Saturday, February 04, 2006

My wish for budget 2006 - SRS

If I were the Finance Minister, I would ... Review the Supplementary Retirement Scheme and make it more effective in helping people to make additional savings for retirement.

I will increase the amount of contribution to a flat 15% of annual income, or $16,000 whichever is higher.

For non-residents who do not contribute to CPF, I will allow an additional contribution of 20% of earnings, subject to a cap of $9,600 (being 20% on $4,000 X 12).

The other features of the SRS can remain the same.

Annuity income is exempt from personal tax

If you buy an annuity, the income that you receive is fully exempt from personal tax.

Here is an example. Assume an annuitant invest $100,000 in an annuity and receive back a total of $150,000 during the lifetime. This comprise of a return of capital (ie $100,000) and the income earned on investing this sum, (ie $50,000).

The annuitant does not have to pay any personal tax on the full amount revieved as annuity.

If the annuitant had invested invested in other type of investment and earned an income of $50,000 over several years, this income will be taxed at the marginal rate. If this rate is an average of 10%, the tax payable is $5,000.

By investing in the life annuity, the annuitant enjoy this tax exemption and receives $5,000 more.

An annuity has a tax advantage. It is better to invest in an annuity, if the return given is competitive.

In the above example, if the total payout of $150,000 is received over 20 years, the annuity income for each year is $7,500. This represents an attractive return of 7.5% on the invested sum. However, this return comprise partly of the consumption of the capital and on the actual income earned.

NTUC Income offers an attractive return on our annuities. We now account for 60 percent of the market. The remaining 40% is shared by several life insurance companies.

Friday, February 03, 2006

Cancel your motor insurance and move to NTUC Income

NTUC Income charges a lower premium rate for motor insurance. The difference can be up to 25%.

If you have insured at a higher premium rate, you can cancel the existing policy, get the refund premium and move to NTUC Income now.

Your current insurer will normally charge 15% of the premium or $100 for administration charges for cancellation. The unused premium minus the cancellation charge is returned to the policyholder.

Here is an example.

Take the case of a policyholder who pays a premium of $1,200 and wish to cancel the policy after 6 months.

The refund premium is 1/2 of 85% of $1,200 = $510.

If our premium is $900 (ie 25% lower than $1,200), the policyholder pays only $450 for the 6 month of insurance with us.

He will benefit by cancelling the policy and moving to us now. The benefit is higher, if you cancel your policy within the first few months.

Advice: How to restructure your life insurance


Dear Mr Tan

In today's global market condition and removal of the iron rice bowl, job security are now being a thing of the past. Many Singaporean whom have bought numerous
life insurance policies found that they are not able to keep up with the long term payment.

This has resulted in cancellation after emptying accumulated bonuses to pay their insurance premium. It is no longer attractive to make a long term commitment.

I am a victim of multinational company relocated from Singapore to New Delhi.



I will get someone to assist you on restructuring your insurance plans, as follows:

- surrender for the cash value
- NTUC Income gives generous values compared to other insurance companies
- invest the cash value in our combined fund (for flexibility and attractive return)
- make flexible savings under our Ideal plan
- take a decreassing term assurance for your coverage (it cost you much less)

Thursday, February 02, 2006

Avoid Structured Deposit


In 2003, my father and I invested $5,000 in a 6-year capital guaranteed investment product called "Enrich Account".

It provides a 3.6% pay-out in the first year and subsequent pay-outs on the Bank's discretion. We received a payout of S$180 in 2003, S$90 in 2004 and no payout in 2005. The current value of the investment is S$4,300. We are tied up till 2009.

I suspect the poor performance is due to its bond investments which are affected by the rising interest rate environment. Although it is capital guaranteed, it ties up our money for 6 years and ultimately gives poor returns.

What is your advice?


This is a good example of structured deposits and the problems with them. I avoid them.

If you wish to invest in a structured product, you should understand how it works. You should also ask the Bank to disclose disclose the minimum and maximum return and the actual returns realised - for each of the structured products which have matured.

Wednesday, February 01, 2006

A new way to sell insurance


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Tired of making cold calls?
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Tired of long working hours?

We are looking for qualified agents to join our expanding team of full-time Insurance Consultants

• Fixed salary of $1,500 to $2,500 with performance-based incentives
• Comprehensive training and career progression
• Office-based environment
• Attractive staff benefits and balanced work-life
• 5-day work week
• Get a sign-on bonus of $1,000 (subject to conditions)

Interested candidates, please apply via:

Tuesday, January 31, 2006

Regular investments using CPF


Dear Mr. Tan,

Thank you for regular updates in your blog. It is interesting, relevant and useful.

Could you discuss a little on regular savings plan for your investment funds products, using CPF OA and SA?

I am sure other readers would be keen to know if there is such a plan as it potentially helps to beat the CPF returns (if using CPF funds for investment). If there is no RSP arrangements, would NTUC be looking into this?



NTUC Income has a regular savings plan. It is called the Ideal plan. It has to be paid by cash.

Alternatively, you can invest your CPF savings (ordinary or special account) as a single premium under our Flexilink plan. You can top up your savings at any time with a "recurring" single premium, provided that the top up is at least $1,000.

The advantage of a single premium plan is that the charge is very low.

Top Up Rider for Incomeshield


Dear Mr Tan,

I am a fan of your blog. My family are gratefully insured under Incomeshield for many years. Your recent discussion on affordable medical insurance prompts me to seek your advice.

In about a week's time, my father is likely to undergo an angioplasty op by a referred doctor in SGH's National Heart Centre, likely under "minimum" B1 ward. Based on our calculation, we may be able to claim less than half of the hospital bill from Incomeshield. My dad is under Plan B.

This prompts me to think of getting my family a second medical plan (a backup) that may cover the higher cost should special circumstances that need private or Class B1 govt ward arise in the future.

However, we do not wish to give up on Incomeshield which we have great faith in in taking care of us in decades to come. And I know private medical plans are very
expensive (as you have mentioned) and also have to be paid by cash.

I would like to seek your advice on whether NTUC Income (and/or CPF Board)
allow one to take up both Incomeshield (paid with cash instead) and another
Shield plan (e.g. Aviva's MyShield) (paid from CPF Medisave) at the same
time. If it is possible, how will the claim process be like with 2 shield



I am sorry to learn about your father's medical condition. Is your father covered under a dread disease policy? He can claim under this policy for a cash benefit.

For Incomeshield, we will be introduced a rider that can pay more, for major illness. The additional premium is 15% of the standard premium. It should cover all of the medical bill for your father's case, apart from the mandatory deductible and co-insurance. Under plan B, the premium will be about 30% lower than the expensive
plan that covers everthing "as charged".

The rider should be ready within two months.

Tan Kin Lian

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