What your ILP does with your money when you're not looking

Quick test. Without opening any documents, can you name the funds inside your ILP?

If you can't, you're in the majority, and this article is for you.

An Investment-Linked Policy is two products wearing one contract. Part of every premium pays for insurance cover. The rest buys units in investment sub-funds that you choose. That second part is the piece most owners never look at again, which is strange when you think about it, because it's the part that's supposed to grow.

Here is the machinery. When your premium comes in, it buys units at that day's fund price. Low price, more units. High price, fewer. Over the years you fill a jar with these units, and the value of your policy on any given day is simply units multiplied by price. Nothing mystical.

Fees are where it gets quieter. Most ILP charges never appear on a bank statement where you'd notice them. They're taken by cancelling some of your units, or deducted inside the fund before the price is even published. A management fee of one and a half percent sounds harmless in year one. Compounded over twenty years, it can be the difference between a policy that worked and one that disappointed. If you can't list your charges from memory, ask for a breakdown in writing. Any adviser worth their fee can produce one. (Yes, I'm aware I just gave you a stick to poke advisers with. Use it.)

Now the underused part: the switch. Nearly every ILP lets you move money between sub-funds, often with several free switches a year. This is the steering wheel of the whole vehicle. A policy left in its default fund for a decade wasn't managed. It sat there, through every rally and every crash, taking whatever came.

Steering well takes rules, not moods. I follow a written framework I call PEAK: documented conditions for entries and exits, decided before markets get emotional, checked every market day. The specifics belong in a consultation, but the principle travels: decisions made in advance beat decisions made in adrenaline.

Now the other side of the ledger, because the structure does several things genuinely well. One premium handles two jobs, so your protection and your investing never drift apart or get separately forgotten. The regular premium is a discipline machine: it keeps buying units in the very months when most do-it-yourself investors lose their nerve and stop. Free switches mean an actively watched policy can reposition without paying brokerage each time. And many of the funds available to my clients are CPF-OA and SRS eligible, which puts money to work that would otherwise sit idle.

So should you even own one of these? It depends, and anyone who answers without asking about your situation is selling, not advising. An ILP suits someone who wants insurance and investing handled together, who'll hold long term, and who will either watch it or appoint someone who will. If your protection is already sorted and you enjoy running your own brokerage account, an ILP may add cost you don't need. Both answers are respectable.

The expensive answer is the middle one: buying a policy, assuming it manages itself, and discovering fifteen years later that nobody was at the wheel.

Here's your homework, and it takes one evening. Find your latest statement and write down three numbers: total premiums paid, current value, and annual charges. Those three numbers start every useful conversation about whether your policy is earning its keep. If any of them is hard to find, that's the first thing to fix.

No promises of returns here. Funds fall as well as rise, and an ILP's value is never guaranteed. But watched, understood, and steered, a policy has a fighting chance. In a drawer, it has none.