Read an interview on the Sunday Times the other day and it immediately stuck me to write something on it.
What financial planning have you done for yourself?
I’ve a unit trust-linked savings plan which gives me an 8 per cent return annually over a seven-year period. This allows me to draw out the cash in my late 20s when I may need the money to buy a property or start a family.
The interviewee was a 20 year old oil trader, Michelle Qiu.
I’m not sure whether it was Michelle that had the wrong idea about her investment-linked plan (ILP), or it was the journalist that misquoted her.
But one thing’s for sure – the 4% and 8% returns (used to be showing 5% and 9%) that all of us see in the benefit illustrations of an ILP are purely projections.
The return could very well turn out to be 8%. But it could also end up as 10%, 5%, 1%, 0%, -5%, or even-10%! Basically, it can be anything.
Unfortunately, the illustrations only show projections for 5% and 8%, so many people have been mislead to think that these returns are a given.