1.

HPS works in a way such that should one of the owners paying for the house pass on
before the house is fully paid for, there will be a payout done but it doesn’t go
towards the homeowners but rather the flat itself. It is a decreasing term insurance.
2. Seeing as she wants a level term coverage, she should go for a level term assurance
policy as a mortgage reducing term assurance will cause her coverage to decrease
over time. The main difference is in the coverage between the two assurances. One
has a level term, the other one has a decreasing coverage in the later years. Mortgage
reducing term assurance is designed in a manner whereby the early years where the
responsibility is still high, the coverage will be at its peak then it will slowly
decrease over time.
3. There is no need for her to buy a whole life plan. Term life insurance would be
cheaper and to address her immediate need of wanting to increase her coverage for a
fixed period of 20 years.
4. No, they shouldn’t. Because CPF OA is accumulating at a 2.5%, if they were to take
funds out of their CPF OA to pay off for the mortgage loan with an interest of 2.6%,
they will essentially be losing out because the rate that the loan is growing is at
2.6%, which is higher than what CPF OA is offering.
5. Her savings ratio of 35%, which is higher than the recommended range of 10%. This
means that her net cash flow/gross income excluding CPF is of a healthy range. She
is not spending beyond her means, and she still has excess money to spend and to
save. If she would like to further improve this, possibly one thing that can be done
would be to budget $200 for holiday instead of $500. This will cause her savings
ratio to increase by 5%.
6. Endowment is to receive a sum of money at the maturity of the policy by paying an
insurance company a yearly payment otherwise known as a premium. By doing so, it
will generate returns that are higher than what the banks can offer her.
7. A single premium retirement plan works in a way such that once you have finished
the payment term, there is an accumulation period before the payout. After which,
during the payout, the policy owner will receive a constant flow of income every
month in their retirement years. It is because this is a single premium retirement
plan, she need not worry about not being able to afford it in the future because the
premiums are paid up front.
8. The implications involved in using a unit trust would be that the capital is not
guaranteed, with that being said, should the market go against the favor of her
investments with the unit trust, it might potentially jeopardize her retirement.
9. By investing in stocks, she is exposing herself to market risk, liquidity risk and
inflation risk.
10. Admin fee, investment fee, surrender fee, fund management fee, fund switch fee
11.