INVESTIGATION ON TERMINATION RATES OF INVESTMENT-LINKED INSURANCE PRODUCTS INCLUDED IN THE CPFIS - AN UPDATE

News Release by: Central Provident Fund Board 27 October 2004 --

In response to media queries in early September 2004, the CPF Board has expressed its concern over the sharp increase in the termination rates of investment-linked insurance products (ILPs) included in the CPF Investment Scheme (CPFIS). The Board also informed the media that it has asked each of the insurance companies to investigate into the matter and submit a report. The Board would like to update the media that all twelve participating companies have submitted their investigation report. These companies have, where applicable, provided details of the termination cases which have resulted in members unnecessarily losing part of the CPF used to purchase the ILP. For example, some members have been advised by their financial adviser representatives to terminate their existing ILP and then buy a similar product when in fact they are entitled to free switching or lower sales charges. In doing so, they incur additional sales charges. Some members have been offered discounts in the form of cash which were pocketed by the members instead of returning to their CPF account. The majority of the companies have also informed the Board of the actions which they have taken, or will be taking, against their errant representatives. Such actions range from issuing warning letters to termination of service, depending on the severity of the offences. The CPF Board is pleased to note that since it started working with the Life Insurance Association (LIA) and its member companies on this matter, LIA has reported that the termination rate of ILPs has reduced significantly. The Board recognises that there will always be valid termination cases. However, it will continue checking on the industry. Besides LIA, the Board is also working with the Investment Management Association of Singapore and its member companies on this matter. The Board will continue to monitor the situation closely and work with the industries to help CPF members preserve and increase their savings for retirement. PUBLIC ENQUIRIES: Members with queries can call the CPF Call Centre at 1800-227-1188 (press 1, followed by 4)