With NTUC Income reducing its annual bonuses but increasing its terminal bonuses, it attracted unhappiness among some minority policyholders. Although they have the right to be unhappy but I am surprised that some policyholders think they have the right to demand that the bonus structure remain status quo. I think this has to do with how the policy was sold. The following are some of my thoughts but they are not pertaining to just NTUC Income’s par products but in general with any par products in the market:

1. Par products have both a guaranteed and non-guaranteed death benefit and surrender value. What is guaranteed is guaranteed and what is not-guaranteed is not-guaranteed. Thus bonuses structure is not guaranteed. It is the duty of the financial adviser to explain this simple reasoning. However, many financial advisers sell their par products based on the high projected non-guaranteed cash value which I am afraid is the wrong way of selling.
2. What is the par product for? Is it for protection or saving? If it is for protection, it is important to highlight that the importance of the guaranteed death benefit and de-emphase reliance on the non-guaranteed death benefit. If the par product is for saving, it is important to choose a high guaranteed maturity benefit. If a high non-guaranteed maturity benefit is desirable (i.e. client has a high risk appetite), some amount of money can be invested into say unit trusts.
3. Never use a wholelife product for saving and never use saving plan for protection. I met a client last year who was sold a wholelife nearly 20 years ago but was misrepresented by his agent that the product was a saving plan for his children’s education. Poor thing, he discovered that the cash value could hardly send his children to university.
4. Always go for a limited premium paying whole life. At least there is no need to pay for premium when a person is retired.
5. For very high coverage, use a term insurance.
6. For very high (potential) investment, use unit trusts, go for ETFs and for the high networth there are other choices like hedge fund.

In all things, I always tell my clients never put all eggs into a single basket. Do not put all hopes into insurance, do not put all hopes into unit trusts, do not put all hopes into shares, do not put all hopes into a term insurance. Always use the universal rule of investing: diversification across many insurers, type of policies, and investment instruments. I personally do not believe that there is only one optimal way of doing financial planning.