Illustration caps compared: Hong Kong's 6% / 6.5% customer IRR and Singapore's 4.25% / 3.00% investment return

An illustration cap is a ceiling, set by a regulator or an industry body, on how high a return assumption a point-of-sale benefit illustration may use. In Hong Kong, the Insurance Authority (IA) has since 1 July 2025 capped the customer internal rate of return (IRR) in benefit illustrations for participating policies at 6.0% a year for HKD policies and 6.5% a year for non-HKD policies. In Singapore, the Life Insurance Association, Singapore (LIA) caps the investment rate of return used in benefit illustrations for SGD participating policies at an upper 4.25% and a lower 3.00%. The first caps the return to the customer and the second caps the participating fund's investment return, so 6.5% and 4.25% cannot be compared directly.

Applies to: Hong Kong, Singapore. Every percentage on this page is a cap under illustration rules: it is not a return, not a guarantee, and not a cap on actual payouts.

The two caps in one table

Sources: for Hong Kong, the HKMA repository copies of the IA practice note (28 February 2025) and interpretation note (10 July 2026); for Singapore, the LIA page on illustrated returns (accessed 24 October 2026) and the LIA media release of 2 June 2021.

Hong Kong: the cap applies to the "customer IRR"

Paragraph 3.1 of the IA practice note states that the cap applies to the customers' internal rate of return calculated on the projected surrender value (Customers' IRR) — the annualised return of projected total surrender cash value against total premiums paid. In other words, the cap is measured at the customer level: the cost of insurance, charges, bonus smoothing, shareholder allocation and similar factors are already reflected in the surrender cash value.

Key points:

1. All scenarios: the cap applies to the base, optimistic and pessimistic scenarios alike, and to all premium payment modes, policy terms and policy options (such as regular withdrawals). Illustrations of "withdrawal plans" are therefore also covered.
2. Tiered by currency: 6.0% for HKD policies and 6.5% for non-HKD policies (such as USD or RMB). The tiers reflect differences in interest rate conditions between currencies; they do not mean non-HKD policies will necessarily return more.
3. Scope: the cap targets participating business as defined in section 21B. Hong Kong participating savings plans fall within this scope; qualifying deferred annuities and universal life do not.
4. In-force policies: re-illustrations of policies already in force are not subject to the cap, but the IA requires that they not be used for aggressive or unethical selling.
5. No effect on actual returns: paragraph 3.6 states that the cap does not limit insurers' target underwriting or investment results, nor does it affect the actual returns on participating policies already issued.
6. Tools and promotions: illustrations of participating products produced in any form, such as calculators or websites, are also covered; promotional offers not reflected in projected policy values fall outside the scope (paras 2.3 and 2.4).

Review mechanism: on 10 July 2026 the IA issued an interpretation note under which the customer net return is estimated from the asset allocation of major participating products and the expected returns published by at least three investment banks and three asset managers, and compared with the non-HKD cap. The caps are adjusted only if the difference exceeds 50 basis points, in steps of 50 basis points, with the HKD and non-HKD tiers moving together. Regular reviews take place every two years; the first will be based on data as at 1 July 2027, with results announced in the third quarter of 2027, and the industry will be consulted before any adjustment.

Beyond the cap, the revised GL16 also requires benefit illustrations to show a scenario in which bonuses are insufficient to offset premiums, and prohibits wording such as "vanishing premium" (according to law firm DLA Piper, 25 March 2026).

Singapore: the cap applies to the "participating fund investment rate of return"

LIA's current rule is that the upper illustrated investment rate of return in benefit illustrations for SGD participating policies is capped at 4.25% a year, and the lower illustrated rate must be at least 1.25 percentage points below the upper rate, giving a cap of 3.00%. These levels have applied since 1 July 2021; before that they were 4.75% and 3.25% (source: LIA media release, 2 June 2021). LIA states that the caps are reviewed every year and that these rates are for illustration only: they do not represent upper or lower limits on the participating fund's investment performance, nor do they reflect the actual returns of existing or future participating policies (source: LIA page, accessed 24 October 2026).

Milliman notes that the Singapore cap is on the investment rate of return after investment expenses — a cap on "investment return" — whereas Hong Kong caps the customer IRR directly.

MAS Notice 320 also constrains illustrations from another direction: the return assumptions in a benefit illustration may not exceed the industry best estimate. Singapore illustrations are therefore subject to two constraints — the LIA cap and the "no higher than best estimate" rule — and the rates insurers actually illustrate may be below the cap. For a full guide to reading Singapore benefit illustrations, see our sister site wholelife.com.sg.

Why 6.5% and 4.25% cannot be compared directly

When "Hong Kong 6.5%" and "Singapore 4.25%" are placed side by side, the most common misreading is that "Hong Kong policies return more than two percentage points more than Singapore ones". That conclusion does not hold, for four reasons:

In general, moving from the "fund investment return" to the "customer return on surrender cash value" for the same policy involves deductions for the cost of insurance, charges and shareholder allocation, so the customer-level return is usually lower than the fund-level return. One cap sits after those deductions and the other before them, and each applies to different currencies, so the numbers are not comparable.

The right way to compare is to take the same currency, the same premium payment term and the same policy year, read the guaranteed cash value and the non-guaranteed part in each of the two benefit illustrations, and look at each one's pessimistic scenario.

What the caps do not cover

Illustration caps are often misread as a "cap on returns" or a "promise of returns". The caps do none of the following:

1. They do not govern actual bonuses: in both places the caps restrict only the figures illustrated at the point of sale. Actual bonuses depend on the participating fund's performance and the board's decisions, and may be higher or lower than illustrated.
2. They do not govern declarations on in-force policies: the Hong Kong cap does not change bonus declarations on policies already sold, and re-illustrations of in-force policies are not subject to the cap.
3. They are not a guarantee: the part of an illustration below the cap is still non-guaranteed.
4. They do not cover every currency: LIA's public documents address SGD participating policies; this site has not found any public document setting illustration caps for USD or other non-SGD participating policies, makes no inference about them, and defers to the insurer's documents.
5. They do not replace fulfilment ratios: the caps constrain "what is said" and fulfilment ratios record "what is delivered". The two should be read together; see How to read fulfilment ratios.

Since the cap took effect, the illustration basis for newly sold Hong Kong policies differs from before. Using the fulfilment ratios of series sold before 1 July 2025 to draw conclusions about new series means taking into account that the illustration basis has changed.

Which columns to read in a benefit illustration

Whether the benefit illustration is from Hong Kong or Singapore, the following columns matter more than "the highest line":

1. Guaranteed cash value: the part written into the contract that does not change with bonuses. Look at the policy year in which it comes close to total premiums paid.
2. Share of the non-guaranteed part: how much of the total cash value consists of non-guaranteed bonuses, especially terminal bonuses. The higher the share, the more likely the actual outcome will depart from the illustration.
3. Pessimistic scenario or lower illustrated rate: in Hong Kong, look at the pessimistic scenario; in Singapore, the column at the lower illustrated rate (no higher than 3.00%).
4. Sustainability of withdrawal plans: if the illustration includes regular withdrawals, check when policy values decline under the pessimistic scenario and whether the withdrawals can be sustained.
5. Deductions and charges: Singapore benefit illustrations usually include an Effect of Deductions statement; in Hong Kong, look at the explanation of policy charges and surrender charges.
6. Currency: confirm the currency used in the illustration against the currency you live in; for currency risk, see Choosing the policy currency.

Illustrated figures are projections under specific assumptions and do not indicate future results. If you would like a benefit illustration interpreted column by column, you can register your needs through the contact details on this site.