Do not invest in unregulated investments

Dear Mr Tan,
I read your blog.
Have you heard about this UFUN (www.ufunclub.com)?
A lot of people (Spore, Msia, Thai) are investing and claim they are getting good returns in the first few months. Is this kind of investment safe?
They give dividends (in the form of e-token) to members and the returns are good.
They are inviting a lot of new members to join.
Each investment can be US$500, US$1000, US$5000, US$10000 and US$50000.
‎Pls comment if you know about this UFUN scheme and if some people have already fallen prey to this scheme.

REPLY
I have not heard about this scheme. My comments below apply to questionable schemes in general and are not related to this specific scheme.

I would advice people to avoid investing money in schemes that are not regulated by the authority. It is easy to give your money away, but quite difficult to get it back.

Even if you are getting back the return, in the form of dividends or principle, remember that the money that is used to pay you may come from the investments of other people. Similarly, your money may be used to pay off the earlier investors.

This type of scheme is called a Ponzi scheme. The Ponzi scheme will grow as more and more people join. Eventually, when there are more people wishing to withdraw their investments, the scheme will close down and the promoters will disappear. The investors will not get their money back.

Lighten Medisave burden on self-employed seniors

Contributed by Dr. Tommy Wong

From 1 January 2014, the Medisave contribution rate for non-pensioners and for those who are age 60 and above is 9.5%. This rate applies to both employee (monthly wage ≥ $750) and self-employed (average monthly income > $1,500). There is a cap of $5,700- on the annual contribution for the self-employed. While this practice appears fair on surface, there is actually a hidden burden to the self-employed.

For the employee, the following table shows the contribution rates by the employer and employee to the employee’s CPF account. So even though the Medisave contribution rate is 9.5%, depending on the age, the employee's ​​contribution rate is ​7.5% or 5.0%.

Employee Age (Years)	Contribution Rate (for monthly wages ≥ $750)
	Contribution by Employer (% of wage)	Contribution by Employee (% of wage)	Total Contribution (% of wage)
Above 60-65	7	7.5	14.5
Above 65	6.5	5	11.5

On the other hand, for the self-employed, since there is no employer’s contribution, they have to pay the entire 9.5% contribution all from their own income. So, compared to an employee, his take home pay is lower. For the self-employed whose financial situation is not well off, this is a real burden.

Can the Government review the Medisave contribution rate for the self-employed seniors so that their burden​ can be lightened?​

Dr. Tommy Wong is the author of the book series "Wisdom on How to Live Life" The ebook series can be ordered at http://c-opal.com/pdfbook/6. His website is at http://wisdomlife.page4.me/.

How to use the IRR function

 you have a complicated stream of cash flows under a life insurance policy, you can use the IRR function to calculate the yield, as explained here:http://c-onyx.com/page/1893

Internet banking is difficult with DBS Bank

If I use the standard of the internet banking system of DBS Bank as a gauge, I have to declare that the level of efficiency in Singapore is deplorable. It is so wasteful and inefficient. That is why Singapore has become so costly, and has achieved the distinction of being the most costly city in the world. 
Somehow, the impractical approach adopted by our regulars and businesses towards managing business risks has added layer of costs and waste to the economy. 
It can be so costly so to handle simple business transactions and to make payments.

Here is my painful experience. I spent one hour to make payroll for four employees through Internet Banking for DBS Bank today. 
As there were two new employees, I have to register them as "a new beneficiary". After registration, I could not find these beneficiaries. 
I called their hotline, listen to all kinds of irrelevant messages and spoke to their help staff. 
She asked me to click a few buttons, but none worked. She had to go and check their back end system and call me back.
My admin staff was at my side to double check that the entries were made correctly. She wasted one hour as well.
I may have to revert to paying by cheques.
This is the level of inefficiency that I have to encounter each month. My feedback to DBS Bank over the past year went through deaf ears. They don't care.
I could not move to another bank as they do not have a branch nearby.

Coal mining venture - is this a scam?

Is this investment a scam?
http://c-onyx.com/page/1902

If you offer you a guaranteed interest rate and a buyback option, do you find it to be more acceptable?

Create a pseudo rural sector to raise the reproduction rate

In most countries, the marriage and child birth rate in the cities is low. This is due to the high cost and stress of city life. These countries have a rural sector where the cost of living is low and where most people married at a young age and raise many children.

These countries with a rural sector have an overall fertility rate that is higher than countries with a high urban population.

If Singapore wishes to increase our reproduction rate, we need to build a "rural sector" where some families can afford to marry at a younger age and raise a family. But it is not possible to have a real rural sector in Singapore due to our small land area and the high cost of housing.

We can create a pseudo rural sector which allows some families to marry at a younger age and raise a family.

 How can this be done?

The Deductible under Medishield Life can be removed

I find it quite ridiculous that we take so much trouble to design a medical insurance scheme, called Medishield, that pays a small proportion of the hospital bill. It is better to change the scheme to cover a larger proportion of the hospital bill and make it more meaningful. 
One change is to remove the Deductible or reduce it to small amount. 
Here is the explanation
http://c-onyx.com/page/1894

Hedging a stock portolio

I have $X invested in shares, mostly in Singapore. I do not like the events in Ukraine, Iraq and South China Sea. I wanted to sell some of my share holdings, but it will take some time. 
I decided, as an alternative, to sell $X in futures (S&P and Nikkei). If the stock market falls by 5%, I hope to be able to gain 5% on the futures. However, if the stock market rises by 5%, I will lose 5% on the futures. So, my net exposure should be nil.
My actual holdings in shares will not correlate exactly with the two indices that I have sold. So, there will still be a small net exposure, perhaps of 10% or so. It does not matter. At least, I am more than 90% protected.
When the events are resolved, I can remove the positions in the S&P and Nikkei and continue to hold my long stock position.
This is an example of using the futures to hedge an existing stock portfolio.

I use the online platform called Plus500.com. It is easy to use and is much better than other platforms that I have tried previously.

Tan Kin Lian

CPF milestones and timelines

http://leongszehian.com/?p=9248

5 July event in Hong Lim Park

I have decided to speak at the 5 July event in Hong Lim Park asking if Lee Hsien Loong is the right person to lead Singapore. https://www.facebook.com/events/657651847623510/?ref_dashboard_filter=upcoming

I hope that many of you will turn up to hear my speech. Do register in the page to show that you are joining the event. 

Question: will I support or oppose this motion? Come and hear my views.

A pathetic response from a Member of Parliament

The 76 year old lady begged for her CPF money to be returned to her. MP Hri Kumar could only say that these are the rules, and everyone must abide by the rules - good and bad. They cannot take the good without the bad.
https://www.youtube.com/watch?feature=player_embedded&v=70AbFnGD928

I find the MP's reply to be pathetic. Surely an MP can give a better answer? Does the MP know that the lady, and many others, did not agree to the rules that lock away their CPF money?

A better answer from a good MP is - if you know how to take care of your money, if you know the consequences of your decision, and your personal circumstances justify the return of your CPF money, I will speak on your behalf to ask for your money to be returned to you.

And this special consideration should be given to other people who have good reason to take out their CPF money.

This will create some work for the MP and for CPF, but what are they elected or employed for? They have to use their judgment and do not implement rules blindly !

Poor standard of our civil service

I applied to speak at Hong Lim Park and received an approval e-mail from the National Parks Board.

Dear applicant,

Your application to register your event has been approved. In registering your event, you have agreed to the Speakers’ Corner terms and conditions of approval for events and activities carried out at Speakers’ Corner, Hong Lim Park.

Please note that you will be required to apply for a police permit or licence if any of the organisers and speakers are not Singapore citizens, or if any of the participants are not Singapore citizens or permanent residents.

Please refer to the Public Order Act, Public Order (Unrestricted Area) Order 2013, Public Entertainments and Meetings Act and the Public Entertainments and Meetings (Speakers’ Corner)(Exemption) Order 2013 for information on the situations you will be required to apply for a police permit or public entertainment licence under existing laws.

As an organiser, you are responsible for ensuring that the laws are complied with. We also seek your cooperation in helping to keep Hong Lim Park litter-free.

Please print this page as proof of your registration and bring it on the day of your event. Thank you.

Yours sincerely,
Commissioner of Parks and Recreation

HERE IS MY REPLY
Dear National Parks Board,

There is no information in your email about the event that I have registered for, which you have approved.

MY COMMENT
There is something seriously wrong with our civil service. They cannot get a simple procedure right.
I am not an organizer of the event. I am just applying to speak. Their reply holds me responsible as an organizer.

Should I join Eldershield at 40?

Several people have asked for my views on whether it is advisable for them to buy Eldershield insurance.

Basic Eldershield is recommended and designed by the Ministry of Health and is underwritten by three insurance companies - NTUC Income, Great Eastern and Aviva. Each person, on reaching age 40 will be assigned to an insurance company at random, but is allowed to switch to another company.

Click here to read my views:
http://c-onyx.com/page/1881

Life insurance - before and now

There was a time, long ago, when life insurance was good. The insurance company took your money, invest for the long term, earn a yield of 6.5% and give you a return of 5%, after expenses and profit. 

You are not able to earn a yield of 5% from other investments, except for quality shares, but most people do not know how to invest in these shares.

Today, life insurance gives a bad deal. The insurance company takes your money, earn a return of 5% and gives you a return of 2.5%, after expenses and profit.

You can get a good return by investing in an index fund, i.e. the STI ETF. This can give you a return of 6% or more. This gives you a payout that is more than 50% higher than the payout from a life insurance policy.

If you have a better choice, why put your money in a traditional or investment linked policy and get a poor return?

To learn more about how to invest in a better investment, attend this talk:
http://c-onyx.com/page/1056

What caused the high cost of living in Singapore?

Singapore has become one of the most expensive cities in the world. We did not achieve this dubious distinction from nothing. There are a few important factors.

1. Top most must be the high cost of properties. This has its multiper effect to all parts of the economy, affecting housing, commercial rentals and even the rentals of food courts!

2. The high taxes collected from vehicles, goods and service taxes, levies and other fees.

3. The high prices charged by many large companies that are mostly owned by the government.

4. The wastefulness and inefficiency of the way that we do our business or carry out our activities, due to an excessive and impractical cautious approach and a disregard for cost.

I have made many observations in the social media. Sadly, most Singaporeans are used to the inefficiency and wastage and consider it to be "acceptable".

Well, it is one important factor leading to the high cost of living in Singapore.

http://c-onyx.com/page/1876

Practical measures to help PMEs to find jobs

There is a simple solution that the government should introduce to help PMETs to compete for jobs against foreigners on employment pass.

Here are two practical measures.
http://c-onyx.com/page/1866

A quick analysis of Medishield Life

I have done a quick analysis of the increase in coverage and premiums under the newly introduced Medishield Life

The results are shown here:
http://c-onyx.com/page/1865

Tan Kin Lian

Note: if you find any mistake in my figures, please send an email to kinlian@gmail.comNote: if you find any mistake in my figures, please send an email to kinlian@gmail.com

Why consumers should invest in the STI ETF

The best investment plan for long term savings is the Straits Times Index ETF. The reasons are:

a) It is well diversified, reducing risk
b) It earned an average yield of more than 9% over the past 20 years, after deducting expenses.
c) The expenses is only 0.3% per annum.
d) When investing for the long term, you can ignore the dialy market fluctuation.

If you are investing for 30 years, the difference between an investment linked policy that pays a net yield of 3% and the STI ETF (assuming only 6%,) is quite large. The STI ETF can pay 50% more. If you get $200,000 from the policy, you get $300,000 from the STi ETF.

You can take a monthly sum of $100 or more in the STI ETF using the regular investment plan offered by POSB or OCBC. See
http://c-onyx.com/page/42

To understand more about this investment, attend this talk. Spend $30 and 3 hours. and get a lot more for your retirement!

http://c-onyx.com/page/1056 See More

Enroll your children for the financial planning talk before they start work

A man visited my office to buy my life insurance book. His son, who was just about to start work in a contract job, was approached by an insurance agent who recommended to him an investment linked policy with a monthly premium of $300 and other riders to cover death, accident and disability with a total monthly premium of $70. The son had no idea about what the policies were for, so he approached his father for advice (what a sensible young man!). The father approached me.

I analyzed the policies and came to the following conclusion:

a) The investment linked policy had a projected value, at the end of 30 years, of $180,000 (based on the average between the 4% and 8% yield).
b) If the son invested the same money in the STI ETF earning an average yield of 6% (similar to the projection), the projected sum is $280,000, after deducting expenses and setting aside $10 for the cost of insurance.
c) He does not need to spend $70 a month for the additional covers. By spending $30 a month, he will have adequate term insurance under the SAF policy.

The father decided to enroll himself and his wife and son for the Financial Planning talk on 21 July to learn about financial planning for his son.

He was glad that he saw me, as this information could give his son an additional $100,000 in 30 years time.

I wish to send this message to other parents. Your children will also fall into the trap of buying the wrong investment product. Enroll them and get them to attend the financial planning talk.
http://c-onyx.com/page/1056

Note:
Although the investment linked policy use a projected yield of 6%, the actual yield is only 3.2% due to the charges and upfront fee, amounting to 2.8%.
For the STI ETF, the net yield is 5.7% as the annual fee is only 0.3%

How to stop mis-selling of life insurance policies

I make a guess, and this is just a guess, that 30% of the life insurance policies sold each year are sold wrongly and for the wrong reasons.

Examples are:
a) Policies that require a big monthly premium to be paid that is beyond the means of the policyholder, such as a student that is not working

b) Policies sold on the misconception that it is a form of savings that can be withdrawn like a fixed deposit, without the policyholder realizing that one or two years of the premium will be forfeited.

c) Policies sold to a policyholder who thinks that it is a single premium policy, when in fact it is an annual premium policy.

d) Policies sold to replace an existing policy - on the false claim that it offers better value to the policyholder.

In most cases, the agents were aware about the misconception and were in fact, responsible for telling misleading the policyholder.

When the policyholder finds out the truth and lodges a complaint to the insurance company, the officer handling the complaint gets a statement from the agent. The agent will deny any wrong doing, and the officer usually tells the policyholder that the complaint is not substantiated, in other words, the consumer cannot get their money back.

If the officer bothers to use his common sense and look at the facts, he or she will surely recognize the following:

a) How can a student, without any income, afford a large monthly premium?
b) How can a consumer, with modest means afford a large annual premium - when their total savings is just enough to pay one year's premium?
c) Why does the policyholder want to stop an existing policy and take up a new policy, when the policyholder is likely to suffer a financial loss?

Surely, something is amiss?

It is usually too late to act, when the policyholder makes a complaint, and it can come several years after the policy is taken.

The best time to act is at the time that the policy is issued. The insurance company can, as a matter or practice, get an officer to call the policyholder and check that he or she is aware about the actual terms of the contract.

If this call is made, any misunderstanding could be found immediately and the situation could be rectified. If the insurance company has such a practice, most of the misrepresentations and bad sales could be prevented.

Many years ago, I introduced this "call the policyholder" practice in the insurance company that I was in charge. I required the agent's supervisor to call the policyholder for each new policy that was issued, and verify that their understanding of the policy is exactly what it should be. The supervisors did not find any case of serious misrepresentations.

The sales general manager reported that the new sales dropped by 30 percent (if my memory served me correctly). My guess is - the insurance agents stopped the mis-selling as they knew that they would be caught quite soon. And this represented 30% of the new sales.

Any insurance company can stop the mis-selling by introducing a system to "call the policyholder to verify the understanding". But will they want to do it?

Well, the answer is "no". They will only do it when the regulator, i.e. the Monetary Authority of Singapore, require them to.

Tan Kin Lian

Increase CPF monthly payout from age 65

In addressing people who do not have the required CPF minimum sum, the government has to consider this question about how much they can be allowed to withdraw from the minimum sum from age 65:

a) Should the monthly withdrawal be reduced according to the available minimum sum and the payment be continued for 20 years or for life?

b) Should the monthly withdrawal be allowed at the level that is needed for their current needs, say $800 a month, although the minimum sum may run out earlier?

The government has chosen method (a).

I think a better decision is method (b). The retiree needs a minimum sum to survive from month to month. Their immediate needs are greater than their longer term needs.

They have to face a separate problem when their minimum sum is exhausted, but at least they can live adequately for the immediate future.

Tan Kin Lian

CPF interest rate has to be reviewed

One major source of unhappiness is the low rate of interest, i.e. 2.5% and 4%, payable on the CPF savings.

It is a wrong policy to invest the CPF savings in long term government bonds, which gives a low yield. As the savings are being invested for a long term, say more than 40 years, it is more appropriate to invest them in good quality shares which can give a better return compared to than government bonds.

The yield on good quality shares has averaged more than 8% per annum over the past three decades.

While the values of the shares may fluctuate from one year to the next, this fluctuation is immaterial for a long term investor. While some shares may turn bad, they can be compensated by the good performance of other shares. It is the average yield of the portfolio over the long term that matters to the CPF members.

The CPF members do not expect a yield of more than 8% per annum. But 2.5% and 4% is too low. A yield of 6% would be more appropriate and fair to the people, whose savings have been locked up for a long time.

There is a negative point about raising the yield or interest rate on CPF savings. This will also affect the interest rate charged on loans to buy HDB flats and other properties. The impact has to be considered when making a change. This issue may be difficult, even problematic, but it can be overcome.

It is time for the interest rate policy of the CPF to be reviewed. A higher return will ensure that the members will have more adequate savings for their retirement.

Tan Kin Lian

PM should seek an out of court settlement with Roy Ngerng

PM Lee must take heed of the strong support from ordinary people in Singapore towards the legal defense fund of Roy Ngerng. More than $70,000 were raised in just 4 days, surpassing the target needed to pay a good lawyer to defend Roy Ngerng.

If PM Lee continues with the legal action and wins the case in court and, if the court award the damages of $250,000 that he had asked for, what is likely to happen next?

I expect that the people of Singapore will come forward again and contribute the $250,000 in damages in full. And they will do so, with great anger against the person who is collecting this money. Even if it is donated to charity, it will still be the hard earned money of the donors.

And if that happens, it will surely be followed by a resounding defeat of the People's Action Party at the next general election.

What can PM Lee do now? He can remove the demand for aggravated damages and reduce his claim for damages to $10,000 - twice of what Roy Ngerng had earlier offered. And this is likely to be accepted by Roy Ngerng, leading to an amicable close to this case.

And this may turn out to be positive for PM Lee, as he will be sending a strong message that he is willing to listen to the voices of the people.

Tan Kin Lian

Give a better return on CPF savings

One source of unhappiness with the CPF is the low rate of interest paid on the savings, i.e. 2.5% on the ordinary account and 4% on the special account. The interest rates are so much lower than the actual return that is earned on the funds invested by Temasek Holdings and GIC.

This unhappiness is valid. It is wrong for the government to invest the CPF funds in low yielding government bonds, although they give the reason that the funds have to be invested securely.

The savings are invested for 40 years or longer. For long term investments, the correct investments are in good quality shares, and not in bonds. The difference in return can be as much as 4% per annum.

If the long term savings were invested mainly in good quality shares, the average yield over the past three decades would be more than 8% per annum, and not the 2.5% or 4% that were distributed.

While the values of the shares may fluctuate from year to year, the changes are immaterial to the CPF members, whose savings are locked up for a long term. They are not allowed to take out their savings prematurely, so the fluctuations in the asset values do not matter to them.

Even if some of the share investments turn out to be bad, they will be compensated by the appreciation in other shares. It is the long term average that count. And the long term average had been more than 8% per annum.

We do not need to expect a yield of 8% per annum. A yield of 6% would be fair. And if an adequate and fair yield had been given in the past years, the CPF savings would be much higher today, perhaps 50% more!

One important change to the CPF is to make the return more aligned to the actual yield that can be earned on quality quality shares.

Tan Kin Lian

Adopt a constructive approach

Sam Tan said:
Beware Fellow Singaporeans, It is PAP deliberate ploy to constantly provoke and attack WP in parliament to create DRAMA (corner WP to say and do wrong things) so that PAP can take these words/ actions against WP in next GE campaign ACCUSE WP for being an irresponsible/ destructive Opposition like those in other countries.

Hence convince Singaporeans to stick with a one party system so that PAP can control Singaporeans with their iron fists and implement all policies they want without consultation, debate and obstruction from Opposition and Singaporeans.

Remember this, every alternative policy/ suggestion has its pros and cons and PAP will attack the cons of whatever WP suggest and WP will never win the debate with PAP majority in the parliament. https://sg.news.yahoo.com/pm-lee-asks-low-thia-khiang--where-do-you-stand-180324245.html

REPLY
The pugnacious approach of our PAP leaders is not constructive. They set a bad example. 
They should be open minded to get the views of other people and seek a better solution to many of the "elephants in the room", i.e. problems that they have been ignoring or unable to solve for a long time.

Does the CPF Minimum Sum include the amount set aside for Medisave?

Someone asked:

I am curious about CPF Minimum Sum and Medisave Minimum Sum. If I am not mistaken, the Retirement Account compromise of Ordinary Account + MediSave Account + Special account once the person turns 55. So should not it be the minimum sum for CPF wef 1 July 2014 be $155,000 and out of that, $43,500 from the Medisave? Need correct interpretation please

REPLY
The minimum sum for retirement is $155,000 and for Medisave account is $40,500. Together, the total is $195,500.

Read
http://mycpf.cpf.gov.sg/CPF/my-Cpf/reach-55/Reach55-2.htm
and
http://mycpf.cpf.gov.sg/CPF/my-cpf/reach-55/Reach55-4.htm

Can a person earning $3,000 at age 25 meet the minimum sum at 55?

To answer this question, I present two scenarios:
a) Moderate salary increase. 
b) Low salary increase. 

The results can be found here:
http://c-onyx.com/page/1856