Do not allow the adviser to churn your CPF investment

Recently, there is some articles in the newspaper about "churning" of investments using CPF savings. Let me explain what the issue is.

Churning takes place when there is unnecessary buying and selling of investment in order to generate income for the insurance adviser.

A customer has to incur a front-end spread (ie the difference between the bid and offer price), when investing in this product. Most companies charge a spread of 5%. NTUC Incomes charges a lower spread of 3.5%.

If the investment is sold within a short time, there is insufficient time to realise a good return to recover the front end cost. We advise CPF funds to be invested for the long term and not for short term speculation.

NTUC Income is against churning, as it is at the expense of policyholders. We pay a lower rate of commission to our insurance advisers. They do not have the incentive to churn. Our supervisor call the policyholder at the time of purchase to ensure that they properly understand their investment and the features of the product.

We have the lowest rate of early surrenders in the industry. If a customer wishes to surrender his investment, we explain the disadvantages of early surrender. We also provide them with other options such as switching from one fund to another so that they avoid high front end cost.