Who picks the investments: investor control and what a policy can hold

Law as at 27 September 2026, for an individual resident in Singapore who owns a life policy personally. The general explanation of investor control, written for US readers, is on our PPLI overview; this article covers what it means for families living in Singapore.

PPLI.com is a research publisher, not an insurer, broker or financial adviser, and is not licensed by the Monetary Authority of Singapore. Nothing here is an offer of insurance. To buy a policy, deal with an insurer or adviser licensed or exempted by MAS and check it on the MAS Financial Institutions Directory.

Why the question arises

A policy wraps a portfolio. The insurer holds the assets in a separate account, the policyholder's contract value tracks them, and the tax systems that give policies special treatment do so on the footing that the insurer, not the policyholder, is the investor. That footing is fragile if the policyholder calls the trades. A system that taxes investments held directly, but defers or exempts investments held inside a policy, has every reason to look through a policy where the only thing that changed was the name on the custody account.

So the question for any family is not simply “what can the policy hold?” It is “who decides what the policy holds, and which tax systems care?”

Singapore: no investor control rule, and little to protect

We found no Singapore tax rule that treats a policyholder as owning a policy's underlying assets because he influences how they are invested. There is also little for such a rule to do. A resident individual pays no Singapore tax on foreign-sourced income received here (Income Tax Act 1947 s 13(7A)(b), except through a Singapore partnership), no tax on one-tier Singapore dividends (s 13(1)(za)), and generally no tax on gains from selling shares and financial instruments held as investments, which IRAS describes as “generally not taxable”, though trading can be. IRAS also lists “Payouts from insurance policies as they are capital receipts” among gains that are generally not taxable.

For a person whose only tax home is Singapore, a directly held portfolio and the same portfolio inside a policy produce, in most cases, the same Singapore tax result: very little. The policy's charges are then a cost with no Singapore tax saving to offset them. That is the honest starting point, and it is why the investment rules that matter to a Singapore-only resident are not tax rules at all.

The constraints that do apply

• The insurer's own rules. The insurer decides what it will accept into its separate account, how assets are valued, how often they can be dealt in, and who may manage them. It has to be able to value the policy, pay a death claim and process a surrender.
• The insurer's regulator. A Singapore-licensed insurer is supervised by MAS, including under a notice on investment-linked policies. We could not retrieve the current text and say nothing about its detail. An insurer licensed elsewhere answers to its home regulator.
• The other tax system. If anyone in the family is still inside another country's tax net, or may be again, that country's rules on control and permitted assets apply through them.

United States: investor control and diversification

For a US citizen living in Singapore, a policy works for US tax only if it is life insurance under section 7702 and, for a policy based on a segregated account, adequately diversified under section 817(h). Section 817(h)(1) says a variable contract based on a segregated asset account is not treated as life insurance “for any period (and any subsequent period)” for which its investments are not adequately diversified. The Treasury regulations set the test: no more than 55% of the account in any one investment, 70% in any two, 80% in any three and 90% in any four (Treas. Reg. s 1.817-5(b)(1)(i)).

The regulations also explain why insurance-dedicated funds exist. An interest in a fund is looked through, so that a share of each of its assets counts toward diversification, where all beneficial interests are held by insurers' segregated accounts and public access is available only through a variable contract (s 1.817-5(f)). A fund built that way lets one policy hold one fund and still be diversified.

Investor control is the separate question of who is the owner. Revenue Ruling 2003-91 holds that “The holder of a variable contract will not be considered to be the owner, for federal income tax purposes, of the assets that fund the variable contract”, on facts that include: “All investment decisions concerning the Separate Account and the Sub-accounts are made by IC or Advisor in their sole and absolute discretion”; the holder “may not select or direct a particular investment to be made”; the holder may reallocate between sub-accounts; and the holder “cannot communicate directly or indirectly with any investment officer” about specific investments. Sub-account interests were not available to the public.

In Webber v Commissioner, 144 T.C. 324 (2015), as reported by US law firms, a policyholder who in practice directed the separate account's investments was treated as owning them and taxed currently. The further consequence, on the analysis of US commentators rather than a ruling on point, is that a US person treated as owning foreign fund shares may face the passive foreign investment company rules. How this fits a US citizen's wider position in Singapore, including the 1% excise tax on premiums paid to foreign insurers, is covered in US citizens in Singapore.

United Kingdom: the personal portfolio bond rules

A family that may return to the UK needs to know the personal portfolio bond rules in the Income Tax (Trading and Other Income) Act 2005, sections 515 to 526. In outline, a policy is a personal portfolio bond if its terms allow the holder to select assets other than permitted property. Section 520 lists the permitted categories: property in the insurer's internal linked funds, authorised unit trusts, investment trusts and overseas equivalents, OEICs, cash, certain other policies, interests in certain collective investment schemes including non-UK unit trusts, UK REITs and overseas equivalents, and authorised contractual schemes.

The charge is a deemed gain at the end of each policy year. HMRC's helpsheet HS321 describes it as 15% of the total premiums paid plus previous personal portfolio bond gains, less previous part-surrender gains. The deemed gain is taxed as savings income at 20%, 40% or 45% now, and 22%, 42% or 47% from 6 April 2027. Time-apportionment relief for periods of non-UK residence under section 528 can reduce gains on a policy that has been held abroad, and a return to the UK after five years or less abroad can bring gains made during the absence, on a policy held before departure, back into charge under the temporary non-residence rule in section 465B.

Our UK edition explains the rules in full in personal portfolio bond rules explained, and the move itself is covered in leaving the UK for Singapore.

Germany: the asset-management policy

German-connected families face a similar idea in a different form. German statute commentaries describe a “vermögensverwaltender Versicherungsvertrag”, an asset-management policy, as taxed as if the assets were held directly, so that the usual treatment of life policy gains under section 20(1) no. 6 of the Income Tax Act does not apply. We have not verified the statutory wording ourselves. The point for a Singapore resident is that German ties can outlast a move. German advisers report that German nationals remain within unlimited inheritance tax for five years after leaving, and that an extended limited income tax liability can apply for ten years after a move to a low-tax country, depending on the facts.

What a policy can hold in practice

The result of these rules is a small set of structures that most insurers offer and that the main tax systems accept.

Insurer-dedicated funds

A fund whose units are available only to insurers' separate accounts. The policyholder chooses the fund, or chooses between several, but not the individual investments inside it. For US purposes this is the look-through structure in the diversification regulations. For UK purposes, whether a given fund is permitted property depends on its legal form.

Insurer-appointed managers

The insurer appoints an investment manager, often one the policyholder has proposed, to run the separate account under a written mandate: a risk profile, an asset allocation range, perhaps a currency. The policyholder can change the mandate or ask the insurer to change managers, but does not give trade instructions. This is closest to the facts of Revenue Ruling 2003-91.

Internal and collective funds

An insurer's internal linked funds and public collective funds sit comfortably inside the UK permitted property list and are simple to value. They offer less tailoring, and for US persons a public fund raises its own questions, because the ruling's facts involved sub-accounts not available to the public.

What does not fit

Direct holdings the policyholder picks himself, such as a single private company, a property the family uses, a painting or a loan to a family business, are the assets most likely to fail the control and diversification tests, and the ones insurers are least keen to hold. Where a family wants such assets, a different structure is usually the honest answer.

Liquidity: the question insurers ask first

An insurer has to be able to pay a death claim and process a surrender. Hedge funds, private credit funds and private equity funds may have lock-ups, notice periods, gates and side pockets. Inside a policy those terms do not disappear; they become the policy's terms. A family that puts illiquid alternatives into a policy should expect the insurer to limit how much can be held, to require that the rest stays liquid, and to reserve the right to delay payment or pay in kind if an underlying fund suspends dealing.

Our tools help test the economics before the structure: the hedge fund X-ray, the private credit real yield calculator and the liquidity event planner.

Worked examples

Hypothetical, with invented names and stated assumptions.

Example 1: a Singapore-only resident who wants to pick stocks

Assumptions: Mr Chua, a Singapore citizen with no tax residence or citizenship anywhere else and no plans to leave, wants his policy to hold twenty listed shares he selects himself, and to trade them when he likes.

Singapore tax: no difference between holding the shares directly and holding them inside a policy; the dividends and gains are generally untaxed either way. The only questions are whether an insurer will accept that arrangement, what it charges, and whether the policy is worth having for other reasons, such as succession or a possible future move. If he may one day move to a country with investor control rules, a policy built on his own trade instructions may not travel well.

Example 2: an American who wants a specific fund

Assumptions: Ms Porter, a US citizen resident in Singapore, wants her policy to invest in one private credit fund she has chosen, which is also sold to the public, and to tell the manager when to add or sell.

US tax: a single-fund account that is not an insurance-dedicated fund risks failing diversification, and her direct instructions look like investor control. If either fails, the inside build-up is taxed to her currently and the fund shares may be treated as hers. A version that respects the rules uses an insurance-dedicated fund or a discretionary manager with a written mandate, and no contact from her about specific investments.

Example 3: a UK family that may return

Assumptions: the Hughes family pays a single premium of £2,000,000 into a policy that lets them choose any asset, including unlisted shares. They return to the UK and are UK resident for the next three policy years. For illustration, assume no withdrawals, no time-apportionment relief for those years, and tax at 45%.

The tax is due on gains that do not exist in the account and whatever the investments actually did. From 6 April 2027 the additional rate on savings income rises to 47%. A policy limited to permitted property avoids the charge; the time to decide that is before the premium is paid.

A checklist

1. List every tax system the family is in now, or may be in later: citizenship, a residence tail, a planned return.
2. For each, find out whether it has an investor control, permitted property or asset-management rule.
3. Decide who will choose the investments: you (usually a problem), a manager under a mandate, or an insurer-dedicated fund.
4. Check how the insurer values and deals in each asset, and what happens if a fund suspends dealing.
5. Keep communications with the manager at mandate level if a US or similar rule applies.
6. Review the structure when anyone in the family changes residence.

Where this sits

Investment choices inside a policy for Singapore residents are covered more broadly on our page on investment flexibility. The generic explanation of investor control is on the PPLI overview, and the Singapore picture on PPLI for Singapore residents. How the policy is reported once it holds these assets is in what CRS and FATCA report. If you have a question about the research, ask a question.

Investor control and what a policy can hold: questions

Does Singapore have an investor control rule for life policies?

We found no Singapore tax rule that treats a policyholder as owning a policy's investments because he influences them. For a resident individual, foreign-sourced income and investment gains are generally not taxed in Singapore anyway, so the limits come from the insurer and from any other tax system that still applies.

What is Revenue Ruling 2003-91?

A US ruling holding that the holder of a variable contract is not treated as owner of the assets funding it where the insurer or its adviser makes all investment decisions in its sole and absolute discretion, the holder cannot select or direct particular investments, and the holder cannot communicate with the investment officers about specific investments.

What does section 817(h) require?

That the investments of a segregated asset account behind a US variable contract are adequately diversified. The regulations allow no more than 55% in one investment, 70% in two, 80% in three and 90% in four. A contract that fails is not treated as life insurance for that period and any later period.

What is a personal portfolio bond?

Under the UK Income Tax (Trading and Other Income) Act 2005, a policy that allows the holder to select assets other than permitted property. It is taxed on a deemed gain each policy year equal to 15% of premiums plus prior deemed gains, less prior part-surrender gains, as savings income.

What is an insurer-dedicated fund?

A fund whose interests are held only by insurers' separate accounts and are available to the public only through a policy. Under the US diversification regulations, such a fund is looked through, so a policy can hold one such fund and still be diversified.

Can my own manager run the investments in my policy?

Often, yes, if the insurer appoints the manager and the manager works under a written mandate from the insurer. The policyholder can usually propose the manager and the mandate but should not give trade instructions where a US-style investor control rule applies.

Can a policy hold hedge funds or private credit?

Some insurers accept them, subject to their own limits on illiquid assets. Lock-ups, gates and suspension terms of the funds become, in effect, the policy's terms, so surrenders and even death claims may be delayed, depending on the policy conditions.

Does a Singapore-only resident gain anything by using a policy for investments?

Not in Singapore tax, in most cases, and the charges are a cost. The reasons to consider one lie elsewhere: succession across borders, a possible future move, or another country's tax system that still applies to someone in the family.

Sources and authorities

Singapore: Income Tax Act 1947 s 13; IRAS: gains from sale of property, shares and financial instruments. United States: 26 USC 817; 26 USC 7702; Treas. Reg. s 1.817-5; Rev. Rul. 2003-91, IRB 2003-33; secondary on Webber: National Law Review. United Kingdom: ITTOIA 2005 s 515, s 520, s 528, s 465B; HMRC HS321 (2026); gov.uk: savings rates from April 2027. Germany (secondary): EStG s 20 summary; Lorenz & Partners on inheritance tax for expats; extended limited tax liability.

Research checked 27 September 2026 against the statutes, rulings and guidance linked above. Our editorial standards explain how errors are corrected.

PPLI.com is not licensed by the Monetary Authority of Singapore and does not give financial advice. This is general information about Singapore law and other tax systems, not an offer or invitation to enter into any contract of insurance. Policies issued by insurers not licensed in Singapore are not covered by the Policy Owners' Protection Scheme or by the nomination rules in the Insurance Act 1966.