life Wealth Abundance provides a balance between flexibility and legacy distribution purpose. However, it is crucial to carefully consider your long-term priorities and factors before selecting a policy, as these plans do not guarantee the principal in case of premature termination or even after the minimum commitment period. Returns are all subjected to market conditions, and it is recommended to seek clarification from agents or financial advisors regarding the associated charges before making a commitment.

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