ILP Returns are Not Guaranteed

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.

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Jack says 10 years ago

The whole interview was a joke. Although the headlines imply that Michelle is some super high flier oil trader earning big bucks at only 20 years old, the detailed story reveals that she is probably doing nothing much more than an administrative support role in an oil trading firm.

She makes a big show about learning, picking up tips and tricks of trading, preparation to become a trader etc., but the fact is she has never actually engaged in oil trading as at the date of interview. There are so many boo boos to the answers she gave (including this rubbish about making 8% p.a.) that I doubt she even has any rudimentary understanding of trading / investments.

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ILP Returns are Not Guaranteed

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