Revision to illustration rates in Policy Illustration

A possible reduction in bonuses for insurance policy was mentioned about a year ago.

Come 1st July 2021, the upper and lower illustration rate for policy illustration will be revised. LIA is adjusting the cap on the illustrated investment rate of return (IIRR) in the Policy Illustration (PI) for participating plans (par plans) as follow.

 Upper Illustration RateLower Illustration Rate
LIA’s current cap on IIRR4.75% per annum3.25% per annum
LIA’s new cap on IIRR, effective 1 July 20214.25% per annum3.00% per annum

Taking note that IIRR are used purely for illustration purposes and do not represent upper and lower limits of the investment performance of the insurer’s Par Fund. The actual returns on the participating fund on your policy will not be affected by this change and it may be lower than 3% p.a or higher than 4.25% p.a. The IIRR is not the yield of your policy which is commonly misunderstood by policy holders and they felt cheated by insurers when they did not receive the illustrated rate of returns.

While there are no significant reasons to rush into getting the next policy, you are encourage to speak to your financial adviser to understand how these changes may affect your insurance policies. If you need a second opinion, feel free to drop me an email and my team will get back to you on your queries.


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