Pre-need’s dilemma

Give it to Filipinos to find ways and means of profiting from an otherwise losing proposition.

Despite assurances from Lifetime Plans that its planholders are not affected by the problems of its sister company Pacific Plans owned by the Yuchengco group, some pension plan holders and other holders of fixed value plans have decided to pre-terminate their plans and receive much less in return.

Those who believe however that the Yuchengco group made a well thought out move when it transferred to Lifetime Plans last year the fixed value plans of Pacific Plans, leaving the latter with the open-ended educational plans, are now trying to make a killing by acquiring pre-terminated fixed value plans, especially those that are maturing in a year’s time.

We’re talking about big bucks here. Take my case for instance. I have a pension plan with Pacific Plans before and now Lifetime Plans which requires me to shell out something like P200,000 for five years. After 10 years, I get double the amount. So if there’s someone out there who is pre-terminating his plan which matures next year, I will have to pay him probably P200,000 now and get P500,000 next year. Not bad.

After CAP and Pacific Plans, expect every firm that has offered open-ended educational plans to file for suspension of payments.

In open-ended plans, a pre-need firm pays the tuition of a beneficiary regardless of the amount. After 1992 when tuition fee increases were deregulated, many pre-need firms stopped selling open-ended plans and instead offered fixed-value plans but some continued to do so.

For instance, CAP continued to sell open-ended plans from 1992 to 2002 despite the tuition fee increase deregulation.

The law is giving the pre-need firms a way out of the mess they found themselves deeply embroiled in by filing for suspension of payments. Why not avail of it?

There is rumor in the pre-need industry that Platinum is next. Rumors have it that the owner has a serious gambing problem and his spending habits. He reportedly both a brand new BMW X5 inspite of his company’s financial dilemma. Platinum is dead, not dying.

There are also rumors that Prudential is next in line but we have yet to confirm the reports.

Not all is lost for the pre-need industry however. There are companies that have invested their planholders’ money wisely and have trust fund surpluses. Those companies that are encountering financial difficulties are those that set aside only five percent of the amount paid by the planholders for the trust fund and then spent the rest for commissions and other expenses. There is no way for the five percent that they set aside as trust fund to yield 100 percent come plan maturity. Thus, the inability to pay.

I heard that some of the healthier companies that have put more of the money on trust funds and less on commissions and other expenses are Philam and Loyola.

The problem of the pre-need industry has just began.

At least 70 percent of all pre-need firms are safe. All of them are in a position to return the original amount paid by their tradtional or open ended planholders. Whether they can pay the tui-tion fees at their present cost is another matter.

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