Bid-Offer Spread (ILP) Singapore: The Hidden 3–5% Cost Behind Older Policies

The bid-offer spread is the gap between the higher “offer” price you paid to buy units in an investment-linked policy sub-fund and the lower “bid” price you received when selling or switching out of it, historically around 3–5% and built into the fund’s pricing structure rather than charged as a separate line item.

Not financial advice. All figures for educational reference only. Data as at August 2026.

What Is Bid-Offer Spread (ILP) Singapore?

In a single-priced fund, one Net Asset Value (NAV) applies to both buyers and sellers on a given valuation day. In a bid-offer priced fund — the older structure common in Singapore ILPs before 2021 — two prices exist simultaneously: the offer price, which is what you pay to buy units, and the bid price, which is what you receive when you sell or switch out. The offer price sits above the bid price, and that gap is the spread.

The spread exists to cover the fund manager’s dealing costs (brokerage, stamp duty, market impact) when buying and selling the underlying assets to meet investor inflows and outflows, so in principle it is not pure profit for the insurer. In practice, however, it functioned as a real drag on ILP returns that was rarely made explicit to policyholders in plain language, which is part of why MAS pushed for reform.

The spread is separate from — and stacks on top of — the other charges built into an ILP, including mortality charges for the insurance cover, policy administration fees, and the fund management fee (expressed as a Total Expense Ratio). A policyholder paying premiums into a bid-offer priced sub-fund effectively lost a percentage of every contribution to the spread before any of those other charges were even applied.

How Does It Work in Singapore?

Under the old bid-offer structure, a typical spread ran 3–5%, meaning for every S$100 of premium allocated to units, only roughly S$95–S$97 of actual unit value was purchased at the offer price. If you then immediately sold those units back at the bid price, you would receive less again, since the bid price sits below even the fair value the offer price was set against. This made the spread a real, immediate cost rather than a timing quirk.

MAS’s Consultation Paper on Proposed Enhancements to Disclosure Requirements for Sale of ILPs, and subsequent industry-wide reforms, moved to single NAV pricing for ILP sub-funds with effect from 23 September 2021. Under single pricing, one NAV per unit applies to both buyers and sellers, so the spread as a distinct pricing mechanism disappears for funds priced this way — though the underlying dealing costs the spread used to cover do not vanish; they are typically absorbed into the fund’s ongoing management fee instead.

The practical implication for a Singapore policyholder today depends entirely on when their specific policy and sub-funds were set up. New ILPs sold from late 2021 onward should be single-priced with no separate bid-offer spread. Policies bought earlier may have been migrated by the insurer, or may still be running on the legacy bid-offer basis — the only reliable way to check is to read the current fund fact sheet or ask the insurer directly, since “my ILP is old” is not itself proof either way.

It’s also worth noting that the spread historically varied by asset class rather than being a single fixed number across all ILP sub-funds. Equity sub-funds investing in less liquid markets sometimes carried a wider spread than bond or money market sub-funds, reflecting the underlying manager’s actual cost of trading those securities. This meant two policyholders in the same ILP product, but allocated to different underlying sub-funds, could have experienced meaningfully different entry costs purely because of which asset class they chose, independent of any difference in fund performance itself.

Worked Example

Mr Lim bought an ILP in 2018 with a sub-fund priced under the old bid-offer structure, using a 4% spread. He tops up S$10,000 into the fund. At the offer price, this S$10,000 buys him units worth S$9,600 in bid-price terms — the S$400 difference is absorbed by the spread the moment the units are created, before any market movement has even occurred.

Compare this with a colleague who buys a similar exposure through a single-NAV-priced ILP sub-fund issued after September 2021. Her S$10,000 top-up buys S$10,000 worth of units at the single NAV price (before the fund’s ongoing management fee, which both policies also pay). She starts from a higher unit value on day one purely because her policy’s pricing structure has no separate spread to cross — illustrating why checking your specific policy’s pricing basis matters more than assuming all ILPs work identically.

Advantages

• Funds dealing costs transparently, in theory. The spread was designed to make buyers and sellers, rather than the wider fund, bear the transaction costs of their own trades.
• Largely resolved for new policies. Since September 2021, most newly issued ILP sub-funds use single NAV pricing, removing this specific cost for new buyers.
• Predictable and disclosed in fund fact sheets. Where a spread still applies, it is a known, quoted figure rather than a variable or hidden charge, making it possible to factor into return expectations.
• Encourages longer holding periods. Because the spread is a one-time cost on entry and exit rather than an ongoing drag, it discourages excessive short-term switching in older policies.
• Being phased out industry-wide. MAS’s push toward single pricing means the spread is a shrinking issue for the ILP market overall, not a permanent structural cost.

Risks and Limitations

• Directly reduces starting capital. A 3–5% spread means your invested value is immediately below what you paid in, before any investment return is even considered.
• Stacks with other ILP charges. The spread combines with mortality charges, admin fees and fund management fees, which together typically pushed net returns 1.5–3.5% below the illustrated projection on older policies.
• Easy to overlook. Because the spread is embedded in unit pricing rather than shown as a separate deduction on your statement, many policyholders were unaware it existed.
• Applies on every switch, not just entry. Each time you switched sub-funds under the old structure, you crossed the spread again, compounding the cost of active rebalancing.
• Legacy policies may still carry it. If your ILP was issued before 2021 and was never migrated to single pricing, you may still be paying this cost today without realising it.

Comparison

MAS’s 2021 pricing reform shifted most ILP sub-funds from bid-offer to single NAV pricing.

Frequently Asked Questions