I met a client who consulted me on various financial matters. One of which was retirement planning. She seems to have no appetite for risk. Not comfortable with investments that is subjected to market risk, I propose a plan which my opinion is RISKLESS.

For $8,794.80 of annual saving for 20 years, she will get $390,000 of guaranteed sum at the end of 30 years. This will be when she just retires. Total premium paid over 20 years is = $175,896. Therefore the absolute return is 390000/175896-1 = 122%. There is no ifs and no buts. The premium is guaranteed and the maturity benefit is also guaranteed. Although I have confident in getting a much higher return if I am paid an on-going fee to manage a portfolio of RISKY investment, such a plan I recommended to her is suitable for a conservative person.  

Why do I say such a conservative plan is RISKLESS? Firstly this is a personal opinion (not a fact). Secondly it is because such a plan come from a life insurance company (for some strange reason – traditional fund managers cannot provide such guarantee – maybe because they have no confident to be in the business for so long?) Thirdly, if a life insurance company goes kaput, in my opinion Singapore Government will rescue it because without doing so, it will have a very hard hit towards the Island’s reputation as a financial hub. Just look at the departure of the UNSW in just mere 3 months in Singapore. The government is doing its very best to help these students. Why? It is because if it does not do so, Singapore’s reputation as an education hub is going to be ruined.