What to ask if offered an ILAS
An investment-linked assurance scheme (ILAS) is sometimes recommended as a way to save for retirement, as monthly contributions are invested into a range of funds over a set period of years. Here are some questions to ask before signing up for one these plans:
How much in commissions are you paid if I sign up for this?
Ask for this answer in writing. By offering commissions for the entire term upfront (which can be as long as 20 to 30 years), insurance companies have been able to make ILAS extremely popular among 'independent' financial advisers. Few products in the marketplace can offer advisers remuneration anywhere close.
Where in the contract does it say my contributions for the initial period are eventually given back to me?
Some independent financial advisers (IFAs) claim that your initial contributions are 'ring-fenced' and 'held ransom' for you. Dig into the contract details and you may find that your initial contributions are used to cover administration fees.
The brochure says the total cost of the ILAS is less than 1 per cent a year - are investment administration charges and fund expenses included in that?