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I have a life cover pol­icy at San­lam and I would like to con­vert it to an in­vest­ment or re­tire­ment fund to boost my re­tire­ment. Does it have any in­vest­ment value?


Pre­vi­ous-gen­er­a­tion “uni­ver­sal life” prod­ucts had an in­vest­ment el­e­ment in­te­grated with life cover.

But the sale of those prod­ucts stopped, ba­si­cally, around the turn of the cen­tury.

Al­though uni­ver­sal poli­cies had some ad­van­tages of their own, no­tably the pos­si­bil­ity of a sur­ren­der value and up­side in­vest­ment po­ten­tial, they suf­fered from the disadvantages, such as a lack of trans­parency, volatile in­vest­ment mar­kets af­fect­ing cover, and the cost of pure risk cover be­ing more ex­pen­sive than it oth­er­wise could have been.

As a re­sult, new-gen­er­a­tion prod­ucts were de­signed around a gen­eral cus­tomer and ad­viser pref­er­ence of “buy the most cost-ef­fec­tive cover and in­vest the rest”.

The re­sult was both risk and sav­ings prod­ucts that were more trans­par­ent, more eas­ily un­der­stood by cus­tomers and that ad­dressed spe­cific fi­nan­cial needs.

Now, in re­sponse to the spe­cific ques­tion, both life cover and re­tire­ment needs are the pil­lars of any fi­nan­cial plan, but I would en­cour­age cus­tomers not to look at it com­pletely sep­a­rately.

It should not be an “ei­ther-or” as far as pri­or­i­ties are con­cerned. In­stead, no re­tire­ment plan can be con­sid­ered com­plete with­out suf­fi­cient life, dis­abil­ity and in­come pro­tec­tion cover also be­ing put in place.

Al­though there are re­tire­ment an­nu­ities that in­clude an el­e­ment of life cover, these prod­ucts are cer­tainly no longer the norm.

It may have been seen as a tax ad­van­tage to ef­fec­tively also be able to deduct risk cover con­tri­bu­tions for per­sonal in­come tax pur­poses, but then pay­ment of the cover also had to be used to pur­chase an in­come.

Cus­tomers would gen­er­ally be bet­ter served by us­ing their max­i­mum al­lowance to ac­tu­ally save to­wards re­tire­ment.

In ad­di­tion, risk cover con­tri­bu­tions can be paid from “af­ter-tax” money, but with the pro­ceeds be­ing free of in­come tax in the hands of the claimant.

Also note that there are some “re­tire­ment boost­ers” or cash-back ben­e­fits avail­able un­der some mod­ern risk cover prod­ucts, but these come in the form of spe­cific ben­e­fits that must be se­lected upfront, and for which you pay a spe­cific premium to con­trib­ute to­wards such a priv­i­lege.

It is not as sim­ple as sim­ply elect­ing to con­vert some of your day-to-day cover to a re­tire­ment ben­e­fit at any point in time.

There will be a cost im­pact from day one, when cover is struc­tured in that way.

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