Continue paying into investment plan after 5 years, or switch to savings a/c?

chandira

Hi

Hope I'm posting this in the right forum. I have a type of investment/life insurance fund set up for me by a financial advisor 5 years ago, with New Ireland. I've been paying into it since 2005, and the money was intended to pay back a small loan to my mother. Part of the money I pay is for life insurance, and the balance is invested. That's how it was explained to me at least.

I'm just wondering, given that I've paid into this plan for 5 years- is it worth leaving the money there in the hopes that it will increase in value, or should I just pull it out now? The last time the advisor checked for me, it was worth less than I'd paid in, which is obvious in the current climate. I still haven't reached the amount I owe my mother, and I'm wondering am I better off at this stage just paying into a savings a/c for the remainder of the time period.

I'd appreciate any advice as I'm totally green in this area. I don't particularly want to contact the advisor again, as I feel his main interest is just earning more money off me. My mum was using him at the time, which is why I went with him.

Many thanks

chandira

Anyone?

Kristopherus

Do you get an annual statement from them giving the value of the life cover and also the value of the investment. Do you know what proportion in the monthly instalment is for life cover and for investment. Also remember that most of your first year's payment went to your advisor as his commission.

hmmm

Do you need life assurance?

What is the fund invested in? If it is invested in shares, the last 5 years have been one of the worst performances since the great recession, so it wouldn't be unexpected.

Did you tell the advisor at the beginning how much risk you were willing to accept?

If you are invested in shares, it is relatively risky with potentially higher payouts than a deposit account. Generally you'd want to be looking at keeping your money invested for at least 5 to 10 years to smooth out the ups and downs.

Jayminato

Depending on costs and charges associated with your product I would suggest now is not a good time to bail out of this. You have just been through one of the biggest downturns during 2008. There has been an equity rebound since around April 2009 which has aided the recovery in value of many of these types of investment funds.
If this is a regular premium contract you have been buying units in an investment fund on a monthly basis via your monthly contribution and the value of these units can fall as well as rise.

You should have most definitely been provided with a full disclosure illustration when putting this contract in place which should have demonstrated charges and how much of your money is being invested for you.

To say the first years premium was paid in commissions is not true by the way. Need any help just PM me.

J

chandira

Thanks for the replies, much appreciated.

Some answers.

I do need life assurance, for mortgage cover. I'm not sure what portion is life assurance vs fund amount- I guess it depends on what they are charging me currently for the life assurance. I'd say it's about 50/50.

I don't currently get a statement of what the fund is worth. Any info I have received has come through the advisor, whom I hold in low regard.

I'm not sure what the fund is invested in unfortunately. I can't remember if I spoke to the advisor re the level of risk, but my preference was for a savings a/c, so he knew I was pretty risk averse- bear in mind this fund was established purely to repay a loan to my mother.

My question now is this- would it be prudent to stop paying into the fund now, and just keep an eye on the value of what's left in it? Or would you recommend continuing to pay into it? My preference is to stop paying into it and start paying the amount into a bank a/c- as ultimately I just want to pay my mother back as quickly as possible.

Thanks again.

Jayminato

chandira wrote: »

Thanks for the replies, much appreciated.

My question now is this- would it be prudent to stop paying into the fund now, and just keep an eye on the value of what's left in it? Or would you recommend continuing to pay into it? My preference is to stop paying into it and start paying the amount into a bank a/c- as ultimately I just want to pay my mother back as quickly as possible.

Thanks again.

The answer really depends on your attitude to risk. If you are completely adverse to risk then you need to stop paying and open a deposit account which will earn you little or no interest and may not even keep up with inflation.

or

Stick to your guns with the regular investment you currently have. Ask your advisor or ring the company directly and ask about your ''allocation rate'' which is the amount of your monthly premium that is actually going towards investment. (probably circa 95% allocation meaining you have a 5% charge per month on your monthly contributions.... I cant be definite on this without reviewing the whole contract.

You should really have a fund choice on this product which will allow you switch into lower risk fixed interest funds or deposit funds (both of which are under performing at the moment by the way). By availing of a simple fund switch you can avoid any surrender penalties that may apply if you terminate the contract.

Investing in unit linked managed funds which is effectively what you have here is not all bad. However the investor as well as the advisor needs to be well informed as to risk vs reward etc and a suitable investment risk profile should be established with a client in order to ensure the investor understand and is comfortable with the risk.

These type of funds have shown double digit returns for the last 20 months or so and this upturn should have been reflected in your values. There is still reasonable value in these equity type funds for the short term (12-24 months).

Maybe you should spread the risk within your investment and diversify a % of monies into lower risk funds to help you deal with the volatility??

Hope this helps

J