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  • 1 Post By shri

HSBC Income Goal Insurance Plan

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  1. #1

    HSBC Income Goal Insurance Plan

    Hi, I signed up for to HSBC Income Goal Insurance Plan about 9 months ago

    I realise now what a mistake it is in that the accumulation period is 10 years and then annuity period another 10 years after by which time I would be around 55 yrs old. Feel like I have been scammed as I initially believed it would just take 6 years to break even of my initial premiums .

    The plan I am on is for 3 years annual premium payment, I am heading into the second premium in May. I am considering whether it is worth it to terminate it now so I "save" second & third year premiums from being locked into this income goal insurance plan.
    i.e. Cut my loss so I will have more cash to do things now.

    My premium is around 600k a year. I will lose about 180k to 220k if I terminate now, but the remaining premiums (1.2M) won't be locked in the next 10-20 years.

    I would have (0.3 guaranteed cash from the termination + 1.2M = 1.5M) to invest or purchase property now over the next 10-20 years.
    So in fact the 180-220k loss may not be that significant over 10 year period.

    If i pay for the coming year's premium it would be point of no return as I would lose significantly more than 30% from the premiums until 6-10 year in accumulation period.

    I appreciate if someone could give me advice or their thoughts on my situation.
    Thanks!


  2. #2

    Join Date
    Dec 2002
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    What is the underlying investment in this plan?


  3. #3

    I'm sorry to hear about your situation.

    As Shri said, more information would be needed to form a view - expected returns, duration of pay outs and whether they are guaranteed or only projected estimates.

    What you could do is a basic spreadsheet - comparing the cash contributions to this plan + expected payouts on the one hand against an investment in, say, a low cost index equity fund with all distributions reinvested on the other.

    I realise this is something of an apples to oranges comparison but it may give you a place to start.


  4. #4

    Let me try my best to explain.. as I don't understand the meaning of underlying investment of the plan..

    So the cash contributions are like all up front in the first 3 years and projected estimates are Guaranteed Cash Value and Accumulated Non-Guaranteed Annuity Payment, Dividends/Interests as well as Special Bonus. Special bonus is supposedly paid on early termination.

    Cash Contribution Guaranteed Value Non Guaranteed Special Bonus
    Year 1 580k 340k 0 67k
    Year 2 600k (1.1M) 770k 0.1k 151k
    Year 3 600k (1.7M) 1.22M 0.4k 240k
    Year 4 0 (1.7M) 1.28M 0.7k 252k
    Year 5 0 (1.7M) 1.35M 1k 330k
    Year 6 0 (1.7M) 1.37M 1.4k 432k

    so on and so forth until
    Year 10 (1.7M) 1.45M 3k 700k

    then it goes into annuity period and starts to pay back monthly payments over the next 10 years
    Year 11 (1.7M) 1.56M 734k 0
    Year 12 (1.7M) 1.65M 771k 0
    Year 13 (1.7M) 1.70M 820k 0
    ....
    until
    Year 20 (1.7M) 1.99M 1.3M 0

    By the end of the 20 years it would be 3.3M from the initial 1.7M.

    Supposedly by Year 6 the non-guaranteed and special bonus would be equivalent to the accumulative cash contributions... but non-guaranteed ..... depends on the performance of that year...

    Could you tell me more about cost index equity fund? Do you mean like 2800 tracker fund.I would like to try to compare how much money if I terminate now before second year premium on that equity fund for similar period of time. I am hoping that such a comparison can help me decide whether the current loss of 180k, it will be a better in 5-10 years time.


  5. #5

    Join Date
    Jun 2018
    Posts
    1,478

    Did you also get a tax deduction on the new scheme?

    https://www.ia.org.hk/en/qualifying_...icy/index.html

    An annuity product like that one should not have been sold as a short term investment... Cutting and running early and incurring that loss is very unlikely to be advantageous unless you think the tracker is going to make excellent returns consistently.

    The underlying investment strategy of the insurance product won't be as volatile as just buying an equity tracker either. The policy documents should at least give you an indication of how the premiums are invested.


  6. #6

    Join Date
    Dec 2002
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    While everyone says 2800 ... I would humbly suggest you figure out what this fund invests in and follow that benchmark and/or a global benchmark from MSCI / FTSE (IWDA - a UK ETF is a good proxy) for a 100% equities comparison.

    2800 while its good for local bias and easy investment into China is in my opinion not a benchmark for a global fund result. Almost anything will outshine 2800 and give you an unfair/biased opinion.

    Past investment returns may not repeat ... blah blah...

    traineeinvestor likes this.

  7. #7

    The initial monthly guaranteed annuity payment is 16.6k and annuity option is Fixed Annuity Payment 10yr Rollover.

    From what it says in the brochure... it says funds seem invested in
    60-100% Fixed Income Assets (government bonds, corporatebonds and alternative credit such as infrastructure debt)
    0-40% Growth assets - equities & alternative investments

    I will check out this global benchmark from MSCI/FTSE.

    Thanks for the advice guys. Really appreciate it. I've been flooded with spreadsheet analysis's but my problem is lack of understanding on how compounding, investing and how to input all the variables into it to compare apple to bananas.

    I'm going to read more about the benefits of annuity investments seems like it does have its purposes for building up retirement funds... and something about growing the investment without being taxed.
    I am not sure if this counted for tax deduction either if it does that's another benefit...


  8. #8
    Quote Originally Posted by ironsmiter:
    The initial monthly guaranteed annuity payment is 16.6k and annuity option is Fixed Annuity Payment 10yr Rollover.

    From what it says in the brochure... it says funds seem invested in
    60-100% Fixed Income Assets (government bonds, corporatebonds and alternative credit such as infrastructure debt)
    0-40% Growth assets - equities & alternative investments

    I will check out this global benchmark from MSCI/FTSE.

    Thanks for the advice guys. Really appreciate it. I've been flooded with spreadsheet analysis's but my problem is lack of understanding on how compounding, investing and how to input all the variables into it to compare apple to bananas.

    I'm going to read more about the benefits of annuity investments seems like it does have its purposes for building up retirement funds... and something about growing the investment without being taxed.
    I am not sure if this counted for tax deduction either if it does that's another benefit...
    On tax, if you plan on living anywhere other than Hong Kong in the future, you may want to check out how the income stream from the annuity will be taxed wherever it is that you will live. If it's treated as taxable income at a high tax rate that would make a big difference to your expected returns.

  9. #9

    Join Date
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    Compouding is rather simple if you spend some time understanding the principles of "72".

    In a very simple version - Take the average return (growth or increase in price + income or dividends) over 10-20 years and assume everything is reinvested back. Growth is automatically invested back, dividends are reinvested back IF you buy additional units/stocks/whatever.

    Say the amount is 7.2% per year.

    Divide 72 by that number and you get a the number of units of time (per year in this case) that it will take for your investment to double if the rate of return remains at 7.2 and if you reinvest.

    Gets a bit complicated - but the simplest form is applicable if you're in accumulation phase.