Dear Mr Tan,
I am insured for group medical by my company. An insurance agent advised me to buy a Shield plan from his company so that I can continue to get coverage after I leave this employer. I read your previous posting that this is double coverage. What should I do?
Which company offer the best Shield plan? Is it NTUC, AIA or Avivia? What is your advice?
REPLY
If you buy a Shield plan on top of the medical insurance provided by your employer, you are paying the full premium for the Shield plan for partial or no coverage, as most of the medical cost can be met from the employer's plan.
Here are two better options for the employee:
1) Ask your employer to buy a Shield plan. This allows allows you to continue the plan on your own when you leave your employer, i.e. the plan is portable. As the Shield plan has a deductible, you can ask the employer to buy the rider to cover it. If the total cost to the employer is higher than the group plan, you can volunteer to pay a portion of the total cost.
2) Ask your employer to stop the group plan and contibute the premium to your Medisave account. You can pay for your own Shield plan using the Medisave.
Both options avoid the wastage of double coverage and reduces the cost to the employer and employee.
I am not familiar with the coverage and premium charged on the Shield plans by the various insurance companies. I am not able to comment on the plan that is best for you.
Wednesday, October 31, 2007
Give a fair return to the policyholder
Dear Mr Tan,
I am a regular visitor to your blog, which I find it quite informative. You have been advocating "Buy Term and Invest the rest".
Are you also saying that there is no need for one to buy whole life or endowment policies as they do not yield better returns?
If I extrapolate, does it mean that on hindsight, when you were CEO of Income, products such as Living Policies should not have been sold? I hope to see your response to this issue in your blog.
REPLY
1. NTUC Income launched its Combined Funds in 2003. I have been actively promoting these products under its Flexi-Link and Ideal plans. These investment products have low charges and give good value to the policyholder. The insurance protection can be bought seprately through term insurance. Most of my personal savings are in these products.
2. The Endowment and Living policies from NTUC Income give a fairly satisfactory return ,due to lower commission rates,. The return is higher than similar products from other insurance companies. They are suitable for policyholders who prefer to have the discipline of regular savings.
3. For most young people, who needs flexibility in their savings, "buy term and invest the difference" is a better choice. The investment should be made in large, well diversified, low cost funds. The Combined Fund from NTUC Income meet this criteria. Another option is the STI Exchange Traded Fund.
4. I have always upheld the principle that a insurance product must be designed to give a fair return to the policyholder, while leaving a fair margin to pay the expenses to market and manage the product. During my tenure, I kept the expense low, so that the policyholders can get a fairly attractive return for their long term savings.
I am a regular visitor to your blog, which I find it quite informative. You have been advocating "Buy Term and Invest the rest".
Are you also saying that there is no need for one to buy whole life or endowment policies as they do not yield better returns?
If I extrapolate, does it mean that on hindsight, when you were CEO of Income, products such as Living Policies should not have been sold? I hope to see your response to this issue in your blog.
REPLY
1. NTUC Income launched its Combined Funds in 2003. I have been actively promoting these products under its Flexi-Link and Ideal plans. These investment products have low charges and give good value to the policyholder. The insurance protection can be bought seprately through term insurance. Most of my personal savings are in these products.
2. The Endowment and Living policies from NTUC Income give a fairly satisfactory return ,due to lower commission rates,. The return is higher than similar products from other insurance companies. They are suitable for policyholders who prefer to have the discipline of regular savings.
3. For most young people, who needs flexibility in their savings, "buy term and invest the difference" is a better choice. The investment should be made in large, well diversified, low cost funds. The Combined Fund from NTUC Income meet this criteria. Another option is the STI Exchange Traded Fund.
4. I have always upheld the principle that a insurance product must be designed to give a fair return to the policyholder, while leaving a fair margin to pay the expenses to market and manage the product. During my tenure, I kept the expense low, so that the policyholders can get a fairly attractive return for their long term savings.
Free look period
Dear Mr Tan,
Recently, I bought the Revosave after meeting a NTUC agent in a shopping mall. She was very persuasive and told me all the good features of the insurance policy. I signed for the policy.
Later, my friend told me that the return on this policy is poor, compared to other products from NTUC. I want to cancel the policy. What is your advice?
REPLY
If you have bought the policy within the last 14 days, which is the free look period, you can ask to cancel the policy and get a full refund.
The return on this policy is about 2% to 3%. It is lower than the return on an ordinary endowment policy, which should give about 4% p.a. Due to the annual payout under this policy, the period of investment is short. After deducting the commission payable to the agent, the return to the policyholder is quite low.
Recently, I bought the Revosave after meeting a NTUC agent in a shopping mall. She was very persuasive and told me all the good features of the insurance policy. I signed for the policy.
Later, my friend told me that the return on this policy is poor, compared to other products from NTUC. I want to cancel the policy. What is your advice?
REPLY
If you have bought the policy within the last 14 days, which is the free look period, you can ask to cancel the policy and get a full refund.
The return on this policy is about 2% to 3%. It is lower than the return on an ordinary endowment policy, which should give about 4% p.a. Due to the annual payout under this policy, the period of investment is short. After deducting the commission payable to the agent, the return to the policyholder is quite low.
Journey on upper deck of bus
I visited a friend at his office in Bedok. To home by MRT, I have to take the train from Bedok to City Hall and change to another train to Yio Chu Kang. From there, I can take a bus to my home. I expect the trains to be crowded, as it was 5 pm.
I search the public tranport guide and found that there is a bus service 25 from Bedok Interchange to Ang Mo Kio Interchange. From there, I could change to another bus to my home.
I had a pleasant ride from Bedok to Ang Mo Kio on a comfortable seat on the upper deck of the bus. I had a good view of Singapore. The bus was not crowded.
Lesson: It is now quite easy for me to move around Singapore on the public transport, with I carry the guide with me.
I search the public tranport guide and found that there is a bus service 25 from Bedok Interchange to Ang Mo Kio Interchange. From there, I could change to another bus to my home.
I had a pleasant ride from Bedok to Ang Mo Kio on a comfortable seat on the upper deck of the bus. I had a good view of Singapore. The bus was not crowded.
Lesson: It is now quite easy for me to move around Singapore on the public transport, with I carry the guide with me.
Tuesday, October 30, 2007
A bus journey with a transfer
I was invited to a dinner at Concourse Building in Beach Road.
I decided to take a bus from my home. There is no direct bus. I went to the Transit Link website and used its Bus Journey Planner.
I entered my starting and ending bus stops. It displayed the best route for me. I had to take service 857 for 4 stops to Bendemeer Road and change to service 107 for 8 stops to Jalan Sultan.
It was quite convenient and easy. As it was during the busy period, I had to stand on the first part of the journey. I had a seat for the second part.
This is the first time that I have taken a bus journey with a transfer. It was quite easy with a little preparation. The service provided by Transit Link was useful.
I decided to take a bus from my home. There is no direct bus. I went to the Transit Link website and used its Bus Journey Planner.
I entered my starting and ending bus stops. It displayed the best route for me. I had to take service 857 for 4 stops to Bendemeer Road and change to service 107 for 8 stops to Jalan Sultan.
It was quite convenient and easy. As it was during the busy period, I had to stand on the first part of the journey. I had a seat for the second part.
This is the first time that I have taken a bus journey with a transfer. It was quite easy with a little preparation. The service provided by Transit Link was useful.
BIGe from Aviva
Mr. Tan
I cannot understand how come Aviva BIGe can guaranteed interest of 3.5% without sales charges and withdrawal fees wherelse not other institution can offer that. Is there any "catch" that I overlook on this product?
REPLY
Aviva only guarantees 3.5% for 3 months. Thereafter, they have the right to reduce the interest rate (subject to a minimum of 2.5%).
Although they have to pay out 3.5%, they are able to invest in the stockmarket to earn a much higher return. They are taking some risk, but it can be covered by their risk capital.
I think that they probably invest a portion of their funds in the stockmarket to earn a higher return. This is also a good way for them to build up a base of customers for their other products. They only offer this facility on CPF savings, as the saving for most members are quite modest.
I cannot understand how come Aviva BIGe can guaranteed interest of 3.5% without sales charges and withdrawal fees wherelse not other institution can offer that. Is there any "catch" that I overlook on this product?
REPLY
Aviva only guarantees 3.5% for 3 months. Thereafter, they have the right to reduce the interest rate (subject to a minimum of 2.5%).
Although they have to pay out 3.5%, they are able to invest in the stockmarket to earn a much higher return. They are taking some risk, but it can be covered by their risk capital.
I think that they probably invest a portion of their funds in the stockmarket to earn a higher return. This is also a good way for them to build up a base of customers for their other products. They only offer this facility on CPF savings, as the saving for most members are quite modest.
Monday, October 29, 2007
Unit Trust and ILP
Hi Kin Lian,
I have been reading your blog articles and found them to be useful. May I ask your expert advice on the following:
(1) What is the difference between buying unit trusts from insurance companies (i.e. investment link products) versus buying from banks? It appears that many people are buying ILP as the insurance agents are peddaling these products. The banks don't peddale these products because unit trusts are not their lifeblood.
Reply: For lump sum investments, the difference between ILP (from insurance company) and unit trust (from a bank) is quite small. The upfront charge is between 2.5% to 5%. The annual charge is similar.
For monthly investments, the ILP imposes an additional charge which can take up up to 18 months of the premium. Most of the charge goes to pay the commission of the insurance agent. There is no similar charge from unit trust.
(2) Is it worthwhile to pay for a financial adviser from a wealth company (not insurance company) to take care of our investment funds? Should I decide by myself?
Reply: For most people, it is better to choose a large, well diversified, low cost fund and invest for the long term, i.e. 10 years or longer. In this case, you do not need a financial adviser to advise you on when to buy or sell.
The additional charge impose by the financial adviser can take away an additional 0.5% to 1% a year. Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
I have been reading your blog articles and found them to be useful. May I ask your expert advice on the following:
(1) What is the difference between buying unit trusts from insurance companies (i.e. investment link products) versus buying from banks? It appears that many people are buying ILP as the insurance agents are peddaling these products. The banks don't peddale these products because unit trusts are not their lifeblood.
Reply: For lump sum investments, the difference between ILP (from insurance company) and unit trust (from a bank) is quite small. The upfront charge is between 2.5% to 5%. The annual charge is similar.
For monthly investments, the ILP imposes an additional charge which can take up up to 18 months of the premium. Most of the charge goes to pay the commission of the insurance agent. There is no similar charge from unit trust.
(2) Is it worthwhile to pay for a financial adviser from a wealth company (not insurance company) to take care of our investment funds? Should I decide by myself?
Reply: For most people, it is better to choose a large, well diversified, low cost fund and invest for the long term, i.e. 10 years or longer. In this case, you do not need a financial adviser to advise you on when to buy or sell.
The additional charge impose by the financial adviser can take away an additional 0.5% to 1% a year. Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
When to buy a Life Annuity?
Hi Mr Tan,
Thanks for the link to your FAQ. Very informative and good.
http://www.tankinlian.com/faq/life.html
I hope you can advise on the following questions, as the insurance adviser may not give truthful answers.
1. What is estimated total annual cost (distributing, commission, fund management fee, profit, etc) in term of % of invested sum ?
Reply: I estimate the expenses, when spread over the years, to be less than 1% per year.
2. Better to buy early (age 50) or late (age 70) ?
Reply: Perhaps at 65.
3. Is it a good time to buy when interest rate peak ?
Reply: Yes.
Thanks for the link to your FAQ. Very informative and good.
http://www.tankinlian.com/faq/life.html
I hope you can advise on the following questions, as the insurance adviser may not give truthful answers.
1. What is estimated total annual cost (distributing, commission, fund management fee, profit, etc) in term of % of invested sum ?
Reply: I estimate the expenses, when spread over the years, to be less than 1% per year.
2. Better to buy early (age 50) or late (age 70) ?
Reply: Perhaps at 65.
3. Is it a good time to buy when interest rate peak ?
Reply: Yes.
Increase in ERP charges
The ERP (electronic road pricing) charges will be increased again.
It will cost $6.50 in ERP charges to drive from Ang Mo Kio to the city. That is a lot of money. You have to pay the high charges for parking your car as well. And it is no fun to drive in a congested road.
Taking a taxi is also expensive. You have to pay the taxi fare, a lot of surcharges, including the ERP charges.
What is the solution?
1. Learn to take public transport, like the bus or MRT
2. It is comfortable, even when it is crowded
3. It is relatively inexpensive.
4. Buy a ez-Link card and travel around Singapore. Use it on the MRT, bus or LRT. You will get familiar with the system.
5. Visit the Transit Link website and try the Bus Journey planner.
It will cost $6.50 in ERP charges to drive from Ang Mo Kio to the city. That is a lot of money. You have to pay the high charges for parking your car as well. And it is no fun to drive in a congested road.
Taking a taxi is also expensive. You have to pay the taxi fare, a lot of surcharges, including the ERP charges.
What is the solution?
1. Learn to take public transport, like the bus or MRT
2. It is comfortable, even when it is crowded
3. It is relatively inexpensive.
4. Buy a ez-Link card and travel around Singapore. Use it on the MRT, bus or LRT. You will get familiar with the system.
5. Visit the Transit Link website and try the Bus Journey planner.
Intra town travel
From Wikipedia:
The concept of having rail lines which could bring people from door to door without requiring the use of road-clogging buses was much favoured by the government transport planners, especially with the increased emphasis on a rail-based public transport network.
For intra town travel, LRTs were favoured over buses because trains run on dedicated elevated guideways, bypassing any traffic congestion and traffic lights on the roads, and does not add to road traffic. Train arrival and departure times are also almost guaranteed this way.
It is also cleaner as the trains are electrically powered, and therefore lessens the effects of air pollution.
MY OBSERVATION:
It is useful to have a LRT system in our busy towns, where the roads are congested, perhaps Tampines and Toa Payoh?
The concept of having rail lines which could bring people from door to door without requiring the use of road-clogging buses was much favoured by the government transport planners, especially with the increased emphasis on a rail-based public transport network.
For intra town travel, LRTs were favoured over buses because trains run on dedicated elevated guideways, bypassing any traffic congestion and traffic lights on the roads, and does not add to road traffic. Train arrival and departure times are also almost guaranteed this way.
It is also cleaner as the trains are electrically powered, and therefore lessens the effects of air pollution.
MY OBSERVATION:
It is useful to have a LRT system in our busy towns, where the roads are congested, perhaps Tampines and Toa Payoh?
Ride on Bukit Panjang LRT
I took a ride on the Bukit Panjang LRT.
It was a pleasant experience. The fare is about 80 cents, similar to a bus fare. The waiting time for a train is about 3 minutes. Each LRT station has lifts and staircase. I find the service to be satisfactory. Well done to SMRT.
I met a friend. He told me that he like the LRT service. According to him, the only drawback is that the train had to make some sharp turns at certain parts of the journey. I was not aware about any inconvenience.
I find that the LRT train occupies only half of the platform. A full length train will have twice the capacity. More people can be encouraged to take the LRT.
It was a pleasant experience. The fare is about 80 cents, similar to a bus fare. The waiting time for a train is about 3 minutes. Each LRT station has lifts and staircase. I find the service to be satisfactory. Well done to SMRT.
I met a friend. He told me that he like the LRT service. According to him, the only drawback is that the train had to make some sharp turns at certain parts of the journey. I was not aware about any inconvenience.
I find that the LRT train occupies only half of the platform. A full length train will have twice the capacity. More people can be encouraged to take the LRT.
Sunday, October 28, 2007
Views of Light Rail Transport
I posted my experience on travelling on the Light Rail Transport (LRT) in Sengkang.
I received the following comments from other users:
1. The distance between LRT stops is longer than between bus stops
2. It is tiring to climb up and down the stairs to the LRT stations
3. The LRT service in Choa Chu Kang is inefficient and slow
4. It is expensive to travel by LRT.
I did some further research and found the following:
1. The average distance between LRT stops is about 0.65 km, compared to 0.4 km for bus stops. For more developed areas, the distrance is similar to bus stops.
2. LRT stations are provided with lifts and stairs.
3. The fare for LRT is about the same as for a feeder bus. It cost about 66 to 88 cents, depending on distance.
It is costly to build the infrastructure for the LRT system. We need to use it more fully. We need to get more people educated about using the LRT in the towns that are served by it.
I received the following comments from other users:
1. The distance between LRT stops is longer than between bus stops
2. It is tiring to climb up and down the stairs to the LRT stations
3. The LRT service in Choa Chu Kang is inefficient and slow
4. It is expensive to travel by LRT.
I did some further research and found the following:
1. The average distance between LRT stops is about 0.65 km, compared to 0.4 km for bus stops. For more developed areas, the distrance is similar to bus stops.
2. LRT stations are provided with lifts and stairs.
3. The fare for LRT is about the same as for a feeder bus. It cost about 66 to 88 cents, depending on distance.
It is costly to build the infrastructure for the LRT system. We need to use it more fully. We need to get more people educated about using the LRT in the towns that are served by it.
Tips on Buying Insurance
Insurance to buy:
1. Insure the potentially large loss, with a small chance of occurence. For example, the total loss of a property or vehicle or a large liability claim.
2. Compare the premium rates charged by different insurance companies for the same insurance product. Competition helps you to get a lower price.
3. Buy a product where the total claims paid by the insurance company represent at least 65% of the premium. You are getting a fair deal.
Insurance to avoid:
4. Do not insure a small loss that you can afford to pay from your savings, such as the Deductible on a medical insurance plan or the Excess on a motor insurance claim.
5. Do not buy any product that is designed to be different and are not comparable to other products in the market. It allows the insurance company to charge a higher premium, relative to the claim.
6. Avoid a product where the features are too complicated, and you are not able to determine the expected claim ratio.
1. Insure the potentially large loss, with a small chance of occurence. For example, the total loss of a property or vehicle or a large liability claim.
2. Compare the premium rates charged by different insurance companies for the same insurance product. Competition helps you to get a lower price.
3. Buy a product where the total claims paid by the insurance company represent at least 65% of the premium. You are getting a fair deal.
Insurance to avoid:
4. Do not insure a small loss that you can afford to pay from your savings, such as the Deductible on a medical insurance plan or the Excess on a motor insurance claim.
5. Do not buy any product that is designed to be different and are not comparable to other products in the market. It allows the insurance company to charge a higher premium, relative to the claim.
6. Avoid a product where the features are too complicated, and you are not able to determine the expected claim ratio.
Invest in a large, well diversified, low cost equity fund
Dear Mr Tan
You advised to invest in equities for 10 years or longer. Is there a risk that, at the end of 10 years, the fund will still show a loss for the period? In the past, I have invested in some funds for more than 10 years and still showed a loss.
REPLY:
There is a chance that you may suffer a loss, but the chance is quite small.
You should invest in a large, well diversified, low-cost fund for 10 years or longer. Preferably, the fund should be invested to follow the market benchmark.
Since 1980, there has never been a period of 10 years when the Singapore equity market (as reflected by the Straits Times Index) shown a loss. For some periods, the average return is higher and for other periods, they are lower.
Over the past 20 years, the average return on Singapore equities is 9.2% per annum (including reinvestment of dividends). The average return on global funds for the same period is 7.7%, after conversion to Singapore dollars.
If, at the end of 10 years, the market is weak and produces a low average return, you have the choice of waiting a few more years for the market to recover to get a higher return.
If you invest in a small fund that is not well diversified, your fund may perform worse than the market, due to poor stock selection by the fund manager. You may suffer a loss for the 10 years period. If your selected fund incurs a high expense ratio, it will also give a lower return than the market.
Lesson: Invest in a large, well diversified, low cost equity fund for a period of 10 years or longer. This will reduce your risk and give you a better return
You advised to invest in equities for 10 years or longer. Is there a risk that, at the end of 10 years, the fund will still show a loss for the period? In the past, I have invested in some funds for more than 10 years and still showed a loss.
REPLY:
There is a chance that you may suffer a loss, but the chance is quite small.
You should invest in a large, well diversified, low-cost fund for 10 years or longer. Preferably, the fund should be invested to follow the market benchmark.
Since 1980, there has never been a period of 10 years when the Singapore equity market (as reflected by the Straits Times Index) shown a loss. For some periods, the average return is higher and for other periods, they are lower.
Over the past 20 years, the average return on Singapore equities is 9.2% per annum (including reinvestment of dividends). The average return on global funds for the same period is 7.7%, after conversion to Singapore dollars.
If, at the end of 10 years, the market is weak and produces a low average return, you have the choice of waiting a few more years for the market to recover to get a higher return.
If you invest in a small fund that is not well diversified, your fund may perform worse than the market, due to poor stock selection by the fund manager. You may suffer a loss for the 10 years period. If your selected fund incurs a high expense ratio, it will also give a lower return than the market.
Lesson: Invest in a large, well diversified, low cost equity fund for a period of 10 years or longer. This will reduce your risk and give you a better return
Easy and difficult way to handle a simple matter
I own 1,000 shares but lost the share certificate 10 years ago. I wish to transfer the shares to the Central Depository.
1. Easy way (but not implemented)
I sign a declaration that my share certificate was lost for 10 years. The share registrar accept my statement and transfer the register them with the Central Depository, based on the company's share register.
2. Difficult way (which was the current practice)
I have to sign a declaration before commissioner of oath
I have to sign an indemnity and find a bank or insurance company to provide a counter indemnity
I have to apply to the share registrar to issue a new share certificate
I have to bring the certificate to the Singapore Exchange
I have to visit the stamp duty office and pay the stamp duty
Total of 5 tips and about $400 in expenses.
3. Life in Singapore can be complicated and costly. Businesses and government departments are more interested to make money from every activity. They do not care about the unncessary burden to the public.
1. Easy way (but not implemented)
I sign a declaration that my share certificate was lost for 10 years. The share registrar accept my statement and transfer the register them with the Central Depository, based on the company's share register.
2. Difficult way (which was the current practice)
I have to sign a declaration before commissioner of oath
I have to sign an indemnity and find a bank or insurance company to provide a counter indemnity
I have to apply to the share registrar to issue a new share certificate
I have to bring the certificate to the Singapore Exchange
I have to visit the stamp duty office and pay the stamp duty
Total of 5 tips and about $400 in expenses.
3. Life in Singapore can be complicated and costly. Businesses and government departments are more interested to make money from every activity. They do not care about the unncessary burden to the public.
Lesson about structured products
1. Do not invest in structured products, such as swing fund or vitamin account.
2. The hidden cost is high.
3. You are locked in for a long period of 5 years or longer
4. You get a poor return, of less than 1% per year
5. You would have earned much more by investing in government bonds
2. The hidden cost is high.
3. You are locked in for a long period of 5 years or longer
4. You get a poor return, of less than 1% per year
5. You would have earned much more by investing in government bonds
Vitamin Account
I found the following information on the Vitamin account from the bank's website:
With the Vitamin Account, you'll enjoy:
4% quick payout after 3 months
Annual potential payouts
Unique Immune-15 Effect to potentially improve your immunity against market risk
Vitamin Account is a 6-year equity-linked structured deposit. The Bank will return you 100% of your principal amount if you maintain Vitamin Account till maturity or upon early redemption by the Bank.
Meanwhile, you should ensure that you have sufficient liquid assets during the 6-year investment period. Early withdrawal by you may result in you receiving substantially less than the principal amount invested.
From Year 2 onwards, when the potential payout rate for the year is 3% or more, the Bank will redeem your investment early. You will receive 5% bonus payout and your full principal amount. There will be no other potential payout.
With the Vitamin Account, you'll enjoy:
4% quick payout after 3 months
Annual potential payouts
Unique Immune-15 Effect to potentially improve your immunity against market risk
Vitamin Account is a 6-year equity-linked structured deposit. The Bank will return you 100% of your principal amount if you maintain Vitamin Account till maturity or upon early redemption by the Bank.
Meanwhile, you should ensure that you have sufficient liquid assets during the 6-year investment period. Early withdrawal by you may result in you receiving substantially less than the principal amount invested.
From Year 2 onwards, when the potential payout rate for the year is 3% or more, the Bank will redeem your investment early. You will receive 5% bonus payout and your full principal amount. There will be no other potential payout.
Saturday, October 27, 2007
What is 1 million dollars?
Remember Buangkok station? The operator did not wish to open the station during the intial period, as there were not sufficient commuters. They estimated that it would cost $1 million a year to operate the station. Residents living around the station were furious to see the station closed. They put up a "white elephant" sign.
Is $1 million a lot of money? It is a lot of money, if we measure the time taken for a working person to earn this sum. It is quite little, for many people who paid several million dollars to buy an expensive apartment in town.
I recall this joke.
Someone asked, "God, what is one million years to you". God replied, "To me, it is like one second".
He asked again, "God, what is one trillion dollars to you?" God replied, "To me, it is like one cent".
He though of a great idea. He asked again, "God, can you send just one cent to me?".
There was a slight pause. Then, God replied, "Of course. In a second!".
Is $1 million a lot of money? It is a lot of money, if we measure the time taken for a working person to earn this sum. It is quite little, for many people who paid several million dollars to buy an expensive apartment in town.
I recall this joke.
Someone asked, "God, what is one million years to you". God replied, "To me, it is like one second".
He asked again, "God, what is one trillion dollars to you?" God replied, "To me, it is like one cent".
He though of a great idea. He asked again, "God, can you send just one cent to me?".
There was a slight pause. Then, God replied, "Of course. In a second!".
Payout under Vitamin Account
Dear Mr Tan
I invested $X with a local bank for over 5 years under its Vitamin account. Recently, I received a letter announcing a payount of this "Equity-Linked Structured Deposit Tranche A".
It calculates the payout to be as follows:
The average of the annual returns of all 18 shares is 1.9782%
The average is 1.9782/18 = 0.1099%
The letter indicated that they are crediting my principal plus .1099% (indicated as the 2nd payout amount) into my bank account on the maturity date.
What is my total return from this investment?
REPLY
I am not familiar with the terms of this structured product. There appears to be a 1st payout that was made earlier. Can you find out the amount of this first payout, so that your total return can be calculated?
I invested $X with a local bank for over 5 years under its Vitamin account. Recently, I received a letter announcing a payount of this "Equity-Linked Structured Deposit Tranche A".
It calculates the payout to be as follows:
The average of the annual returns of all 18 shares is 1.9782%
The average is 1.9782/18 = 0.1099%
The letter indicated that they are crediting my principal plus .1099% (indicated as the 2nd payout amount) into my bank account on the maturity date.
What is my total return from this investment?
REPLY
I am not familiar with the terms of this structured product. There appears to be a 1st payout that was made earlier. Can you find out the amount of this first payout, so that your total return can be calculated?
Hassle in writing a cheque
I had a lot of trouble in writing a cheque payable to the share registrar. I had to issue 4 separate cheques and mail them to the registrar. They were caused by minor mistakes on my part, but the banking system and the share registrar refused to be flexible.
The mistakes were:
Cheque 1: I write 15 cents in the "words" section instead of 50 cents.
Cheque 2: I write Lim + Associates intead of Lim Associates
Cheque 3: I overwrite the month 09 over 07
The amount of the cheque was only $270.50.
For these minor mistakes, the front line staff refused to accept the cheque or to call me to correct the mistake over the telephone. They were very firm in rejecting the cheque and asked to send a new cheque to replace it.
Nowadays, people can transact millions of dollars by a telephone call. Yet, our archaic banking practices refused to accept a minor mistake of less than $1 on a cheque. They act inflexibly, and disregard the expense and trouble to their customer.
If I find a bank that is willing to be flexible, they can get my business.
The mistakes were:
Cheque 1: I write 15 cents in the "words" section instead of 50 cents.
Cheque 2: I write Lim + Associates intead of Lim Associates
Cheque 3: I overwrite the month 09 over 07
The amount of the cheque was only $270.50.
For these minor mistakes, the front line staff refused to accept the cheque or to call me to correct the mistake over the telephone. They were very firm in rejecting the cheque and asked to send a new cheque to replace it.
Nowadays, people can transact millions of dollars by a telephone call. Yet, our archaic banking practices refused to accept a minor mistake of less than $1 on a cheque. They act inflexibly, and disregard the expense and trouble to their customer.
If I find a bank that is willing to be flexible, they can get my business.
Friday, October 26, 2007
Registering my share certificate
I hold 1,000 shares of a company and has been receiving dividends for more than 10 years. As I lost of certificate many years ago, the shares were not registerd in the Central Depository.
To transfer my shares to the Central Depository, the share registrar required me to:
1. Sign a statement before a commission of oath
2. Sign an indemnity
3. Get the indemnity counter signed by a bank or insurance company
4. Pay a fee of $270
I have to make several trips and spend a lot of expenses and fees.
The new certificate is issued by the share registrar after a few weeks.
I had to go to Singapore Exchange to register the shares. At the counter, the staff was told to go to another office in Bugis Junction to get a certain form, pay stamp duty and bring it back to Singapore Exchange.
I lost my temper. I asked to speak to the manager. He was not available.
Is there a better way? Of course! The share registrar could register my shares with the Central Depository after I have signed the declaration and paid the fees.
These two parties, namely the share registrar and the Singapore Exchange, made me spend so much unnecessary time and expenses over a simple matter. They do not seem to care about how much trouble they cause to me.
To transfer my shares to the Central Depository, the share registrar required me to:
1. Sign a statement before a commission of oath
2. Sign an indemnity
3. Get the indemnity counter signed by a bank or insurance company
4. Pay a fee of $270
I have to make several trips and spend a lot of expenses and fees.
The new certificate is issued by the share registrar after a few weeks.
I had to go to Singapore Exchange to register the shares. At the counter, the staff was told to go to another office in Bugis Junction to get a certain form, pay stamp duty and bring it back to Singapore Exchange.
I lost my temper. I asked to speak to the manager. He was not available.
Is there a better way? Of course! The share registrar could register my shares with the Central Depository after I have signed the declaration and paid the fees.
These two parties, namely the share registrar and the Singapore Exchange, made me spend so much unnecessary time and expenses over a simple matter. They do not seem to care about how much trouble they cause to me.
Protection under a ILP policy
Dear Mr Tan,
I bought ILP 1 year ago. I heard the charges will be getting higher as growing older. I plan to use it as a investment. When I get old, I will withdraw all the amount and left a minimum of 1k inside. I heard from my agent the protection will value will will be there if I don't draw out all the money. Any advice regarding this matters?
REPLY
It depends on your ILP contract. You have to confirm this matter with the insurance company, in case the agent is mistaken (which I believe is the case). The insurance company is unlikely to leave this type of loophole for the benefit of the customer.
I bought ILP 1 year ago. I heard the charges will be getting higher as growing older. I plan to use it as a investment. When I get old, I will withdraw all the amount and left a minimum of 1k inside. I heard from my agent the protection will value will will be there if I don't draw out all the money. Any advice regarding this matters?
REPLY
It depends on your ILP contract. You have to confirm this matter with the insurance company, in case the agent is mistaken (which I believe is the case). The insurance company is unlikely to leave this type of loophole for the benefit of the customer.
Unncessary trouble and expenses
I lost a share certificate 10 years ago. I was registered as the shareholder in the company's books. As I did not have the certificate, I could not transfer the share to the Central Depository of the Singapore Exchange.
Recently, I decided to apply for a new certificate to be issued, so that it can be tranferred to the Central Depository.
I faced a lot of trouble, time and expenses in handling this simple matter. It is so wasteful and quite uncecessary.
It is due to the inconsiderate procedures and requirements of the banks, share registrar and the Singapore Exchange. I shall describe my experience in more detail in later postings.
My experience shows the ugly side of Singapore behaviour. Many organisations are so keen to reduce their cost and make more profits, that they add a lot of trouble and expenses to the consumer. Nobody seems to care!
Recently, I decided to apply for a new certificate to be issued, so that it can be tranferred to the Central Depository.
I faced a lot of trouble, time and expenses in handling this simple matter. It is so wasteful and quite uncecessary.
It is due to the inconsiderate procedures and requirements of the banks, share registrar and the Singapore Exchange. I shall describe my experience in more detail in later postings.
My experience shows the ugly side of Singapore behaviour. Many organisations are so keen to reduce their cost and make more profits, that they add a lot of trouble and expenses to the consumer. Nobody seems to care!
My first ride on LRT (Light Rail Transport)
I took my first ride on the LRT today. I took the MRT (NE line) to Sengkang Station and changed to the LRT. I took the East Loop and the West Loop.
It was a pleasant ride, and allowed me to view the entire Sengkang estate from an elevated level.
The LRT is a good system. I hope that it will be built in more towns in Singapore, including the old towns.
With a good public transport system, more people can do without a private car. This will reduce congestion on the roads and reduce the need for more car parks. It is a hassle to drive on congested roads and to find a parking space.
It was a pleasant ride, and allowed me to view the entire Sengkang estate from an elevated level.
The LRT is a good system. I hope that it will be built in more towns in Singapore, including the old towns.
With a good public transport system, more people can do without a private car. This will reduce congestion on the roads and reduce the need for more car parks. It is a hassle to drive on congested roads and to find a parking space.
Thursday, October 25, 2007
Question on Financial Advice from Indonesia
Dear Mr. Tan,
Since you have good knowledge about insurance and investment, especially mutual fund, i'd like to ask for you advise related to insurance and investment.
Let's say I have only a free Rp500,000 per month and I don't have any insurance nor investment. I want to buy an insurance to cover me from death, critical illness and accident. I also want to buy an investment. What would you say for my case?
I am a single male aged X working for a private company. I have parents already retired, and 3 brothers and sisters (1 working and 2 studying).
REPLY:
You can read this FAQ
http://www.tankinlian.com/faq/fptips.html
I hope that it gives you guidance to make a decision.
Since you have good knowledge about insurance and investment, especially mutual fund, i'd like to ask for you advise related to insurance and investment.
Let's say I have only a free Rp500,000 per month and I don't have any insurance nor investment. I want to buy an insurance to cover me from death, critical illness and accident. I also want to buy an investment. What would you say for my case?
I am a single male aged X working for a private company. I have parents already retired, and 3 brothers and sisters (1 working and 2 studying).
REPLY:
You can read this FAQ
http://www.tankinlian.com/faq/fptips.html
I hope that it gives you guidance to make a decision.
Infinity Funds
Someone sent the following facts to me, about the there Infinity funds available from Fundsupermart.
I understand that these funds are managed by Vanguard and that charges are less than 0.3%. The local distributor add other charges that bring the expense ratio to about 1.1%.
In my view, an expense ratio of more than 1% is high for an indexed fund. I hope that the distributor can bring down the expense ratio.
INFINITY GLOBAL STOCK INDEX
Fundsupermart's Discounted Initial Sales Charge: 1.0 %
Annual Management Charge: 0.48 %
Annual Management Charge (Mother Fund): 0.29 %
Annual Expense Ratio * 1.17%
Website:
http://www.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=370281
INFINITY EUROPEAN STOCK INDEX
Fundsupermart's Discounted Initial Sales Charge: 1.0 %
Annual Management Charge: 0.48 %
Annual Management Charge (Mother Fund): 0.29 %
Transaction Fee: 0.2%
Annual Expense Ratio: 1.13%
Website:
http://www.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=370282
INFINITY US 500 STOCK INDEX
Fundsupermart's Discounted Initial Sales Charge: 1.0 %
Annual Management Charge: 0.48 %
Annual Management Charge (Mother Fund): 0.23 %
Annual Expense Ratio: 1.09%
Website:
http://www.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=370283
I understand that these funds are managed by Vanguard and that charges are less than 0.3%. The local distributor add other charges that bring the expense ratio to about 1.1%.
In my view, an expense ratio of more than 1% is high for an indexed fund. I hope that the distributor can bring down the expense ratio.
INFINITY GLOBAL STOCK INDEX
Fundsupermart's Discounted Initial Sales Charge: 1.0 %
Annual Management Charge: 0.48 %
Annual Management Charge (Mother Fund): 0.29 %
Annual Expense Ratio * 1.17%
Website:
http://www.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=370281
INFINITY EUROPEAN STOCK INDEX
Fundsupermart's Discounted Initial Sales Charge: 1.0 %
Annual Management Charge: 0.48 %
Annual Management Charge (Mother Fund): 0.29 %
Transaction Fee: 0.2%
Annual Expense Ratio: 1.13%
Website:
http://www.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=370282
INFINITY US 500 STOCK INDEX
Fundsupermart's Discounted Initial Sales Charge: 1.0 %
Annual Management Charge: 0.48 %
Annual Management Charge (Mother Fund): 0.23 %
Annual Expense Ratio: 1.09%
Website:
http://www.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=370283
Negative return over 10 years?
Dear Mr Tan,
When you say long term, what is the time-frame? Is it possible, say after 10 years, the value drops below than the current value?
REPLY
It is possible, but extremely unlikely.
If you look at any period of 10 years in the past, I do not think that you will this situation. Even if the unlikely event happens, you can wait for a few more years for the market to recover.
Remember, if the market continues to go down over 10 years, it will be spell disaster for the economic and financial system. In that case, other investments will perform poorly as well.
COMMENT FROM AN EXPERT
In Singapore, since 1980, there has never been a 10-year period when the stock market has realised negative returns.
When you say long term, what is the time-frame? Is it possible, say after 10 years, the value drops below than the current value?
REPLY
It is possible, but extremely unlikely.
If you look at any period of 10 years in the past, I do not think that you will this situation. Even if the unlikely event happens, you can wait for a few more years for the market to recover.
Remember, if the market continues to go down over 10 years, it will be spell disaster for the economic and financial system. In that case, other investments will perform poorly as well.
COMMENT FROM AN EXPERT
In Singapore, since 1980, there has never been a 10-year period when the stock market has realised negative returns.
Wednesday, October 24, 2007
Avoid being judgemental
Many people have the habit of being judgemental. They like to declare another person's view to be right, wrong, good or bad.
I avoid being judgemental. I recognise that there are many views. Each view is suitable for its set of circumstances.
I can express my views, without having to pass judgement on other people's views. I state my views and explain my reasons. I leave it to other people to decide if they wish to accept or ignore my view.
I hope that more people can express their views without being judgemental or critical. They should avoid being engaged in personal attacks.
I avoid being judgemental. I recognise that there are many views. Each view is suitable for its set of circumstances.
I can express my views, without having to pass judgement on other people's views. I state my views and explain my reasons. I leave it to other people to decide if they wish to accept or ignore my view.
I hope that more people can express their views without being judgemental or critical. They should avoid being engaged in personal attacks.
Shower system for a hotel room
I had stayed in many hotels around the world. Most of them have hot and cold water system in the bathroom that are not easy to use. They forget that the hotel guests are usually visiting their hotel for the first time.
One frequent problem is that, if you have just used the soap, you are not able to turn the knob of the taps.
Recently, I visited the Conrad Hotel in Brussels. It has a user-friendly system for hot and cold water. You use one control to decide on the temperature of the water and a separate control for the volume of the water, i.e. to turn on and off.
Photos of Huangshan, China
Earlier this year, I visited Huangshan in China. I took some photos. They were lying in my digital camera, as I did not have the software to transfer them into my computer.
I learned later, that I could remove the SD card (which contains the photos) and copy them into my notebook computer (which has a SD card reader). It is as easy as using a thumb drive.
Tuesday, October 23, 2007
Balance flexibility and security
In a TV interview, an elderly person said that a life annuity locks up his money. He prefers to keep the money in an account, so that he has the flexibility to use it to meet special needs.
Here are my views.
1. You can aim for flexibility, if you have more than adequate funds to last beyond your lifetime.
2. If you have limited savings, it is important that your limited funds be spread throughout your lifetime. This can be done through a life annuity.
3. If you spend your lifetime savings too quickly or make some bad investments, you may deplete your savings and have nothing left to live on.
4. With limited savings, you should use 80% to buy a life annuity and keep the remaining 20% as a flexible source of money to drawn down for your special needs.
Here are my views.
1. You can aim for flexibility, if you have more than adequate funds to last beyond your lifetime.
2. If you have limited savings, it is important that your limited funds be spread throughout your lifetime. This can be done through a life annuity.
3. If you spend your lifetime savings too quickly or make some bad investments, you may deplete your savings and have nothing left to live on.
4. With limited savings, you should use 80% to buy a life annuity and keep the remaining 20% as a flexible source of money to drawn down for your special needs.
Low Cost Funds
Dear Mr Tan
What low cost funds do you recommend? How do I invest in them?
REPLY
I suggest the following:
1. STI Exchange Traded Fund - through the Singapore Exchange
2. Combined Fund from NTUC Income - through an adviser or the business center
3. Money market fund from NTUC Income - through an adviser or the business center
4. BIGe from Aviva
NTUC Income Business Center ... see Link 9 on the right
http://www.income.com.sg/businesscentre/
Aviva
http://www.aviva-singapore.com.sg/
If I know of other low cost funds, I shall put them in this blog. So far, the choice is rather limited.
What low cost funds do you recommend? How do I invest in them?
REPLY
I suggest the following:
1. STI Exchange Traded Fund - through the Singapore Exchange
2. Combined Fund from NTUC Income - through an adviser or the business center
3. Money market fund from NTUC Income - through an adviser or the business center
4. BIGe from Aviva
NTUC Income Business Center ... see Link 9 on the right
http://www.income.com.sg/businesscentre/
Aviva
http://www.aviva-singapore.com.sg/
If I know of other low cost funds, I shall put them in this blog. So far, the choice is rather limited.
Life annuity or money market fund?
Hi Mr Tan,
Currently, which offer better investment yield ? Money market fund or annuity (lifetime with
immediate drawdown and no refund). Please give the name of the fund or annuity.
REPLY
The life annuity provides a higher return as it is invested in long term investments, which give a higher return than short term investments innvested by the money market fund.
You can read this FAQ
http://www.tankinlian.com/faq/life.html
I suggest that you talk to an insurance adviser (call an adviser listed in my blog) or talk to a salaried consultant at the NTUC Income Business Center.
Currently, which offer better investment yield ? Money market fund or annuity (lifetime with
immediate drawdown and no refund). Please give the name of the fund or annuity.
REPLY
The life annuity provides a higher return as it is invested in long term investments, which give a higher return than short term investments innvested by the money market fund.
You can read this FAQ
http://www.tankinlian.com/faq/life.html
I suggest that you talk to an insurance adviser (call an adviser listed in my blog) or talk to a salaried consultant at the NTUC Income Business Center.
Prompt and fair settlement of claims
Hi Mr Tan
I have some question need to ask u regarding making a claim at NTUC insurance. I have heard my friend said NTUC income making a claim is quite troublesome and have a lot of procedue taking sometimes. I mean those policy which family member is dead. Isit true?
REPLY
This statement is not true. The insurance agents from other companies spread these lies, so that the customers will pay a higher premium to buy the insurance policy from their company. This has been happening for 30 years.
NTUC Income has a policy on prompt and fair settlement of claims. There were many claims that were paid without hassle by NTUC Income. Similar claims from other companies took much longer to settle.
I have some question need to ask u regarding making a claim at NTUC insurance. I have heard my friend said NTUC income making a claim is quite troublesome and have a lot of procedue taking sometimes. I mean those policy which family member is dead. Isit true?
REPLY
This statement is not true. The insurance agents from other companies spread these lies, so that the customers will pay a higher premium to buy the insurance policy from their company. This has been happening for 30 years.
NTUC Income has a policy on prompt and fair settlement of claims. There were many claims that were paid without hassle by NTUC Income. Similar claims from other companies took much longer to settle.
Monday, October 22, 2007
When should I sell?
Dear Mr Tan
I had bought a Greatlink Growth Plan using my S10K cpf money in 2000. Today, it is valued at 26k. Now, the question is when should I sell it?
REPLY.
If you are investing for the long term, you can keep the investment. If you are investing for the short time, now is a good time to sell.
I had bought a Greatlink Growth Plan using my S10K cpf money in 2000. Today, it is valued at 26k. Now, the question is when should I sell it?
REPLY.
If you are investing for the long term, you can keep the investment. If you are investing for the short time, now is a good time to sell.
Excessive charge by bank on credit card
COMMENT POSTED IN MY BLOG:
The bank did the right thing by informing customers early and proper disclosures.
Consumers also have their own responsibility in managing their own cash flow. What the banks did was to create convenience for consumers so that they do not have to carry large amounts of cash and at some places, enjoy discounts and rebates.
If they did not set up the framework, consumers would still be carrying large bundles of cash with them all the time.
If you are expecting everything to come without cost, then you have to carry your own bank with you all the time.
Banks do not owe consumers a living. If consumers make use of their services, please expect to pay.
I have never been late in my credit card payment - even with banks where I do not have a GIRO arrangement. Why? It is simple - I make sure honour the rules, and am not tardy nor procrastinate my payment.
Perhaps consumers can consider practicing not delaying payment and avoid unnecessary penalties.
REPLY:
It is all right for the bank to incur a charge to cover its actual cost of handling the late payment. I believe that the cost should be less than $5. It is not correct for the bank to levy an excessive charge (just like imposing a fine) and make a profit on it.
Already, the bank is making a profit on the following:
1. Charge paid by the merchant
2. Annual fee for the credit card (although it is usually waived)
3. Interet on late payment.
I am worried that many businesses are aiming to increase their profit all the time, and they adopt are willing to business practices that are unfair to consumers. I urge consumers to reject these types of business practices.
The bank did the right thing by informing customers early and proper disclosures.
Consumers also have their own responsibility in managing their own cash flow. What the banks did was to create convenience for consumers so that they do not have to carry large amounts of cash and at some places, enjoy discounts and rebates.
If they did not set up the framework, consumers would still be carrying large bundles of cash with them all the time.
If you are expecting everything to come without cost, then you have to carry your own bank with you all the time.
Banks do not owe consumers a living. If consumers make use of their services, please expect to pay.
I have never been late in my credit card payment - even with banks where I do not have a GIRO arrangement. Why? It is simple - I make sure honour the rules, and am not tardy nor procrastinate my payment.
Perhaps consumers can consider practicing not delaying payment and avoid unnecessary penalties.
REPLY:
It is all right for the bank to incur a charge to cover its actual cost of handling the late payment. I believe that the cost should be less than $5. It is not correct for the bank to levy an excessive charge (just like imposing a fine) and make a profit on it.
Already, the bank is making a profit on the following:
1. Charge paid by the merchant
2. Annual fee for the credit card (although it is usually waived)
3. Interet on late payment.
I am worried that many businesses are aiming to increase their profit all the time, and they adopt are willing to business practices that are unfair to consumers. I urge consumers to reject these types of business practices.
Guarantee of 4% per annum?
Dear Mr Tan,
Does the insurance company guarantee at least 4% long term? It may not be realised even after waiting for the long term, right? Or do you based the 4% on past performance and think future will be the same?
REPLY:
The fund or insurance company does not provide this guarantee of 4% return.
If you are investing over a period of 10 years or longer in equities, you are likely to get an average of more than 4% per year, based on past records.
For some periods, the average return can be higher, e.g. close to 8% per year. For other periods, it may be lower, i.e. closer to 4% per year.
Take the investment risk and get a better return. Invest for 10 years or more, so that you can average out the good and bad years.
Invest in a large, well diversified, low cost fund, so that most of the return are given to you (and not taken away as expenses and charges).
I am quite confident that the return in the future will be higher than other types of investments. I am making most of my personal investment in this type of fund.
Does the insurance company guarantee at least 4% long term? It may not be realised even after waiting for the long term, right? Or do you based the 4% on past performance and think future will be the same?
REPLY:
The fund or insurance company does not provide this guarantee of 4% return.
If you are investing over a period of 10 years or longer in equities, you are likely to get an average of more than 4% per year, based on past records.
For some periods, the average return can be higher, e.g. close to 8% per year. For other periods, it may be lower, i.e. closer to 4% per year.
Take the investment risk and get a better return. Invest for 10 years or more, so that you can average out the good and bad years.
Invest in a large, well diversified, low cost fund, so that most of the return are given to you (and not taken away as expenses and charges).
I am quite confident that the return in the future will be higher than other types of investments. I am making most of my personal investment in this type of fund.
How to avoid over-insurance
Mr Tan,
Can you give some tips on how to avoid over-insurance? How much is adequate? How much is excessive?
REPLY:
You have to distinguish between the following:
* insurance - to protect against loss of earnings or to pay for expenses
* investment - to get an attractive return on your savings
If it is for insurance only, you should spend not more than 2% of your income. If you annual income is $40,000, you should spend not more than $800 to cover for the insurance of your life, medical expenses and your home and for your family members. (You may have to pay more, if you wish to insure your car).
If you buy insurance as a form of investment, you must look at the return. For long term investment, you must aim for a return of at least 4%.
If you are paying 10% of your earnings as insurance premium (and many people are), and you get a return of les than 2% per annum on your insurance policy, then you are getting a poor deal.
This is why I advise to buy term and invest the difference. Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
Can you give some tips on how to avoid over-insurance? How much is adequate? How much is excessive?
REPLY:
You have to distinguish between the following:
* insurance - to protect against loss of earnings or to pay for expenses
* investment - to get an attractive return on your savings
If it is for insurance only, you should spend not more than 2% of your income. If you annual income is $40,000, you should spend not more than $800 to cover for the insurance of your life, medical expenses and your home and for your family members. (You may have to pay more, if you wish to insure your car).
If you buy insurance as a form of investment, you must look at the return. For long term investment, you must aim for a return of at least 4%.
If you are paying 10% of your earnings as insurance premium (and many people are), and you get a return of les than 2% per annum on your insurance policy, then you are getting a poor deal.
This is why I advise to buy term and invest the difference. Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
Letter from Lawyer Claiming for the Other Party
Dear Mr Tan,
I receive a threatening letter from a lawyer acting for the other driver involved in an accident a few months ago. I have reported the accident to my insurance company. It is a minor accident.
Why did the insurance company fail to settle this claim with the other party? What should I do?
REPLY:
You can give a reply to the lawyer to tell them to make their claim directly against your insurance company. At the same time, you can pass the lawyer's letter to your insurance company to handle.
It is wrong for the lawyer to sent the letter to you, especially as they can lodge it with your insurance company. Some lawyers, acting on a third party claim, use this approach to intimidate the public.
Perhaps you should make a complaint to the Law Society against this type of behaviour.
I receive a threatening letter from a lawyer acting for the other driver involved in an accident a few months ago. I have reported the accident to my insurance company. It is a minor accident.
Why did the insurance company fail to settle this claim with the other party? What should I do?
REPLY:
You can give a reply to the lawyer to tell them to make their claim directly against your insurance company. At the same time, you can pass the lawyer's letter to your insurance company to handle.
It is wrong for the lawyer to sent the letter to you, especially as they can lodge it with your insurance company. Some lawyers, acting on a third party claim, use this approach to intimidate the public.
Perhaps you should make a complaint to the Law Society against this type of behaviour.
Sunday, October 21, 2007
Learning Powerpoint
In the past, I send the key points of my paper to a colleague to create a powerpoint.
Recently, I had to create some powerpoint myself, as my former colleague was not available. I had to learn how to use Powerpoint.
I asked an expert to show me how to create my powerpoint slides. It was quite easy to use. After a few minutes, I am able to create the slides. But they are just basic slides with words (in different sizes, fonts and colours).
I will still use an artist to do the touch-ups, add the effects and nice pictures.
Lesson: There are still many interesting things to learn, even for someone of my age.
Recently, I had to create some powerpoint myself, as my former colleague was not available. I had to learn how to use Powerpoint.
I asked an expert to show me how to create my powerpoint slides. It was quite easy to use. After a few minutes, I am able to create the slides. But they are just basic slides with words (in different sizes, fonts and colours).
I will still use an artist to do the touch-ups, add the effects and nice pictures.
Lesson: There are still many interesting things to learn, even for someone of my age.
Search for information from the internet
I use the Google search to access information through the internet. It is easy to use and works extremely well.
Here are some examples of my search:
* CPF Minimum Sum
* La Vie En Rose (title of a song)
* O Sole Mio (title of a song)
* Euthanasia
* CPF contribution
* Transit Link (name of company)
The Google search return a list of title that matches the search. If all the words match, the item appears at the time. If some words match, it appear lower down.
I use this to search for information that is needed to research for my articles in my blog or to send to newspapers.
Here are some examples of my search:
* CPF Minimum Sum
* La Vie En Rose (title of a song)
* O Sole Mio (title of a song)
* Euthanasia
* CPF contribution
* Transit Link (name of company)
The Google search return a list of title that matches the search. If all the words match, the item appears at the time. If some words match, it appear lower down.
I use this to search for information that is needed to research for my articles in my blog or to send to newspapers.
High cost of borrowing
Here are some tips, which I hope will be helpful to the young people.
Many people are not aware about the high cost of borrowing. They may not be aware that they are borrowing at all.
Buying a product on 12 or 24 months of "interest free" installments is actually borrowing. If you pay cash, you can easily a 5% or 10% discount on the price.
What is the borrowing cost, over a 24 month period?
If you pay interest at 1% per month, the total payment over 24 months is an additional 12%. If you pay interest at 2% per month (i.e. the rate the credit cards normally charged on rolled over balances), you will pay an additional 27%.
If the merchant that gives you "interest free installment" incurs an interest cost of 1% per month (i.e. the cost of funds provided by the financing company), this merchant will give you a cash discount of up to 12% on the product.
You can negotiate for this cash discount. The merchant has probably added this financing cost to the cost of the product.
Suppose you like something now, and does not have the cash to pay for it?
My advice. Start to save now for the things that you may need in the future. By paying cash, you can save up to 12% to 24% on the financing cost of the product. It is a lot of money to save.
Here is another option. Ask yourself? Do you really need to buy that product now? Can you save first and buy it 2 years later?
By that time, the product will come down in price and you save on the financing cost as well. You will get double benefit! You may also get a better product, as products are being improved all the time.
Many people are not aware about the high cost of borrowing. They may not be aware that they are borrowing at all.
Buying a product on 12 or 24 months of "interest free" installments is actually borrowing. If you pay cash, you can easily a 5% or 10% discount on the price.
What is the borrowing cost, over a 24 month period?
If you pay interest at 1% per month, the total payment over 24 months is an additional 12%. If you pay interest at 2% per month (i.e. the rate the credit cards normally charged on rolled over balances), you will pay an additional 27%.
If the merchant that gives you "interest free installment" incurs an interest cost of 1% per month (i.e. the cost of funds provided by the financing company), this merchant will give you a cash discount of up to 12% on the product.
You can negotiate for this cash discount. The merchant has probably added this financing cost to the cost of the product.
Suppose you like something now, and does not have the cash to pay for it?
My advice. Start to save now for the things that you may need in the future. By paying cash, you can save up to 12% to 24% on the financing cost of the product. It is a lot of money to save.
Here is another option. Ask yourself? Do you really need to buy that product now? Can you save first and buy it 2 years later?
By that time, the product will come down in price and you save on the financing cost as well. You will get double benefit! You may also get a better product, as products are being improved all the time.
Tips on how to play Sudoku (Logic9)
90% of people in Singapore are still not familiar with Sudoku, although it has appeared in the newspapers for two years.
Those who are familiar with this puzzle work on it every day. It keeps the mind alert.
I have four tips to help you solve Sudoku puzzles at all levels, including the difficult (four star) puzzles.
It can be found in this webpage:
http://project.bestsimulation.sg/logic9v4/tips.asp
It takes only TEN minutes to learn the four tips. You can practice on the puzzles. You will be an expert within 2 weeks.
Try it.
Those who are familiar with this puzzle work on it every day. It keeps the mind alert.
I have four tips to help you solve Sudoku puzzles at all levels, including the difficult (four star) puzzles.
It can be found in this webpage:
http://project.bestsimulation.sg/logic9v4/tips.asp
It takes only TEN minutes to learn the four tips. You can practice on the puzzles. You will be an expert within 2 weeks.
Try it.
Saturday, October 20, 2007
Individual Home Delivery
The retail cooperatives in Japan has successfully operated a system of individual home delivery of groceries for more than 20 years.
It operates as follows:
* the customer places an order
* the groceries are delivered to their homes at specified times
It works well for the following:
* special products (e.g. organic) not available from the supermarkets
* heavy items
* for busy customers
Several businesses have tried to provide this service in Singapore. It does not seem to work well. What are the reasons?
It operates as follows:
* the customer places an order
* the groceries are delivered to their homes at specified times
It works well for the following:
* special products (e.g. organic) not available from the supermarkets
* heavy items
* for busy customers
Several businesses have tried to provide this service in Singapore. It does not seem to work well. What are the reasons?
Monthly withdrawals from Growth Combined Fund
A policyholder had about 47,500 units units of the Growth Combined Fund with a value of $87,700.
She wished to make monthly withdrawal of $400 opr $500 from this fund. Assuming that the investment grows at 5% per annum, the money will last as follows
monthly withdrawal $400 - total of 45.7 years
monthly withdrawal $500 - total of 25.6 years
By increasing the payount by 25% (from $400 to $500), the payout period is reduced by 44%. It could be due to the effect of a shorter period of compounding.
The policyholder was happy with the return on the Growth Combined Fund, and the long period for which the payout is projected to be available. She thinks that this scheme is suitable for retirees.
She wished to make monthly withdrawal of $400 opr $500 from this fund. Assuming that the investment grows at 5% per annum, the money will last as follows
monthly withdrawal $400 - total of 45.7 years
monthly withdrawal $500 - total of 25.6 years
By increasing the payount by 25% (from $400 to $500), the payout period is reduced by 44%. It could be due to the effect of a shorter period of compounding.
The policyholder was happy with the return on the Growth Combined Fund, and the long period for which the payout is projected to be available. She thinks that this scheme is suitable for retirees.
Adequate coverage for critical illness
An insurance adviser said that the coverage for critical illness should be adequate to cover the cost of treatment and the loss of earnings.
I know of many cases of critical illness claims, where the claimant was able to continue to work, after the illness had been treated.
If the critical illness results in death, a claim can be made under an ordinary life insurance policy (which is less costly).
My preference is for the critical illness policy to cover the cost of treatment and not to include the potential loss of earnings. This allows more of the savings to be used to earn a higher rate of return in other low-cost investment products.
I know of many cases of critical illness claims, where the claimant was able to continue to work, after the illness had been treated.
If the critical illness results in death, a claim can be made under an ordinary life insurance policy (which is less costly).
My preference is for the critical illness policy to cover the cost of treatment and not to include the potential loss of earnings. This allows more of the savings to be used to earn a higher rate of return in other low-cost investment products.
Euthanasia
A friend asked me to express my views about euthanasia in my blog. He argued that euthanasia should be made legal, and that each individual in poor health should be given the right to pass away peacefully, rather than spend a lot of money on medical treatment (which, in his opinion, enrich the doctors).
Here is my reply to him:
1. This is a highly emotive issue
2. In practice, those who do not wish to be treated, can reject treatment anyway.
Here is the definition of euthanasia:
Euthanasia (from Ancient Greek: ευθανασία, "good death"[I]) is the practice of ending the life of a human or animal who is incurably ill in a painless or minimally painful way, for the purpose of limiting suffering.
Laws around the world vary greatly with regard to euthanasia, and are constantly subject to change as cultural values shift and better palliative care, or treatments become available. It is legal in some nations, while in others it may be criminalized.
Euthanasia can be conducted in various ways. In order to distinguish certain methods, more specific terminology may be used when discussing euthanasia.
Even though it seems like a very humain way of putting a person out of pain, some times doctors put patients to death without their consent. In addition, in Holand, 8,100 patients died because doctors deliberately gave them overdoses of medications, for the purpose of hastening the patient's death. In 61% of these cases (4,941 patients), the overdose was given without the patient's consent.
Here is my reply to him:
1. This is a highly emotive issue
2. In practice, those who do not wish to be treated, can reject treatment anyway.
Here is the definition of euthanasia:
Euthanasia (from Ancient Greek: ευθανασία, "good death"[I]) is the practice of ending the life of a human or animal who is incurably ill in a painless or minimally painful way, for the purpose of limiting suffering.
Laws around the world vary greatly with regard to euthanasia, and are constantly subject to change as cultural values shift and better palliative care, or treatments become available. It is legal in some nations, while in others it may be criminalized.
Euthanasia can be conducted in various ways. In order to distinguish certain methods, more specific terminology may be used when discussing euthanasia.
Even though it seems like a very humain way of putting a person out of pain, some times doctors put patients to death without their consent. In addition, in Holand, 8,100 patients died because doctors deliberately gave them overdoses of medications, for the purpose of hastening the patient's death. In 61% of these cases (4,941 patients), the overdose was given without the patient's consent.
Lee Kum Tatt's Blog
After a period of absence, due to other committments, Dr Lee Kum Tatt and his wife have contributed the following articles:
Secret of Singapore' Success
What Do We Believe in.
http://www.leekumtatt.blogspot.com/
Secret of Singapore' Success
What Do We Believe in.
http://www.leekumtatt.blogspot.com/
Thursday, October 18, 2007
Excessive charges
I received a letter from a credit card company. It announced the "administration fee" for the following:
1. Late payment - $40
2. No money in the bank account for GIRO deduction - $50
These fees are in additional to the high rate of interest levied on the overdue balances.
These fees are excessive. I do not mind paying a fee that covers the additional cost to the company due to the oversight. But it is morally wrong for them to impose an excessive fee to increase their profit.
At one time, only the Government had the right to impose fines. Now, it seems that businesses feel that they have the same right!
I called the credit card company and cancelled the card immediately.
1. Late payment - $40
2. No money in the bank account for GIRO deduction - $50
These fees are in additional to the high rate of interest levied on the overdue balances.
These fees are excessive. I do not mind paying a fee that covers the additional cost to the company due to the oversight. But it is morally wrong for them to impose an excessive fee to increase their profit.
At one time, only the Government had the right to impose fines. Now, it seems that businesses feel that they have the same right!
I called the credit card company and cancelled the card immediately.
Look after interest of consumers
In a speech to the International Cooperative Alliance meeting in Singapore, minister Lim Boon Heng said that the share of value added earned by shareholders is higher than the share to the workers.
I think that he was probably referring to international figures, although I suspect that this remark applies to Singapore as well.
What does this mean?
1. Worker wages are depressed, due to global competion
2. Businesses are able to make excessive profit, in spite of global competition.
Where does the excessive profit come from? I suspect that they come from unethical practices, such as creating sub-prime products, structured financial products, excessive charges and questionable marketing practices.
What does this really mean?
Consumers are being exploited. Consumer protection has been weak in many countries. This is an area of attention for governments, regulators and consumer bodies.
The prevailing idea was that the free market can take care of these matters. This is a wrong notion. Businesses know how to make excessive profit at the expense of consumers, and get away with it.
I think that he was probably referring to international figures, although I suspect that this remark applies to Singapore as well.
What does this mean?
1. Worker wages are depressed, due to global competion
2. Businesses are able to make excessive profit, in spite of global competition.
Where does the excessive profit come from? I suspect that they come from unethical practices, such as creating sub-prime products, structured financial products, excessive charges and questionable marketing practices.
What does this really mean?
Consumers are being exploited. Consumer protection has been weak in many countries. This is an area of attention for governments, regulators and consumer bodies.
The prevailing idea was that the free market can take care of these matters. This is a wrong notion. Businesses know how to make excessive profit at the expense of consumers, and get away with it.
More capacity for public transport
Here are my views.
1. The public transport operators should be required to put more trains and buses, to reduce the waiting time and provide more comfortable rides (i.e. seats) for the commuters.
2. The existing fares allows them to increase the capacity and still make a good rate of return. Currently, they are making excessive profits at the expense of commuters.
3. We need a better system of feeder buses to bring people to the MRT stations or bus terminals.
4. More improving public transport, there will be less demand for private cars and less congestion on the roads.
I hope that the Public Transport Council will hear and act on this view, which has been expressed by many commuters.
1. The public transport operators should be required to put more trains and buses, to reduce the waiting time and provide more comfortable rides (i.e. seats) for the commuters.
2. The existing fares allows them to increase the capacity and still make a good rate of return. Currently, they are making excessive profits at the expense of commuters.
3. We need a better system of feeder buses to bring people to the MRT stations or bus terminals.
4. More improving public transport, there will be less demand for private cars and less congestion on the roads.
I hope that the Public Transport Council will hear and act on this view, which has been expressed by many commuters.
Advantages of public transport
I have been taking public transport (i.e. bus and train) for the past 6 months. Here are my experiences.
Advnantages of public transport:
1. Better than driving. No worry about congested roads or finding a parking space.
2. More economical. No need to pay expensive ERP and parking charges
3. More relaxing, especially if I can find a seat. If not, I can rest standing up.
4. Taxis are expensive, especially due to the peak hour and other surcharges.
What are the disadvantages of public transport?
1. Overcrowding.
2. Long waiting time.
Considering the advantages and disadvantages, my preference is still public transport.
Advnantages of public transport:
1. Better than driving. No worry about congested roads or finding a parking space.
2. More economical. No need to pay expensive ERP and parking charges
3. More relaxing, especially if I can find a seat. If not, I can rest standing up.
4. Taxis are expensive, especially due to the peak hour and other surcharges.
What are the disadvantages of public transport?
1. Overcrowding.
2. Long waiting time.
Considering the advantages and disadvantages, my preference is still public transport.
Spirit of Enterprise Award, 2007
.JPG)
Here is a photo of the honorees at the Spirit of Enterprise Award 2007.
Russell Miller and I started this organisation several years ago. The purpose was to identify and honour small enterprises set up by ordinary people who wanted to build a business.
This is how the honorees are selected. We ask the public to send in their nominations. We arrange for a student to interview the nominee. Their case study is submitted for voting through the internet. A selection panel make the final judgement.
The guest of honour was Mdm Yu Foo Yee Shoon. She is very helpful and always supportive of the ordinary people.
I was not able to attend this Award ceremony, as I was in Brussels. I was told that the event went very well.
The economics of public transport
Public tranport is more convenient and efficient. A big bus can take many people. The passengers have the comfort of being driven to their destination. The buses can move around to carry passengers all the time.
Private cars are costly and congest the roads. They require parking spaces when they are not being used.
In many cities, due to inadequate attention to public transport, many people opted to buy a private car. More roads have to be built and they still get too congested. The parking spaces are insufficient. Life is inconvenient for everyone.
We need a bold approach. We have to make public transport more convenient and more comfortable. There should be sufficient buses and trains to offer shorter waiting times and a comfortable ride, including a seat.
To the country, there is more cost saving if more people take public transport.
Can our transport authority in Singapore take a bold step? Can we increase the capacity of our buses and trains two or three times (by more buses and trains operating at shorter intervals)? Can we offer a better choice for people to take public transport? Can we have convenient feeder services to support our trains and express buses?
People take planes for long distance travel. They can opt for first or businss class. They do not need to fly a private plane. We should offer this type of choice for our public transport as well.
Private cars are costly and congest the roads. They require parking spaces when they are not being used.
In many cities, due to inadequate attention to public transport, many people opted to buy a private car. More roads have to be built and they still get too congested. The parking spaces are insufficient. Life is inconvenient for everyone.
We need a bold approach. We have to make public transport more convenient and more comfortable. There should be sufficient buses and trains to offer shorter waiting times and a comfortable ride, including a seat.
To the country, there is more cost saving if more people take public transport.
Can our transport authority in Singapore take a bold step? Can we increase the capacity of our buses and trains two or three times (by more buses and trains operating at shorter intervals)? Can we offer a better choice for people to take public transport? Can we have convenient feeder services to support our trains and express buses?
People take planes for long distance travel. They can opt for first or businss class. They do not need to fly a private plane. We should offer this type of choice for our public transport as well.
New concept in town planning
I have a new concept in town planning.
Each town comprise of 100,000 residents. It has the facilities, such as a schools, malls, medical facilities, restaurants, services, offices and workplaces.
Several clubs are available in the town. You can join a club to enjoy its sporting and social activies. You get to make more friends and get to know your neighbours.
The unique feature is that all transport within the town will be by elevated light rail transport. Adequate trains are provided, so that the waiting time is less. There are no internal roads. Private cars are not allowed.
People can work or cycle at ground levels, and sheltered. They can move by travelletors. Bicylces belong to the town and can be rented for hourly use.
The internal transport will take the residents to the MRT stations, bus terminus or car parks that are located at the fringe of the towns. Some people do not need to own cars, as they can rent a car for a day.
This concept allows a higher density of development. It may be possible to have 50% more usage of the land.
It can support a good quality of life. Children can move around the town, without the fear of being knocked down by traffic. They can study in a nearby school in the town.
The entire town is a real estate investment trust (REIT). Each resident owns units of the REIT and has the prioirty to rent an apartment at its market rate. The dividend from the REIT can be used to offset the rental.
If the owner wants to work in another town, it is easy to rent an apartment in that town, and reinvest in that REIT. They do not have to incur a high cost of selling an indivual property. It gives flexibility for people to change jobs and make a new life, with new friends, in another town.
This concept will encourage more people to work in their town. It will reduce traffic congestion on the main roads in Singapore that connect the various towns.
I hope to get more people to like this idea. It may be suitable for Singapore, due to our limited land.
Each town comprise of 100,000 residents. It has the facilities, such as a schools, malls, medical facilities, restaurants, services, offices and workplaces.
Several clubs are available in the town. You can join a club to enjoy its sporting and social activies. You get to make more friends and get to know your neighbours.
The unique feature is that all transport within the town will be by elevated light rail transport. Adequate trains are provided, so that the waiting time is less. There are no internal roads. Private cars are not allowed.
People can work or cycle at ground levels, and sheltered. They can move by travelletors. Bicylces belong to the town and can be rented for hourly use.
The internal transport will take the residents to the MRT stations, bus terminus or car parks that are located at the fringe of the towns. Some people do not need to own cars, as they can rent a car for a day.
This concept allows a higher density of development. It may be possible to have 50% more usage of the land.
It can support a good quality of life. Children can move around the town, without the fear of being knocked down by traffic. They can study in a nearby school in the town.
The entire town is a real estate investment trust (REIT). Each resident owns units of the REIT and has the prioirty to rent an apartment at its market rate. The dividend from the REIT can be used to offset the rental.
If the owner wants to work in another town, it is easy to rent an apartment in that town, and reinvest in that REIT. They do not have to incur a high cost of selling an indivual property. It gives flexibility for people to change jobs and make a new life, with new friends, in another town.
This concept will encourage more people to work in their town. It will reduce traffic congestion on the main roads in Singapore that connect the various towns.
I hope to get more people to like this idea. It may be suitable for Singapore, due to our limited land.
Adequate cover for critical illness
Someone argued against my suggetion to insure $50,000 for critical illness. He said that the correct cover should be determined by a financial needs analysis.
In my view, $50,000 in critical illness coverage is adequate for most poeple.
Most illnesses do not cost a lot of money to treat, especially if they have access to subsidised wards in Singapore.
If they need more than $50,000, they can draw down on your savings from other sources. They should invest a large portion of their savings in more productive assets, and not over-commit all their savings in a low return, critical illness cover.
If a financial adviser tell you that you need more than $100,000 for critical illness coverage, you should ask the following questions:
1. What percentage of people make a critical illness claim?
2. What is the average cost of treating the critical illness? (Do not allow them quote you an isolated case that occurs once in 20 years)?
3. How much commission do they earn by selling a big critical illness policy to you?
In my view, $50,000 in critical illness coverage is adequate for most poeple.
Most illnesses do not cost a lot of money to treat, especially if they have access to subsidised wards in Singapore.
If they need more than $50,000, they can draw down on your savings from other sources. They should invest a large portion of their savings in more productive assets, and not over-commit all their savings in a low return, critical illness cover.
If a financial adviser tell you that you need more than $100,000 for critical illness coverage, you should ask the following questions:
1. What percentage of people make a critical illness claim?
2. What is the average cost of treating the critical illness? (Do not allow them quote you an isolated case that occurs once in 20 years)?
3. How much commission do they earn by selling a big critical illness policy to you?
Can legal issues be simplified?
My friend told me that his son graduated with a law degree. He decided not to practice law, as many lawyers had to work long hours into the late night.
Why is it necessary?
Lawyers spend countless hours producing bundles of legal documents that are hardly needed. The chance of a dispute is small.
Even so, when there is a legal dispute, they produce even more bundles of documents that take a lot of time for the court and the parties to deal with. The issues are made more complicated than really necessary.
Why? Lawyers are paid by the time that they spent. If they spend more time to produce more documents, they can send a larger bill.
I hope that, in today's age, it is possible for the legal practice to be made more sensible. Many issues can be simplified and dealt with more expeditiously.
Why is it necessary?
Lawyers spend countless hours producing bundles of legal documents that are hardly needed. The chance of a dispute is small.
Even so, when there is a legal dispute, they produce even more bundles of documents that take a lot of time for the court and the parties to deal with. The issues are made more complicated than really necessary.
Why? Lawyers are paid by the time that they spent. If they spend more time to produce more documents, they can send a larger bill.
I hope that, in today's age, it is possible for the legal practice to be made more sensible. Many issues can be simplified and dealt with more expeditiously.
Wednesday, October 17, 2007
Nearly 50 years ago
This is a photograph of my primary 4 class, nearly 50 years ago. I am grateful to my teacher, Henry Phang, who kept this photograph.
I was surprised to see that none of the students in my class wore spectacles in those days. Actually, I was already short sighted at that age. Today, many children wear spectacles at a much younger age.
For those who know me, can you guess where I was in that picture?
Disability income insurance
Hi Mr Tan,
I've indeed learnt a lot about financial planning via your blog. Thank you very much for your valuable advice to all the readers.
Is it advisable to have critical illness coverage against the 30 major illness or is it more important to buy disability income insurance?
REPLY
Unfortunately, most insurers do not provide disabilty income insurance on competitive terms.
So, you should buy a critical illness cover. I think that $50,000 is sufficient. The insurance agent will try to get you to buy more, especially a whole life policy.
Try to ask them to give you a critical illness policy that stops at 60. Beyond 60, you have sufficient savings (by saving through an investment fund, to take care of your medical needs.
Read the FAQ in my website, www.tankinlian.com/faq
I've indeed learnt a lot about financial planning via your blog. Thank you very much for your valuable advice to all the readers.
Is it advisable to have critical illness coverage against the 30 major illness or is it more important to buy disability income insurance?
REPLY
Unfortunately, most insurers do not provide disabilty income insurance on competitive terms.
So, you should buy a critical illness cover. I think that $50,000 is sufficient. The insurance agent will try to get you to buy more, especially a whole life policy.
Try to ask them to give you a critical illness policy that stops at 60. Beyond 60, you have sufficient savings (by saving through an investment fund, to take care of your medical needs.
Read the FAQ in my website, www.tankinlian.com/faq
Life in China, Singapore and America
MESSAGE FROM A CHINA STUDENT STUDYING IN AMERICA
The life here is pretty different with China or Singapore. I do enjoy the life here, but I do not like some aspect of the American style life.
Most Americans will drive even there is only five minutes walk. They use dryer to dry clothes instead of natural sunlight, even in New Mexico, where there are strong sunlight in 360 days a year!
They drive instead of walking, use washer instead of washing clothes by hands, but they pay a lot of money to go to the gym!
They also eat too much and consume too much energy. I read from somewhere that the energy consumed by an American is 7 times of an Asian.
If you do not have a car, your life will be hard here. You even can not go to supermarket to buy groceries! The public transportation is very poor and the distance from one place to another is very far. It is very different from what I used to in China.
In many aspects, Singapore is more advanced than the States. Most of the system in Singapore is always very simple and user friendly.
In America, it is not always the case, but still much better than China. About the life style, the Singaporean style is also more economic efficient and environmental friendly.
I think the MRT in Singapore may be the best in the world. Singapore is like a small lab and many smart people are trying smart ideas there. I may go back to Singapore after I work 3-5 years in the States.
All the best!
The life here is pretty different with China or Singapore. I do enjoy the life here, but I do not like some aspect of the American style life.
Most Americans will drive even there is only five minutes walk. They use dryer to dry clothes instead of natural sunlight, even in New Mexico, where there are strong sunlight in 360 days a year!
They drive instead of walking, use washer instead of washing clothes by hands, but they pay a lot of money to go to the gym!
They also eat too much and consume too much energy. I read from somewhere that the energy consumed by an American is 7 times of an Asian.
If you do not have a car, your life will be hard here. You even can not go to supermarket to buy groceries! The public transportation is very poor and the distance from one place to another is very far. It is very different from what I used to in China.
In many aspects, Singapore is more advanced than the States. Most of the system in Singapore is always very simple and user friendly.
In America, it is not always the case, but still much better than China. About the life style, the Singaporean style is also more economic efficient and environmental friendly.
I think the MRT in Singapore may be the best in the world. Singapore is like a small lab and many smart people are trying smart ideas there. I may go back to Singapore after I work 3-5 years in the States.
All the best!
About Money
Dear Kin Lian
1. With Money you can buy a house but not a home.
2. With Money you can buy a clock, but not time.
3. With Money you can buy a bed but not sleep.
4. With Money you can buy a book but not knowledge.
5. With Money you can see a doctor but not good health.
6. With Money you can buy a position but not respect.
7. With Money you can buy blood but not life.
8. With Money you can buy sex but not love.
I am sending you good wishes for good luck which money cannot buy.
Lee Kum Tatt
MY REPLY
I am spreading your good luck to all the visitors of my blog.
1. With Money you can buy a house but not a home.
2. With Money you can buy a clock, but not time.
3. With Money you can buy a bed but not sleep.
4. With Money you can buy a book but not knowledge.
5. With Money you can see a doctor but not good health.
6. With Money you can buy a position but not respect.
7. With Money you can buy blood but not life.
8. With Money you can buy sex but not love.
I am sending you good wishes for good luck which money cannot buy.
Lee Kum Tatt
MY REPLY
I am spreading your good luck to all the visitors of my blog.
Convert from Medishield to Incomeshield
Questions:
I am considering whether to upgrade from Medishield to NTUC Enhanced shield. If I were to buy the enhanced shield and it excludes some pre-existing illness which are presently covered by Medishield, will the expenses incurred from these illness still be covered by Medishield even after the upgrading?
MY REPLY:
I suggest that you should ask this question to the management of NTUC Income. They will be able to give you an answer. I cannot give you an answer, as it does not carry the authority.
I am considering whether to upgrade from Medishield to NTUC Enhanced shield. If I were to buy the enhanced shield and it excludes some pre-existing illness which are presently covered by Medishield, will the expenses incurred from these illness still be covered by Medishield even after the upgrading?
MY REPLY:
I suggest that you should ask this question to the management of NTUC Income. They will be able to give you an answer. I cannot give you an answer, as it does not carry the authority.
Tuesday, October 16, 2007
Investing tips for a young person
Dear Mr Tan,
I attended your talk organised by the Teacher's Co-Operative Society. You mentioned that its best for young investors to invest in equities. How do I go about it?
MY REPLY
I hope that these FAQs will give you the answers:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/august.html
http://www.tankinlian.com/faq/returns.html
There is some concern that the stockmarkets may be too high now. If you are investing a monthly sum, it is all right to get invested at any time.
However, if you are investing a lump sum, it may be better to avoid investing in equities at this time. You can choose a balanced fund or in the money market.
I suggest that you talk to an adviser. Or call the business center in NTUC Income.
I attended your talk organised by the Teacher's Co-Operative Society. You mentioned that its best for young investors to invest in equities. How do I go about it?
MY REPLY
I hope that these FAQs will give you the answers:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/august.html
http://www.tankinlian.com/faq/returns.html
There is some concern that the stockmarkets may be too high now. If you are investing a monthly sum, it is all right to get invested at any time.
However, if you are investing a lump sum, it may be better to avoid investing in equities at this time. You can choose a balanced fund or in the money market.
I suggest that you talk to an adviser. Or call the business center in NTUC Income.
Personal Rapid Transport - for the future
Dear Mr Tan,
I read your description of the personal rapid transport. Are there any examples of personal rapid transport that is successful in other countries?
MY REPLY:
From the examples quoted in Wikipedia, it seems that the closest to personal rapid transport is used in airports. London Heathrow is introducing this system soon.
The nearest example in Singapore is the sky train at Changi Airport. It is still a public transport, rather than a personal transport. However, it has some elements of the personal system. For example, the same train serves two sections of each terminal, i.e. before and after immigration.
If you take the train before immigration at one terminal, it brings you to the section before immigration in the other terminal. If you take it after immigration, it brings you to the section after immigration. Hence, the sky train is intelligent.
This intelligence can be incorporated in a future, large scale transport system. By entering the destination, the personal vehicle should be able to take you to the destination using the best route (avoiding congestion) and safely.
I read your description of the personal rapid transport. Are there any examples of personal rapid transport that is successful in other countries?
MY REPLY:
From the examples quoted in Wikipedia, it seems that the closest to personal rapid transport is used in airports. London Heathrow is introducing this system soon.
The nearest example in Singapore is the sky train at Changi Airport. It is still a public transport, rather than a personal transport. However, it has some elements of the personal system. For example, the same train serves two sections of each terminal, i.e. before and after immigration.
If you take the train before immigration at one terminal, it brings you to the section before immigration in the other terminal. If you take it after immigration, it brings you to the section after immigration. Hence, the sky train is intelligent.
This intelligence can be incorporated in a future, large scale transport system. By entering the destination, the personal vehicle should be able to take you to the destination using the best route (avoiding congestion) and safely.
Investing in an residential REIT
Mr Tan
I refer to your posting about a new concept in town planning. Can you explain the difference between investing in a residential REIT and an individual property? Most people like to invest directly in a specific property.
MY REPLY:
If you own a property and you wish to sell it, you have to incur the legal and agent's fees. This can take up to 4 percent of the total selling price. The selling price depends on the condition of your property, its facing, floor level and other factors. You also have to deal with the agent and the buyer.
If you invest in a REIT that owns a pool of properties, you enjoy the pooling of all the investments. The properties are professionally managed. For example, you may own 1% of a pool of 100 apartments. This is better than owning 1 specific property. You can even rent an apartment from the REIT at its market rental.
The cost of selling an investment in a REIT is less than 0.5%, compared to 4% for selling a property. I hope that the concept of a residential REIT will be more popular in the future.
I refer to your posting about a new concept in town planning. Can you explain the difference between investing in a residential REIT and an individual property? Most people like to invest directly in a specific property.
MY REPLY:
If you own a property and you wish to sell it, you have to incur the legal and agent's fees. This can take up to 4 percent of the total selling price. The selling price depends on the condition of your property, its facing, floor level and other factors. You also have to deal with the agent and the buyer.
If you invest in a REIT that owns a pool of properties, you enjoy the pooling of all the investments. The properties are professionally managed. For example, you may own 1% of a pool of 100 apartments. This is better than owning 1 specific property. You can even rent an apartment from the REIT at its market rental.
The cost of selling an investment in a REIT is less than 0.5%, compared to 4% for selling a property. I hope that the concept of a residential REIT will be more popular in the future.
Monday, October 15, 2007
Personal Rapid Transit - better than taxi
I have described the Personal Rapid Transit system. Someone observed that it is like calling a taxi. Why build this system, when we can use taxis?
The PRT system operates like a taxi. You can book for a vehicle to come to your place, and ask for it to take you to your destination. You do not have to drive or park.
Here are the advantages of PRT, compared to taxis:
1. No need for taxi drivers - no shortage problem. No need to pay surcharges to get drivers to work during peak period.
2. The computerised system knows how to get the destination (and some taxi drivers don't know)
3. No traffic congestion - i.e. no crowding of private cars
4. Greater reliabiilty. If no vehicle is available, the computer system will notify you immediately.
I hope that Singapore will experiment with this PRT system, especially in the new town.
The PRT system operates like a taxi. You can book for a vehicle to come to your place, and ask for it to take you to your destination. You do not have to drive or park.
Here are the advantages of PRT, compared to taxis:
1. No need for taxi drivers - no shortage problem. No need to pay surcharges to get drivers to work during peak period.
2. The computerised system knows how to get the destination (and some taxi drivers don't know)
3. No traffic congestion - i.e. no crowding of private cars
4. Greater reliabiilty. If no vehicle is available, the computer system will notify you immediately.
I hope that Singapore will experiment with this PRT system, especially in the new town.
How to invest $100,000
Dear Mr Tan
My friend has $100,000 in his CPF account. He intends to put $60k in his CPF account and the remaining $40k in avivadirect which promises to give 3.5% every year.
Is this the best alternative? Also is Aviva Direct really so good that it does not have any hidden admin charges,no lock up period and other charges? Appreciate your feedback please.
REPLY:
That is a wonderful idea. I would have done the same, if I were in your friend's position.
My friend has $100,000 in his CPF account. He intends to put $60k in his CPF account and the remaining $40k in avivadirect which promises to give 3.5% every year.
Is this the best alternative? Also is Aviva Direct really so good that it does not have any hidden admin charges,no lock up period and other charges? Appreciate your feedback please.
REPLY:
That is a wonderful idea. I would have done the same, if I were in your friend's position.
Sunday, October 14, 2007
Legal fee paid to Jonathan Lock
Dear Mr Tan
NTUC Income paid $40,000 to Jonathan Lock to cover his legal expenses with his lawyer. Mr Lock has now settled with his lawyer for a "nominal" fee of $5,000. Does this mean that Mr Lock can keep the $35,000?
REPLY:
I do not know the condition on which the payment of $40,000 was made. From what I read in the newspapers, I guess Mr Lock is entitled to keep the remaining $35,000. The whole episode turns out to be financially to his advantage. However, he did suffer a lot of anguish during this period.
http://www.straitstimes.com/Video+News/Singapore/STIVodcast_2763.html?playid=2763&type=Top10
http://sg.news.yahoo.com/cna/20071013/tap-305487-231650b.html
NTUC Income paid $40,000 to Jonathan Lock to cover his legal expenses with his lawyer. Mr Lock has now settled with his lawyer for a "nominal" fee of $5,000. Does this mean that Mr Lock can keep the $35,000?
REPLY:
I do not know the condition on which the payment of $40,000 was made. From what I read in the newspapers, I guess Mr Lock is entitled to keep the remaining $35,000. The whole episode turns out to be financially to his advantage. However, he did suffer a lot of anguish during this period.
http://www.straitstimes.com/Video+News/Singapore/STIVodcast_2763.html?playid=2763&type=Top10
http://sg.news.yahoo.com/cna/20071013/tap-305487-231650b.html
Determine liability for an accident
QUESTION:
How can I dispute a case of where I am positive that the other vehicle was speeding. Do insurance company do investigation on the damages to ascertain the speed of the vehicle?
Scenario:
I was filtering left. Signalled, checked side mirror. After the last vehicle passed on the left, the next one is about 40m away (evidently from small headlight). I filtered and the next thing i know the car crashed onto my left wheel and everything around it. I understand that this case is not exactly favourable since I'm the one filtering.
MY REPLY:
The best way is to get an independent witness to testify that the other vehicle was speeding.
In most cases, the fault is determined by the party that caused the impact. If you knock into another car, you are likely to be liable.
For example, if the vehicle in front slowed down suddenly and you knocked into its back, you cannot claim that the accident was caused by that action. You should have kept a safe distance and be ready to stop on time.
How can I dispute a case of where I am positive that the other vehicle was speeding. Do insurance company do investigation on the damages to ascertain the speed of the vehicle?
Scenario:
I was filtering left. Signalled, checked side mirror. After the last vehicle passed on the left, the next one is about 40m away (evidently from small headlight). I filtered and the next thing i know the car crashed onto my left wheel and everything around it. I understand that this case is not exactly favourable since I'm the one filtering.
MY REPLY:
The best way is to get an independent witness to testify that the other vehicle was speeding.
In most cases, the fault is determined by the party that caused the impact. If you knock into another car, you are likely to be liable.
For example, if the vehicle in front slowed down suddenly and you knocked into its back, you cannot claim that the accident was caused by that action. You should have kept a safe distance and be ready to stop on time.
Saturday, October 13, 2007
Personal Rapid Transit
From Wikipedia, the free encyclopedia
Personal rapid transit (PRT), also called personal automated transport (PAT) is a public transportation concept that offers automated on-demand non-stop transportation, on a network of specially-built guideways.
The first public PRT installation, ULTra, is currently under construction at Heathrow Airport in London, and scheduled to open for public use in 2008.
PRT is a system of small vehicles under independent or semi-independent automatic control, running on fixed guideways. The idea attempts to address a number of perceived weaknesses of public mass transit including fixed timetabling, limited routes, and sharing travel space with unrelated travelers.
In 1988, The Advanced Transit Association (ATRA), a group which advocates the use of technological solutions to transit problems, published a definition for PRT as follows:
* Fully automated vehicles capable of operation without human drivers.
* Vehicles use a reserved guideway.
* Small vehicles available for exclusive use by an individual or a small group, typically 1 to 6 passengers, traveling together by choice and available 24 hours a day.
* Small guideways that can be located aboveground, at ground level or underground.
* Vehicles able to use all guideways and stations on a fully coupled PRT network.
* Direct origin to destination service, without a necessity to transfer or stop at intervening stations.
* Service available on demand rather than on fixed schedules.
Proponents say that the low weight of small vehicles has the important benefit of allowing smaller guideways and support structures compared to other mass transit systems like light rail, translating into lower construction cost, smaller easements, and less visually obtrusive infrastructure.
The concept has been independently reinvented many times since the 1960s. It is considered controversial, and the city-wide deployment with many closely-spaced stations envisaged by proponents has yet to be constructed.
Past projects have failed due to lack of financing, cost overruns, regulatory conflicts, political issues and flaws in engineering or design.
From 2002–2005, the EDICT project, sponsored by the European Union, conducted a study on the feasibility of PRT in four European cities. The study involved 12 research organizations, and concluded that PRT:
* Would provide future cities "a highly accessible, user-responsive, environmental friendly transport system which offers a sustainable and economic solution."
* Could "cover its operating costs, and provide a return which could pay for most, if not all, of its capital costs."
* Would provide "a level of service which is superior to that available from conventional public transport"
* Would be "well received by the public, both public transport and car users."
The report also concluded that, despite these advantages, public authorities will not commit to building PRT because of the risks associated with being the first public implementation.
Personal rapid transit (PRT), also called personal automated transport (PAT) is a public transportation concept that offers automated on-demand non-stop transportation, on a network of specially-built guideways.
The first public PRT installation, ULTra, is currently under construction at Heathrow Airport in London, and scheduled to open for public use in 2008.
PRT is a system of small vehicles under independent or semi-independent automatic control, running on fixed guideways. The idea attempts to address a number of perceived weaknesses of public mass transit including fixed timetabling, limited routes, and sharing travel space with unrelated travelers.
In 1988, The Advanced Transit Association (ATRA), a group which advocates the use of technological solutions to transit problems, published a definition for PRT as follows:
* Fully automated vehicles capable of operation without human drivers.
* Vehicles use a reserved guideway.
* Small vehicles available for exclusive use by an individual or a small group, typically 1 to 6 passengers, traveling together by choice and available 24 hours a day.
* Small guideways that can be located aboveground, at ground level or underground.
* Vehicles able to use all guideways and stations on a fully coupled PRT network.
* Direct origin to destination service, without a necessity to transfer or stop at intervening stations.
* Service available on demand rather than on fixed schedules.
Proponents say that the low weight of small vehicles has the important benefit of allowing smaller guideways and support structures compared to other mass transit systems like light rail, translating into lower construction cost, smaller easements, and less visually obtrusive infrastructure.
The concept has been independently reinvented many times since the 1960s. It is considered controversial, and the city-wide deployment with many closely-spaced stations envisaged by proponents has yet to be constructed.
Past projects have failed due to lack of financing, cost overruns, regulatory conflicts, political issues and flaws in engineering or design.
From 2002–2005, the EDICT project, sponsored by the European Union, conducted a study on the feasibility of PRT in four European cities. The study involved 12 research organizations, and concluded that PRT:
* Would provide future cities "a highly accessible, user-responsive, environmental friendly transport system which offers a sustainable and economic solution."
* Could "cover its operating costs, and provide a return which could pay for most, if not all, of its capital costs."
* Would provide "a level of service which is superior to that available from conventional public transport"
* Would be "well received by the public, both public transport and car users."
The report also concluded that, despite these advantages, public authorities will not commit to building PRT because of the risks associated with being the first public implementation.
New Urbanism - a movement
From Wikipedia.
New urbanism is an American urban design movement that arose in the early 1980s. Its goal is to reform all aspects of real estate development and urban planning, from urban retrofits to suburban infill. New urbanist neighborhoods are designed to contain a diverse range of housing and jobs, and to be walkable.
New Urbanism is also is known as traditional neighborhood design, neotraditional design, and transit-oriented development. A more idealistic variant of New Urbanism, founded in 1999 by Michael E. Arth, is known as New Pedestrianism. The ideas of New Urbanism also are embraced by the European Urban Renaissance movement.
The Local Government Commission, a private nonprofit group in Sacramento, California, invited architects Peter Calthorpe, Michael Corbett, Andrés Duany, Elizabeth Moule, Elizabeth Plater-Zyberk, Stefanos Polyzoides, and Daniel Solomon in 1991 to develop a set of community principles for land use planning. Named the Ahwahnee Principles (after Yosemite National Park's Ahwahnee Hotel), the commission presented the principles to about one hundred government officials in the fall of 1991, at its first Yosemite Conference for Local Elected Officials.
Market Street, downtown Celebration, FloridaCalthorpe, Duany, Moule, Plater-Zyberk, Polyzoides, and Solomon founded the Chicago-based Congress for the New Urbanism in 1993. The CNU has grown to more than 2,000 members, and is the leading international organization promoting new urbanist design principles. It held its fifteenth congress in 2007 in Philadelphia, Pennsylvania, which included applying New Urbanist principles to older cities.
The CNU's Charter of the New Urbanism says:
“ We advocate the restructuring of public policy and development practices to support the following principles: neighborhoods should be diverse in use and population; communities should be designed for the pedestrian and transit as well as the car; cities and towns should be shaped by physically defined and universally accessible public spaces and community institutions; urban places should be framed by architecture and landscape design that celebrate local history, climate, ecology, and building practice. ”
New urbanists support regional planning for open space, appropriate architecture and planning, and the balanced development of jobs and housing. They believe their strategies are the best way to reduce traffic congestion, increase the supply of affordable housing, and rein in urban sprawl. The Charter of the New Urbanism also covers issues such as historic preservation, safe streets, green building, and the renovation of brownfield land.
New urbanism is an American urban design movement that arose in the early 1980s. Its goal is to reform all aspects of real estate development and urban planning, from urban retrofits to suburban infill. New urbanist neighborhoods are designed to contain a diverse range of housing and jobs, and to be walkable.
New Urbanism is also is known as traditional neighborhood design, neotraditional design, and transit-oriented development. A more idealistic variant of New Urbanism, founded in 1999 by Michael E. Arth, is known as New Pedestrianism. The ideas of New Urbanism also are embraced by the European Urban Renaissance movement.
The Local Government Commission, a private nonprofit group in Sacramento, California, invited architects Peter Calthorpe, Michael Corbett, Andrés Duany, Elizabeth Moule, Elizabeth Plater-Zyberk, Stefanos Polyzoides, and Daniel Solomon in 1991 to develop a set of community principles for land use planning. Named the Ahwahnee Principles (after Yosemite National Park's Ahwahnee Hotel), the commission presented the principles to about one hundred government officials in the fall of 1991, at its first Yosemite Conference for Local Elected Officials.
Market Street, downtown Celebration, FloridaCalthorpe, Duany, Moule, Plater-Zyberk, Polyzoides, and Solomon founded the Chicago-based Congress for the New Urbanism in 1993. The CNU has grown to more than 2,000 members, and is the leading international organization promoting new urbanist design principles. It held its fifteenth congress in 2007 in Philadelphia, Pennsylvania, which included applying New Urbanist principles to older cities.
The CNU's Charter of the New Urbanism says:
“ We advocate the restructuring of public policy and development practices to support the following principles: neighborhoods should be diverse in use and population; communities should be designed for the pedestrian and transit as well as the car; cities and towns should be shaped by physically defined and universally accessible public spaces and community institutions; urban places should be framed by architecture and landscape design that celebrate local history, climate, ecology, and building practice. ”
New urbanists support regional planning for open space, appropriate architecture and planning, and the balanced development of jobs and housing. They believe their strategies are the best way to reduce traffic congestion, increase the supply of affordable housing, and rein in urban sprawl. The Charter of the New Urbanism also covers issues such as historic preservation, safe streets, green building, and the renovation of brownfield land.
New Urbanism
Here is a comment regarding my blog of a new concept of town planning.
The concept you talked about is very similar to a movement in the early 1980s called "New Urbanism". New Urbanist neighborhoods are designed to contain a diverse range of housing and jobs, and to be walkable.
The main features of New Urbanism include:
1. Walkable. Most of the dwellings are within a five-minute walk of the center, an average of roughly 2,000 feet.
2. Diverse landuse. i.e. housing, offices etc.
3. Traditional "neighbourhood" design.
For more more this concept, read this (http://en.wikipedia.org/wiki/New_Urbanism#Old_and_new_urbanism)
The ideas for "New Urbanism" arose from an earlier movement called the "Garden City Movement" (http://en.wikipedia.org/wiki/Garden_city_movement)
The concept you talked about is very similar to a movement in the early 1980s called "New Urbanism". New Urbanist neighborhoods are designed to contain a diverse range of housing and jobs, and to be walkable.
The main features of New Urbanism include:
1. Walkable. Most of the dwellings are within a five-minute walk of the center, an average of roughly 2,000 feet.
2. Diverse landuse. i.e. housing, offices etc.
3. Traditional "neighbourhood" design.
For more more this concept, read this (http://en.wikipedia.org/wiki/New_Urbanism#Old_and_new_urbanism)
The ideas for "New Urbanism" arose from an earlier movement called the "Garden City Movement" (http://en.wikipedia.org/wiki/Garden_city_movement)
Compensation for Traffic Accident
Compensation for Traffic Accident
In 2006, about 8,400 accidents happened on the roads involving injuries to people. 190 people died, 104 were seriously injured and 9,600 suffered other injuries.
How do the victims claim for compensation for their medical expenses, loss of wages and permanent disablement?
In most cases, the victim has to look for an lawyer to submit the injury claim. The case can take many years to settle. The legal fees can take away about one third of the total compensation.
Some insurance companies offer to make direct settlement with the injured person. However, there is a suspicion that the compensation may be inadequate. The victim may prefer to engage a lawyer to settle the claim on his or her behalf.
Is there a better way to handle the settlement of injuries caused by traffic accidents?
Sweden has operated an alternative system for about 70 years. The results have been quite satisfactory.
A person who suffers injury caused by a traffic accident can claim for compensation according to the Swedish Traffic Damage Act.
To ensure that the compensation is reasonable and as just and uniform as possible, the law required the insurance company to consult the Swedish Road Traffic Injuries Commission for an advisory opinion before reaching a final settlement with the claimant.
The commission issues its opinion on compensation for personal injury and also for loss of support (i.e. compensation to family on death of the breadwinner).
Where the case is taken to court, the commission will, on request, issue its opinion concerning personal injury.
The courts, lawyers and insurance companies regularly complied with the practice of the commission. About 5,300 cases are tried by the commission in 2006.
It is compulsory for the insurance companies to consult the commission on compensation for loss of support, for loss of income where the medical disability is 10 per cent or more or has exceeded a certain sum or compensation for the personal injury and associated costs.
If the case is to be heard by the commission, the insurance company supplies the commission with the complete dossier, all available documents and a brief summary including the standpoints of both parties. The claimant can look at the summary and is free to add any further commentary to the views.
The majority of the cases are presented to the commission by a legal advisor employed by the commission. If different opinions prevail in a case, the commission’s opinion is given after voting. The commission has access to highly qualified medical experts who may be consulted on medical matters.
The commission’s opinion in a case is sent to the insurance company which in turn forwards it to the claimant. As the opinion is only advisory the parties may settle the case in accordance with the commission’s recommendation, agree on some other solution or bring the case to court.
In more than ninety per cent of the cases that have been tried by the commission the parties agree to settle in accordance with the commission’s recommendation.
The rules regarding the commission and changes to the rules have been approved by the government. The chairman of the commission is appointed by the government and the other members are appointed by the Swedish Financial Supervisory Authority.
The chairman or deputy chairman chair meetings of the commission. They are highly qualified lawyers from the judiciary. They may not be employed by an insurance company.
Twelve members of the commission are laymen representing professional organizations and another twelve members represent the insurance companies. A representative of an insurance company may not participate in the discussion or vote in a case in which his company is involved.
Normally the commission meets with six members; two members from each member category. Less complicated cases may be decided by one member from each member category. In a few cases one chairman alone may decide what the commission’s recommendation should be. The insurance companies covers the costs of the commission.
The system has worked very well over a long period of time. Some of the advantages are:
- Makes court proceedings unnecessary in most cases
- Provides earlier settlement of the compensation
- Establishes a uniform standard of compensation
- The claimant has access to an independent professional opinion, free of charge
The Swedish system of compensation is based on “no-fault”. The injured persons are entitled to receive compensation without having to prove the fault of the driver of the vehicle. This has helped to simplify the settlement of the compensation.
The Commission operates with a set of tables. Compensation is based on such parameters as degree and type of disablement, age, income and other factors. The Commission does not make public the average amount they have awarded.
The findings of the Commission are generally slightly higher than the amount offered by the insurance company. In 2006, the Commission awarded the same amount in 74% of the cases, up to 10% more for 10.4% of cases, 10 to 25% more for 9.5% of cases, and less for 6.1% of the cases. There proportions have remained quite steady in recent years.
If a claimant is not happy with the outcome, the claimant can still have the option to go to court.
I hope that the award of compensation for traffic accidents in Singapore can be reviewed to provide payment to accident victims more promptly and at lower legal cost. It will provide relief to the victims and the family members. This can be based on the model in Sweden.
Tan Kin Lian
The writer was the former chief executive of NTUC Income.
In 2006, about 8,400 accidents happened on the roads involving injuries to people. 190 people died, 104 were seriously injured and 9,600 suffered other injuries.
How do the victims claim for compensation for their medical expenses, loss of wages and permanent disablement?
In most cases, the victim has to look for an lawyer to submit the injury claim. The case can take many years to settle. The legal fees can take away about one third of the total compensation.
Some insurance companies offer to make direct settlement with the injured person. However, there is a suspicion that the compensation may be inadequate. The victim may prefer to engage a lawyer to settle the claim on his or her behalf.
Is there a better way to handle the settlement of injuries caused by traffic accidents?
Sweden has operated an alternative system for about 70 years. The results have been quite satisfactory.
A person who suffers injury caused by a traffic accident can claim for compensation according to the Swedish Traffic Damage Act.
To ensure that the compensation is reasonable and as just and uniform as possible, the law required the insurance company to consult the Swedish Road Traffic Injuries Commission for an advisory opinion before reaching a final settlement with the claimant.
The commission issues its opinion on compensation for personal injury and also for loss of support (i.e. compensation to family on death of the breadwinner).
Where the case is taken to court, the commission will, on request, issue its opinion concerning personal injury.
The courts, lawyers and insurance companies regularly complied with the practice of the commission. About 5,300 cases are tried by the commission in 2006.
It is compulsory for the insurance companies to consult the commission on compensation for loss of support, for loss of income where the medical disability is 10 per cent or more or has exceeded a certain sum or compensation for the personal injury and associated costs.
If the case is to be heard by the commission, the insurance company supplies the commission with the complete dossier, all available documents and a brief summary including the standpoints of both parties. The claimant can look at the summary and is free to add any further commentary to the views.
The majority of the cases are presented to the commission by a legal advisor employed by the commission. If different opinions prevail in a case, the commission’s opinion is given after voting. The commission has access to highly qualified medical experts who may be consulted on medical matters.
The commission’s opinion in a case is sent to the insurance company which in turn forwards it to the claimant. As the opinion is only advisory the parties may settle the case in accordance with the commission’s recommendation, agree on some other solution or bring the case to court.
In more than ninety per cent of the cases that have been tried by the commission the parties agree to settle in accordance with the commission’s recommendation.
The rules regarding the commission and changes to the rules have been approved by the government. The chairman of the commission is appointed by the government and the other members are appointed by the Swedish Financial Supervisory Authority.
The chairman or deputy chairman chair meetings of the commission. They are highly qualified lawyers from the judiciary. They may not be employed by an insurance company.
Twelve members of the commission are laymen representing professional organizations and another twelve members represent the insurance companies. A representative of an insurance company may not participate in the discussion or vote in a case in which his company is involved.
Normally the commission meets with six members; two members from each member category. Less complicated cases may be decided by one member from each member category. In a few cases one chairman alone may decide what the commission’s recommendation should be. The insurance companies covers the costs of the commission.
The system has worked very well over a long period of time. Some of the advantages are:
- Makes court proceedings unnecessary in most cases
- Provides earlier settlement of the compensation
- Establishes a uniform standard of compensation
- The claimant has access to an independent professional opinion, free of charge
The Swedish system of compensation is based on “no-fault”. The injured persons are entitled to receive compensation without having to prove the fault of the driver of the vehicle. This has helped to simplify the settlement of the compensation.
The Commission operates with a set of tables. Compensation is based on such parameters as degree and type of disablement, age, income and other factors. The Commission does not make public the average amount they have awarded.
The findings of the Commission are generally slightly higher than the amount offered by the insurance company. In 2006, the Commission awarded the same amount in 74% of the cases, up to 10% more for 10.4% of cases, 10 to 25% more for 9.5% of cases, and less for 6.1% of the cases. There proportions have remained quite steady in recent years.
If a claimant is not happy with the outcome, the claimant can still have the option to go to court.
I hope that the award of compensation for traffic accidents in Singapore can be reviewed to provide payment to accident victims more promptly and at lower legal cost. It will provide relief to the victims and the family members. This can be based on the model in Sweden.
Tan Kin Lian
The writer was the former chief executive of NTUC Income.
Friday, October 12, 2007
Traffic Accident – How to claim on your Insurance
If you drive a car and you meet with an accident, you face a dilemma. Which party is at fault? Do you want to settle the liability on the spot, or leave it to your insurance company to handle?
In the case of a minor accident, it is best that both parties agree to have a private settlement and not to make any claim on the insurance policy. One party may agree to pay a sum of money to the other party to repair any damage.
The private settlement should be recorded in writing and be signed by an independent witness. Some insurance companies have issued a simple form that can be used to record a private settlement. If you do not have this form, a simple agreement can be written. In fact, if both parties are honorable, a verbal agreement will be adequate.
Some years ago, another car hit my car in the car park. The driver was a young lady, who was obviously an inexperienced driver. Her father called me on the mobile phone and agreed to bear the repair cost of my car.
In case they do not keep their word, I reported the accident to my insurance company but indicated that I had made a private settlement. The other party paid the repair bill, which amounted to more than $1,000. The accident never became an insurance claim.
If you make a private settlement, both parties will keep their No Claim Discount.
If private settlement cannot be reached, you have to make an insurance claim. Both parties can, on the spot, record down the circumstances of the accident and the extent of the damages to the vehicle. Photographs can be taken. If most or all of the facts are agreed, the insurance companies for both vehicles can settle the claim quite easily.
The insurance companies have issued a form called the Singapore Accident Statement, which can be used for this purpose.
Only a small percentage of motorists used the Singapore Accident Statement. This is due to the lack of awareness and to the disputes over the facts of the accident.
Insurance companies are partly to blame. Many years ago, I saw an advisory from an insurance company to its policyholders never to admit liability for an accident. This could be a reason for the many disputes involved in motor accidents.
A better advisory is for the policyholder to use the best judgment and agree to the facts of the accident.
If you cannot reach a private settlement or get a Singapore Accident Statement agreed on the spot, with photographs of damages, what is the next best approach for you to take?
You have to make a report the accident to your insurance company as soon as possible. You have to bring the vehicle to the reporting center, so that photographs of the damages can be taken. These will be useful to settle the repair cost, and also to establish the party that bears the liability for the accident.
Some insurance companies used the service of Idac centers (i.e. independent damage assessment centers). These Idac centers have long operating hours, up to a late time at night, and are located in various parts of Singapore. Most motorists find the reporting at an Idac center to be quite convenient.
After reporting, some insurance companies ask you to send your vehicle to their authorized workshops to carry out the repair. Some allow you to find your own workshop.
Some undertake to arrange the repair for you and ensure that the repair is carried out to a satisfactory repair standard.
It is best for the policyholder to let the insurance company arrange the repair. They can find a suitable workshop to repair the damages at a fair price. They can ensure that the repair is carried out to the quality standard. The policyholder is freed from the hassle of arranging the repair. In some cases, they are given a courtesy car to use during the period of the repair.
By reporting at an Idac center, you will have a good record of the damages. This may be useful to defend against an inflated or aggravated claim that may be submitted by the other party against you.
In past years, many insurance companies did not have a system of prior assessment of damages. They allowed their policyholders to send their vehicle to any workshop. The workshop submits a report of the damages and estimate of the repair cost.
This has led to inflated claims. Some workshops aggravated the damages to the vehicle to submit a large repair bill.
The workshop entices the customer by giving some incentive, such as replacing the old tires, or to repaint the vehicle. The repair bill can easily be more than three times of the fair repair cost.
Some workshops use touts to look for the accident cases and bring the vehicle to their workshop.
Inflated claims will result in higher premiums to be paid by all motorists, including those that did not make any claim.
If you wish to make a third party claim against the other vehicle, which you deem to be at fault in the accident, you should submit your claim directly to the insurance company of the other vehicle.
You should not let your workshop handle your third party claim, as they may inflate the repair cost. They will be using your name to lodge the fraudulent claim. This may cause legal problem to you, as you may be held to be a party to the fraud. It is best to avoid this potential problem. Indeed, it is quite common for third party claims to be inflated or fraudulent.
In the case of a minor accident, it is best that both parties agree to have a private settlement and not to make any claim on the insurance policy. One party may agree to pay a sum of money to the other party to repair any damage.
The private settlement should be recorded in writing and be signed by an independent witness. Some insurance companies have issued a simple form that can be used to record a private settlement. If you do not have this form, a simple agreement can be written. In fact, if both parties are honorable, a verbal agreement will be adequate.
Some years ago, another car hit my car in the car park. The driver was a young lady, who was obviously an inexperienced driver. Her father called me on the mobile phone and agreed to bear the repair cost of my car.
In case they do not keep their word, I reported the accident to my insurance company but indicated that I had made a private settlement. The other party paid the repair bill, which amounted to more than $1,000. The accident never became an insurance claim.
If you make a private settlement, both parties will keep their No Claim Discount.
If private settlement cannot be reached, you have to make an insurance claim. Both parties can, on the spot, record down the circumstances of the accident and the extent of the damages to the vehicle. Photographs can be taken. If most or all of the facts are agreed, the insurance companies for both vehicles can settle the claim quite easily.
The insurance companies have issued a form called the Singapore Accident Statement, which can be used for this purpose.
Only a small percentage of motorists used the Singapore Accident Statement. This is due to the lack of awareness and to the disputes over the facts of the accident.
Insurance companies are partly to blame. Many years ago, I saw an advisory from an insurance company to its policyholders never to admit liability for an accident. This could be a reason for the many disputes involved in motor accidents.
A better advisory is for the policyholder to use the best judgment and agree to the facts of the accident.
If you cannot reach a private settlement or get a Singapore Accident Statement agreed on the spot, with photographs of damages, what is the next best approach for you to take?
You have to make a report the accident to your insurance company as soon as possible. You have to bring the vehicle to the reporting center, so that photographs of the damages can be taken. These will be useful to settle the repair cost, and also to establish the party that bears the liability for the accident.
Some insurance companies used the service of Idac centers (i.e. independent damage assessment centers). These Idac centers have long operating hours, up to a late time at night, and are located in various parts of Singapore. Most motorists find the reporting at an Idac center to be quite convenient.
After reporting, some insurance companies ask you to send your vehicle to their authorized workshops to carry out the repair. Some allow you to find your own workshop.
Some undertake to arrange the repair for you and ensure that the repair is carried out to a satisfactory repair standard.
It is best for the policyholder to let the insurance company arrange the repair. They can find a suitable workshop to repair the damages at a fair price. They can ensure that the repair is carried out to the quality standard. The policyholder is freed from the hassle of arranging the repair. In some cases, they are given a courtesy car to use during the period of the repair.
By reporting at an Idac center, you will have a good record of the damages. This may be useful to defend against an inflated or aggravated claim that may be submitted by the other party against you.
In past years, many insurance companies did not have a system of prior assessment of damages. They allowed their policyholders to send their vehicle to any workshop. The workshop submits a report of the damages and estimate of the repair cost.
This has led to inflated claims. Some workshops aggravated the damages to the vehicle to submit a large repair bill.
The workshop entices the customer by giving some incentive, such as replacing the old tires, or to repaint the vehicle. The repair bill can easily be more than three times of the fair repair cost.
Some workshops use touts to look for the accident cases and bring the vehicle to their workshop.
Inflated claims will result in higher premiums to be paid by all motorists, including those that did not make any claim.
If you wish to make a third party claim against the other vehicle, which you deem to be at fault in the accident, you should submit your claim directly to the insurance company of the other vehicle.
You should not let your workshop handle your third party claim, as they may inflate the repair cost. They will be using your name to lodge the fraudulent claim. This may cause legal problem to you, as you may be held to be a party to the fraud. It is best to avoid this potential problem. Indeed, it is quite common for third party claims to be inflated or fraudulent.
Bad idea to drive to CBD
I drove to CBD for a meeting at Cecil Court. I had a lot of trouble to find the car park in the building. There were two many one way street. After turning a few rounds, I decided to park at Market Street car park.
After 4 hours, I had to pay a parking fee of $16. It was expensive and a hassle to drive. It was a bad idea to drive to CDB.
I would have preferred to take a train, if there was a good feeder service. I hope that the public transport system can be improved.
After 4 hours, I had to pay a parking fee of $16. It was expensive and a hassle to drive. It was a bad idea to drive to CDB.
I would have preferred to take a train, if there was a good feeder service. I hope that the public transport system can be improved.
Thursday, October 11, 2007
Ramadhan in Jakarta
I was in Jakarta during the past four days. The traffic was light. Many people returned to their home town, i.e. not in Jakarta, to celebrate Ramadhan.
It was the first time that I found no traffic congestion in most parts of Jarkarta, although some of the roads are still croweded.
I visited several large malls in Jakarta. They are well patronised. They are of similar quality to the malls in Singapore.
Prices of property in Jakarta are still quite inexpensive, compared to most other cities in South East Asia. The economy is growing well.
It was the first time that I found no traffic congestion in most parts of Jarkarta, although some of the roads are still croweded.
I visited several large malls in Jakarta. They are well patronised. They are of similar quality to the malls in Singapore.
Prices of property in Jakarta are still quite inexpensive, compared to most other cities in South East Asia. The economy is growing well.
Non Guaranteed Rates
Dear Mr Tan
From your years of experience, do you have any statistics which indicate how far insurance companies (e.g NTUC income) deviate in their charges of yearly premiums compared to what had been indicated to the customer at the time of sale years back?
I am considering to buy a policy with non-guaranteed premium compared to one with guarateed premium, since the one with non-guranteed premium seem to be cheaper.
I worry that some years down the road they just jack up the premium... sales gimmick right from the start!!!!
MY REPLY:
When I managed NTUC Income in the past, I hold strongly the principle of fairness to policyholders.
Some other insurance companies were more interested to more profit at the expense of their policyholders. It is a difficult judgement between fairness and profits ( i.e. self interest).
I am not able to comment on the behaviour of other CEOs.
In your case, you should ask this question to the company that you intend to buy the product with non-guaranteed rates. See if they have any statement regarding how they intend to adjust the rates in the future.
From your years of experience, do you have any statistics which indicate how far insurance companies (e.g NTUC income) deviate in their charges of yearly premiums compared to what had been indicated to the customer at the time of sale years back?
I am considering to buy a policy with non-guaranteed premium compared to one with guarateed premium, since the one with non-guranteed premium seem to be cheaper.
I worry that some years down the road they just jack up the premium... sales gimmick right from the start!!!!
MY REPLY:
When I managed NTUC Income in the past, I hold strongly the principle of fairness to policyholders.
Some other insurance companies were more interested to more profit at the expense of their policyholders. It is a difficult judgement between fairness and profits ( i.e. self interest).
I am not able to comment on the behaviour of other CEOs.
In your case, you should ask this question to the company that you intend to buy the product with non-guaranteed rates. See if they have any statement regarding how they intend to adjust the rates in the future.
Non Guaranteed Benefits
Dear Mr Tan
Is there any governing body that will monitor how far insurance companies depart, historically, from the "non-guaranteed" bonus payouts?
If I were to establish an insurance company, the first thing I would do is to inflate the "non-guaranteed" values hugely, it is sure-draw and attract the gullible.
There is nothing to lose, after all I just say they are "projected" "nonguaranteed", these kind of stuffs should be made illegal, how can you sell something on such basis.
MY REPLY:
You can refer this question to the regulatory authority, that is, the Monetary Authority of Singapore.
It is important that the insurance company exercise fairness in giving out the non-guaranteed benefits. The appointed actuary is required to look after this matter.
Is there any governing body that will monitor how far insurance companies depart, historically, from the "non-guaranteed" bonus payouts?
If I were to establish an insurance company, the first thing I would do is to inflate the "non-guaranteed" values hugely, it is sure-draw and attract the gullible.
There is nothing to lose, after all I just say they are "projected" "nonguaranteed", these kind of stuffs should be made illegal, how can you sell something on such basis.
MY REPLY:
You can refer this question to the regulatory authority, that is, the Monetary Authority of Singapore.
It is important that the insurance company exercise fairness in giving out the non-guaranteed benefits. The appointed actuary is required to look after this matter.
Does insurance policy cover terrorism?
Dear Mr Tan
Many insurance policies exclude payments for death/hospitalisation due to terrorist activities. This is unfair.
If I have lunch at Macdonald on a perfectly normal day and a terrorist suicide bomber detonated a bomb and killed me, or maimed me, the insurance policies exclude such incident from death benefit and hospitalisation claims.
As far as I am concerned, such incident is no different from being killed by a flying brick while crossing Punggol Track 22 Road. Why am i paying insurance premium if I am not covered?
REPLY:
Life insurance policies do not exclude death due to terrorist attack. In this event, the sum insured plus bonus are paid in full.
Terrorist attacks are usually excluded from personal accident insurance, as the premium rate is very low. In a terrorist attack, many people are likely to be killed or injured at one time. This is different from being hit by a flying brick on an islated road.
Some personal accident policies do cover terrorist attack, to a limited or full extent.
Many insurance policies exclude payments for death/hospitalisation due to terrorist activities. This is unfair.
If I have lunch at Macdonald on a perfectly normal day and a terrorist suicide bomber detonated a bomb and killed me, or maimed me, the insurance policies exclude such incident from death benefit and hospitalisation claims.
As far as I am concerned, such incident is no different from being killed by a flying brick while crossing Punggol Track 22 Road. Why am i paying insurance premium if I am not covered?
REPLY:
Life insurance policies do not exclude death due to terrorist attack. In this event, the sum insured plus bonus are paid in full.
Terrorist attacks are usually excluded from personal accident insurance, as the premium rate is very low. In a terrorist attack, many people are likely to be killed or injured at one time. This is different from being hit by a flying brick on an islated road.
Some personal accident policies do cover terrorist attack, to a limited or full extent.
Medication to relieve pain from gout
I had pain in my foot due probably to gout caused by high uric acid. I visited a hospital in Jakarta. The doctor prescribed Zoletrol to me.
I told him that I was prescribed with Difnal diclofenac in Singapore. He referred to a drug book and told me that Difnal is a pain killer.
I checked Google and found the following:
Diclofenac (marketed as Voltaren, Voltarol, Diclon, Dicloflex Difen, Difene, Cataflam, Pennsaid, Rhumalgan, Modifenac, Abitren, Arthrotec and Zolterol, with various drug dose combinations) is a non-steroidal anti-inflammatory drug (NSAID) taken to reduce inflammation and an analgesic reducing pain in conditions such as in arthritis or acute injury. It can also be used to reduce menstrual pain, dysmenorrhea.
Diclofenac is available as a generic drug in a number of formulations. Over the counter (OTC) use is approved in some countries for minor aches and pains and fever associated with common infections.
I also found that Difnal is another brand name for diclofenac.
Lesson: Learn about the drugs that you are prescribed with. You can check with Google. Usually, it refers to Wikipedia.
I told him that I was prescribed with Difnal diclofenac in Singapore. He referred to a drug book and told me that Difnal is a pain killer.
I checked Google and found the following:
Diclofenac (marketed as Voltaren, Voltarol, Diclon, Dicloflex Difen, Difene, Cataflam, Pennsaid, Rhumalgan, Modifenac, Abitren, Arthrotec and Zolterol, with various drug dose combinations) is a non-steroidal anti-inflammatory drug (NSAID) taken to reduce inflammation and an analgesic reducing pain in conditions such as in arthritis or acute injury. It can also be used to reduce menstrual pain, dysmenorrhea.
Diclofenac is available as a generic drug in a number of formulations. Over the counter (OTC) use is approved in some countries for minor aches and pains and fever associated with common infections.
I also found that Difnal is another brand name for diclofenac.
Lesson: Learn about the drugs that you are prescribed with. You can check with Google. Usually, it refers to Wikipedia.
Buy an immediate life annuity with $200,000
Dear Mr Tan,
I like to buy a Life Annuity without refund from NTUC Income with my hard cash of $200,000. I am single without dependent and wish to have a higher payment monthly.
May I find out from you what will be my monthly payout? I need this monthly sum to tie over my personal expenses, household bill and HDB loan. I do not intend to put this $200,000 in fixed desposit or do investment which I am not familiar.
Moreover, I am quite a generous and spendthrift person. I am afraid one day all my savings will be parted due to poor financial planning.
I approached an agent from NTUC Income in Aug 2007. She told me that there is no such Life Annuity without refund in NTUC Income. She offered me the Guaranteed Life Annuity (immediate cash). However, this is not what I want. Hence, I did not commit it.
Fortunately, I read your article on The Straits Times dated 24 Sep 07 and is very pleased that you have offered your advices for us to seek help and clarification.
I know you are a very reliable and reputable ex-CEO of NTUC Income. I trust you will help me to check and let me know how much I will get from NTUC Income per month pay-out (Life Annuity without refund) if I cash in my $200,000.
MY REPLY:
As NTUC Income does not offer a "no refund" annuity, the next best option is to buy a Guaranteed Life annuity with a 5 or 10 year guarantee.
I will ask the manager of the business center, to contact you and advise the payout for this annuity.
It is a participating annuity which gives you a bonus each year (the rate of bonus is not guaranteed) and it will enhance your monthly payment.
You can start the annuity at your current age while you are still working part time. If you do not spend all of the money, you can save it in a bank account.
I like to buy a Life Annuity without refund from NTUC Income with my hard cash of $200,000. I am single without dependent and wish to have a higher payment monthly.
May I find out from you what will be my monthly payout? I need this monthly sum to tie over my personal expenses, household bill and HDB loan. I do not intend to put this $200,000 in fixed desposit or do investment which I am not familiar.
Moreover, I am quite a generous and spendthrift person. I am afraid one day all my savings will be parted due to poor financial planning.
I approached an agent from NTUC Income in Aug 2007. She told me that there is no such Life Annuity without refund in NTUC Income. She offered me the Guaranteed Life Annuity (immediate cash). However, this is not what I want. Hence, I did not commit it.
Fortunately, I read your article on The Straits Times dated 24 Sep 07 and is very pleased that you have offered your advices for us to seek help and clarification.
I know you are a very reliable and reputable ex-CEO of NTUC Income. I trust you will help me to check and let me know how much I will get from NTUC Income per month pay-out (Life Annuity without refund) if I cash in my $200,000.
MY REPLY:
As NTUC Income does not offer a "no refund" annuity, the next best option is to buy a Guaranteed Life annuity with a 5 or 10 year guarantee.
I will ask the manager of the business center, to contact you and advise the payout for this annuity.
It is a participating annuity which gives you a bonus each year (the rate of bonus is not guaranteed) and it will enhance your monthly payment.
You can start the annuity at your current age while you are still working part time. If you do not spend all of the money, you can save it in a bank account.
Investing in Australian and New Zealand deposits
Questions:
I like to ask your opinion about foreign currency deposit. They promise about 8% on Australian or NZ deposits placed for 6 months.
It seems to me that conversion back and forth to local currency, plus exchange rate fluctuations over a mere 6 months, would not wipe out the benefits of such high interest rate offered?
It seems quite safe to get at least 4% even in the worst case? Has someone ever done any retrospective desk study to prove the profitability and viability of such schemes on an average situation basis.
MY REPLY:
The exchange rate between Singapore dollar and Australian or New Zealand dollar can fluctuate by more than 5% over a 6 month period. It can wipe out the difference in interest rate between the two currencies. If Australian or New Zealand dollar appreciate, it will add to your return even further
Currently, these two currencies are at a high level, compared to other currencies. It may be risky to invest in them now, unless you are sure that it can maintain its current value or even go higher.
I have written on this matter in one of my blog posting. Go to my blog, www.tankinlian.blogspot.com and search for "foreign currency".
I like to ask your opinion about foreign currency deposit. They promise about 8% on Australian or NZ deposits placed for 6 months.
It seems to me that conversion back and forth to local currency, plus exchange rate fluctuations over a mere 6 months, would not wipe out the benefits of such high interest rate offered?
It seems quite safe to get at least 4% even in the worst case? Has someone ever done any retrospective desk study to prove the profitability and viability of such schemes on an average situation basis.
MY REPLY:
The exchange rate between Singapore dollar and Australian or New Zealand dollar can fluctuate by more than 5% over a 6 month period. It can wipe out the difference in interest rate between the two currencies. If Australian or New Zealand dollar appreciate, it will add to your return even further
Currently, these two currencies are at a high level, compared to other currencies. It may be risky to invest in them now, unless you are sure that it can maintain its current value or even go higher.
I have written on this matter in one of my blog posting. Go to my blog, www.tankinlian.blogspot.com and search for "foreign currency".
The wealthy need medical insurance
Dear Mr Tan,
I have read your article in MyPaper. I felt there were several important factors that you did not take into account when giving the advice to your wealthy client.
I feel that as a person giving financial advice in the papers, which is also read by people with absolutely no financial background, it is important for you to justify your stance and to explain clearly the mitigating factors in this situation.
1. The person mentioned may have assets amounting to several million but they could be tied down in investments that are difficult to liquidate, for instance in properties. As such, he might not have sufficient cash at hand should a medical emergency arise if he does not have any medical insurance.
2. By not buying medical insurance, the person must now always have a fairly decent sum of cash at hand, pehaps $100,000. This would mean opportunity costs as the person could have generated interest had he placed his money into investments. In a decent mutual fund or stock portfolio with a return rate of 15%, this would mean losing $15,000 per year in potential interest. (I obtained this figure because the average annual stock market return is 15% for the past consecutive years, and I obtained the interest rate figure for mutual fund based on a Straits Times article on funds)
3. The person mentioned is likely to be even more affected if he is a retired/non-working individual who is dependent on the return from his assets. Should he not have sufficient cash at hand and is forced to liquidate one or two of his investements to pay for medical fees, he then loses a source of income. In the worst scenario should he be diagnosed with a condition that requires monthly medical payments (like diabetes), his financial situation is made worse as his income has fallen and his expenses have increased.
4. When a medical emergency arises, the person (and perhaps the family) will not be in a sound mind to make financial decisions. Having medical insurance would lift this burden from him.
It is hence a wiser decision to buy medical insurance and pay at most a hundred a month, rather than be caught unprepared when the situation arises.
Just for the record, I would like to clarify that I am NOT a financial advisor and this letter is not written to support the general insurance industry.
MY REPLY:
Thank you for expressing an alternative piece of view. I think that there are many people who agree with you, whle there are others who agree with me.
I have read your article in MyPaper. I felt there were several important factors that you did not take into account when giving the advice to your wealthy client.
I feel that as a person giving financial advice in the papers, which is also read by people with absolutely no financial background, it is important for you to justify your stance and to explain clearly the mitigating factors in this situation.
1. The person mentioned may have assets amounting to several million but they could be tied down in investments that are difficult to liquidate, for instance in properties. As such, he might not have sufficient cash at hand should a medical emergency arise if he does not have any medical insurance.
2. By not buying medical insurance, the person must now always have a fairly decent sum of cash at hand, pehaps $100,000. This would mean opportunity costs as the person could have generated interest had he placed his money into investments. In a decent mutual fund or stock portfolio with a return rate of 15%, this would mean losing $15,000 per year in potential interest. (I obtained this figure because the average annual stock market return is 15% for the past consecutive years, and I obtained the interest rate figure for mutual fund based on a Straits Times article on funds)
3. The person mentioned is likely to be even more affected if he is a retired/non-working individual who is dependent on the return from his assets. Should he not have sufficient cash at hand and is forced to liquidate one or two of his investements to pay for medical fees, he then loses a source of income. In the worst scenario should he be diagnosed with a condition that requires monthly medical payments (like diabetes), his financial situation is made worse as his income has fallen and his expenses have increased.
4. When a medical emergency arises, the person (and perhaps the family) will not be in a sound mind to make financial decisions. Having medical insurance would lift this burden from him.
It is hence a wiser decision to buy medical insurance and pay at most a hundred a month, rather than be caught unprepared when the situation arises.
Just for the record, I would like to clarify that I am NOT a financial advisor and this letter is not written to support the general insurance industry.
MY REPLY:
Thank you for expressing an alternative piece of view. I think that there are many people who agree with you, whle there are others who agree with me.
Subscribe to:
Posts (Atom)
:.
