Optional life insurance collection

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In 1986 my father (now 78 years old) purchased an AMP whole life insurance policy which was to end in 2039. The annual premium – $ 1040. New annual bonus – $ 1030. Death benefit – $ 87,470. Withdrawal benefit – $ 57,930. My parents are concerned that with the AMP share price so low, it could be in danger. Should they continue with the plan, or quit and loan my brother the money to pay off his mortgage? JH

AMP sold its life insurance business to global company Resolution Life in July 2020, so AMP’s share price is irrelevant to this business.

AMP sold its life insurance business to Resolution Life in 2020.Credit:Tamara Voninski

These old whole life insurance policies were generally bad investments.

If your dad is healthy and doesn’t expect a claim on his policy for a while, you can get a quote from Australian political traders (I have no business deal with them), who buy such policies at a price greater than the cash value of AMP.

Your parents could then lend the money at, say, the ABC’s fixed mortgage rate of 2.64%, which is higher than the net policy return.

My wife and I, 73 and 77, respectively, are retired and have a combined income of $ 350,000 in Rest Super, from which we make $ 20,500 per year. We have $ 50,000 in the bank. We own a three-bedroom apartment, valued at $ 2 million, and receive a part-age pension of $ 36,093 per year. Our plan was to take advantage of retirement and, when the need arose, downsize our home. We love our apartment, but think we could move into a similar two-bedroom apartment nearby, with around $ 350,000 left. We would like to have access to these funds to be more generous to our family and to ourselves. We are both in good health. Would the alternative of a reverse mortgage be worth considering? Where would we invest the $ 350,000 if we sold? SP

Being in good health, you could easily expect many years on the surface.

With your savings, you might be able to be more generous to yourself and budget for, say, $ 1,000 more per month. You can do this for a decade or more while still staying in the home you love. Then you could consider moving into a retirement home, while adding the money left over in the super as a downsizing contribution.

Assuming a long life ahead of you, I suspect that you don’t have enough money to be too generous to others, and you are limited by Centrelink’s gifting rules.


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