THE former CEO of NTUC Income, Mr Tan Kin Lian, has locked swords with the company's new management. Mr Tan is organising a 'collective protest-action' at his blog: www.TanKinLian.blogspot.com.

It is almost like a sporting event and great fun to watch.

In one corner, we have Mr Tan Kin Lian. After leading the company as CEO for 30 years he stepped down last year. He says his former employer is giving policyholders a bad deal.

In the other corner is NTUC Income. It has reshaped the bonus structure of 310,000 whole live and endowment, including education policies. The company says it's a good deal.

I have corresponded with both Mr Tan and NTUC Income. Here is my interpretation of their positions in a lively debate format. The text is mine.

MR TAN: Insurers sometimes cut bonuses in one year. You are doing it for every year. It's a different payout from what I agreed to when I bought my policy.

I would like to decline but can't. There is no opt-in, opt-out or voting. It is a 'take it or take it deal'.

INCOME: You worry too much, Mr Tan. We did not cut bonuses but changed the structure. You will get all your bonuses with interest but later, at the end of your policy or upon early surrender.

MR TAN: 'Later' can be a long time. For endowment policies it is likely to be 10, 20 or 30 years. For whole life policies, it is when the policyholder dies.

INCOME: The benefit of paying you later is regulators will not require us to hold so much of your money in low-yielding bonds.

We can invest it in stocks and property, which should yield higher returns in the long-run.

MR TAN: I agree some policyholders may prefer that strategy. So, why not let them opt into your plan? Others, like me, can opt-out.

INCOME: Sorry but it's management's call on the best bonus policy for all 310,000 policyholders.

MR TAN: It looks like we shall agree to disagree.

INCOME: Yes, we agree - to disagree.

Dr Money's analysis

Point #1: A little-known problem of whole life and endowment policies is everyone's money is invested the same.

A recent graduate may prefer high-risk investments while an aging granny does not.

It doesn't matter. Their money buys the same stocks and bonds in one huge policyholders' fund.

Contrast that with a unit trust: The granny can invest in a bond fund and the hot-shot graduate in a stock fund. It is logical, simple and flexible.

At the end of 2006, we had $50 billion invested in inflexible policyholder funds, and that is just for the top four life insurers: AIA, GE Life, NTUC Income and Prudential. It comes to a whopping $50,000 per household.

For NTUC Income, its new bonus structure raises the risks and returns for all of its 310,000 whole life and endowment policies. Some like it. Others don't.

Once again, it shows that 'one size fits all' doesn't work well when it comes to investing.

Unit trusts don't have this problem. They make it super-easy to invest according to your risk preference. It is a BIG advantage.

Point #2: Is it really so easy to fool the regulatory authorities?

NTUC Income says that paying bonuses later permits it to side-step regulator's guidelines about setting aside declared bonuses in low-yielding bonds. It can take the freed up money and invest it in stocks and property to hopefully boost returns.

Not so fast. If NTUC Income's (old) regular bonus and (new) terminal bonus are equally certain to be paid, why would regulators require safe investments (bonds) for one and permit risky investments (stocks and property) for the other?

It is a key question that, so far, no one has been able to answer.

This article was first published in The New Paper on May 12, 2008.