AMP Screwed Me

Scott,

I have invested $200 a month over the last 20 years in an AMP whole of life policy. After 20 years, I have a withdrawal amount of… $64,196! Divided by 240 months (20 years), that is $267 dollars per month -- or about what I gave them. I feel cheated -- I can’t even use that money for a house deposit. What’s more, the payout on my death would be $300k, which is not enough for my kids to buy a house outright in Brisbane. What do you recommend?

Dennis

Hi Dennis,

A whole of life policy is an old-school product that bundles together an insurance policy with a managed fund. It’s a wonderful investment -- for the insurance salesman who sold it to you. He would have been slung 125 per cent of your first year’s premium plus an ongoing trailing commission as high as 8 per cent.

You got snookered.

Now, I assume you already have adequate term life insurance in your super fund (if not, call your fund and get it). So now you need to focus on getting out of this policy without getting a thousand amps (or AMPs) up your rear end.

Let’s look at your options. You could keep paying your premiums. If so, your policy will mature when you reach 95 or you die (whichever comes first) and you or your beneficiary would receive the full insured sum of $300,000 tax free. But I wouldn’t recommend it. Or you could surrender the policy and take the $64,196, but I wouldn’t recommend that either. Your best option is likely to be to convert it to an ‘endowment policy’, which can mature in at least five years’ time.

Still, given the thousands of dollars of commissions you’ve paid over the years, I’d encourage you to ring up AMP and ask them to run the numbers on the best outcome over the next five years.

Scott