NTUC Income is the first insurance company to publish its ACTUAL RETURN on its endowment policies that matured in 2006.
The return was 4.4% p.a. for a 10 year policy, 5.2% p.a. for 15 year policy and 6.2% p.a. for 20 year policy. This is quite an attractive return.
The other life insurance companies are embarrassed to publish their actual returns.
Compared to similar plans offered by other insurers, the return from NTUC Income is up to 15% higher. This is possible due to lower commision to agents, lower expenses and lower distribution to sharehholders.
If the policy that you have taken from another insurer paid you $50,000 on maturity, a similar policy from NTUC Income paid you up to $7,500 nore.
It may be too late for you now. But tell your children. Put their savings with NTUC Income and earn up to 15% more.
Tuesday, November 07, 2006
AIA Choice Life policyholders has to pay premium for longer period
Someone sent this message to me.
AIA's agents have sold several ten thousands of life policies on the "promise" that the premiums will stop after a certain number of years.
Now, the policyhlders are told that they have to pay the premiums for many more years.
The agents earned high commission rates to sell these policies. Should they refund their high commission back to the customers? Should they earn high incomes at the expense of their customers?
A few years ago, it was the Financial Guardian policies sold by AIA. Now it is the Choice Life. What else can be expected in the future?
AIA's agents have sold several ten thousands of life policies on the "promise" that the premiums will stop after a certain number of years.
Now, the policyhlders are told that they have to pay the premiums for many more years.
The agents earned high commission rates to sell these policies. Should they refund their high commission back to the customers? Should they earn high incomes at the expense of their customers?
A few years ago, it was the Financial Guardian policies sold by AIA. Now it is the Choice Life. What else can be expected in the future?
Sunday, November 05, 2006
Two pitfalls to avoid in your investments
So many people have fallen for these bad financial products. And they learned a painful lesson. It has been very costly for them.
Lesson 1.
Do not invest in structured deposit. They are structured to look attractive, but are usually quite deceptive. The product creator and distributor made high profit for themselves. Their large charges are hidden in the complicated structure. You will only find out after a few years. By that time, you will realise that most of the gains have been eaten away by the charges. If the market perform badly, you have to carry the loss.
Lesson 2.
Avoid investing through financial advisers. They will be able to find unit trusts that perform well in the past (from more than 300 unit trusts available in the market). The probem is that these unit trusts are NOT likely to perform well in the future. These unit trusts are likely to have high charges (2% to 3% per year). The financial adviser recommend them to you, because they get a trailer fee of 0.5% to 1% every year. This comes from your earnings.
WHAT IS THE BEST CHOICE FOR THE CONSUMER?
Invest in a large, well diversified fund with low charge. Less than 1% per annum. This is available from NTUC Income. Many people have benefited for it. Join them.
Lesson 1.
Do not invest in structured deposit. They are structured to look attractive, but are usually quite deceptive. The product creator and distributor made high profit for themselves. Their large charges are hidden in the complicated structure. You will only find out after a few years. By that time, you will realise that most of the gains have been eaten away by the charges. If the market perform badly, you have to carry the loss.
Lesson 2.
Avoid investing through financial advisers. They will be able to find unit trusts that perform well in the past (from more than 300 unit trusts available in the market). The probem is that these unit trusts are NOT likely to perform well in the future. These unit trusts are likely to have high charges (2% to 3% per year). The financial adviser recommend them to you, because they get a trailer fee of 0.5% to 1% every year. This comes from your earnings.
WHAT IS THE BEST CHOICE FOR THE CONSUMER?
Invest in a large, well diversified fund with low charge. Less than 1% per annum. This is available from NTUC Income. Many people have benefited for it. Join them.
An expensive lesson
A friend told me this story. She invested $25,000 in a "vitamin account" offered by a bank. The account paid 4% interest. After one year, the value of the account plus the interest paid is still LESS than the principal invested. There was no gain for the past one year.
She also invested in the Combined Fund managed by NTUC Income. It produced a return of about 10% during the same period.
She asked the bank why the return was still negative. The bank officer advised her to wait longer.
My friend now realised that the bank had high charges in the "vitamin account". Her money is locked up for 6 years. She does not know when she is going to get a decent return.
It is an expensive lesson for her.
Most structured deposits being marketed by the banks are similar to this product, namely:
- high charges (not disclosed)
- a complicated formula on calcuting the value of the investments
- a locked-in period
I wish to advise all consumers. Do not invest in the structured products. They are to your disadvantahe.
Invest your money in a large, well diversified fund, with low charges (less than 1% per annum). You will benefit in the long term.
She also invested in the Combined Fund managed by NTUC Income. It produced a return of about 10% during the same period.
She asked the bank why the return was still negative. The bank officer advised her to wait longer.
My friend now realised that the bank had high charges in the "vitamin account". Her money is locked up for 6 years. She does not know when she is going to get a decent return.
It is an expensive lesson for her.
Most structured deposits being marketed by the banks are similar to this product, namely:
- high charges (not disclosed)
- a complicated formula on calcuting the value of the investments
- a locked-in period
I wish to advise all consumers. Do not invest in the structured products. They are to your disadvantahe.
Invest your money in a large, well diversified fund, with low charges (less than 1% per annum). You will benefit in the long term.
Financial Adviser earns trailer fee of 1% annually
I met an agency manager from another company (not NTUC Income). His top adviser wants to leave him to join an independent financial adviser firm. The IFA firms pays him a trailer fee of 1% per annum on the total sum invested.
This means that the customer probably has to bear a charge of 2.5% to 3% on the amount invested. This is required to pay the trailer fee to the adviser and to pay the fund for managing the assets.
The total fee of 3% is FAR TOO HIGH.
Over the past 10 years, the average return on equity is about 7% per annum. After deducting 3%, the investor gets only 4% left. This is insufficient for the risk.
For a fund managed by NTUC Income, the total deduction is less than 1% per annum. If our fund earns 7%, the investor gets 6%.
A difference of 2% over 10 years amounts to more than 20%. You can get a much bigger payout from NTUC Income, because our deduction is modest. Most of the return goes back to you.
Over a long period, most funds will earn about the same return for the same type of risk. There is very little difference between the performance of good fund managers. It is better to invest in a large, well diversified, low charge fund (ie the fund offered by NTUC Income.
This means that the customer probably has to bear a charge of 2.5% to 3% on the amount invested. This is required to pay the trailer fee to the adviser and to pay the fund for managing the assets.
The total fee of 3% is FAR TOO HIGH.
Over the past 10 years, the average return on equity is about 7% per annum. After deducting 3%, the investor gets only 4% left. This is insufficient for the risk.
For a fund managed by NTUC Income, the total deduction is less than 1% per annum. If our fund earns 7%, the investor gets 6%.
A difference of 2% over 10 years amounts to more than 20%. You can get a much bigger payout from NTUC Income, because our deduction is modest. Most of the return goes back to you.
Over a long period, most funds will earn about the same return for the same type of risk. There is very little difference between the performance of good fund managers. It is better to invest in a large, well diversified, low charge fund (ie the fund offered by NTUC Income.
Saturday, November 04, 2006
How to provide for my family
Dear Mr Tan
I am thinking of retiring at 60 in 2007. I like your advice concerning adequate provision for my family. What do I need to do?
I have a 4 year old son, my wife takes (mid 40s) earns about $x monthly. She may also decide to retire.
I have 2 fixed deposits of $50,000. One insurance policy will mature to realise $350,000. We have other policies and investments of about $1 million).
We do not have any outstanding debt.
Best Rgds
GY
-------------------
Dear GY
I advise you to consider the following plans:
For investing CPF or bank deposits:
Flexi-Link
For your wife to invest regular savings:
Ideal
Low cost term insurance (to provide security to your family)
Term
Life annuity
Life annuity
My business center manager will ask my product specialist to contact you.
The specialist is paid a salary and does not earn a commission. Feel free to
talk to the specialist.
Tan Kin Lian
I am thinking of retiring at 60 in 2007. I like your advice concerning adequate provision for my family. What do I need to do?
I have a 4 year old son, my wife takes (mid 40s) earns about $x monthly. She may also decide to retire.
I have 2 fixed deposits of $50,000. One insurance policy will mature to realise $350,000. We have other policies and investments of about $1 million).
We do not have any outstanding debt.
Best Rgds
GY
-------------------
Dear GY
I advise you to consider the following plans:
For investing CPF or bank deposits:
Flexi-Link
For your wife to invest regular savings:
Ideal
Low cost term insurance (to provide security to your family)
Term
Life annuity
Life annuity
My business center manager will ask my product specialist to contact you.
The specialist is paid a salary and does not earn a commission. Feel free to
talk to the specialist.
Tan Kin Lian
Friday, November 03, 2006
Ideal Plan for your child
What is the best plan for a parent to save for a child?
It is the ideal plan. It is flexible and can give you a better return for the future. It is better than a traditional Education policy.
Find out more:
Ideal plan for your child
Act now. Read the FAQ. Call our hotline 62 INCOME (6246 2663)
It is the ideal plan. It is flexible and can give you a better return for the future. It is better than a traditional Education policy.
Find out more:
Ideal plan for your child
Act now. Read the FAQ. Call our hotline 62 INCOME (6246 2663)
Flexi-Link: Earn up to $26,000 more
The Flexi-Link is for you to invest your CPF or fixed deposit to earn a better return.
By choosing the right fund (ie a large, well diversified, low charge fund), you can earn up to $26,000 more, for an investment of $50,000.
Find our more:
FAQ on Flexi-Link
Act now. Read our FAQ and call our hotline now. And benefit from this wonderful investment.
By choosing the right fund (ie a large, well diversified, low charge fund), you can earn up to $26,000 more, for an investment of $50,000.
Find our more:
FAQ on Flexi-Link
Act now. Read our FAQ and call our hotline now. And benefit from this wonderful investment.
Ideal Plan: Earn up to $32,000 more
The Ideal plan is designed for young people to save regularly and invest for their future needs.
By choosing the right fund (ie large, well diversified, low charge fund) for a monthly saving of $200, they can earn up to $32,000 more, compared to similar plans in the market.
More details can be found at:
Ideal plan
Act now. Read the FAQ and call our hotline. Make the right choice, and get a better return on your savings.
By choosing the right fund (ie large, well diversified, low charge fund) for a monthly saving of $200, they can earn up to $32,000 more, compared to similar plans in the market.
More details can be found at:
Ideal plan
Act now. Read the FAQ and call our hotline. Make the right choice, and get a better return on your savings.
Thursday, November 02, 2006
Shop for the best financial products
Where can you get the best insurance, bank or loan products.
Visit this independent website Best Products
Visit this independent website Best Products
Compare fixed deposit with money market fund
Hi Mr Tan,
I am just curious about NTUC's Flexi-cash investment versus MayBank's iSavvy time deposit.
iSavvy returns between 3% to 3.15% (returns variou with different lock-in period), with minimum of $25,000.
Say if I don't forsee an immediate use of my cash, would iSavvy suit me better?
When you have decided to invest your $100k into Flexi-Cash, have you too considered the merits of iSavvy? (being higher returns)
MT
-----------------
Dear MT
The advantage of Flexi-cash is its flexibility. I can withdraw my money at any time, without any penalty. This allows me to invest in an equity fund at the right time, eg if the market has corrected.
Another advantage is that the return is flexible. If the interest rate in the money market goes up, the return in flexi-cash will also go up. As interest rate is expected to increse, it will be to the advantage of the saver to be on "floating rate".
For the small difference in return, compared to the "locked up deposit" from Maybank, I prefer to be in flexi-cash.
Tan Kin Lian
I am just curious about NTUC's Flexi-cash investment versus MayBank's iSavvy time deposit.
iSavvy returns between 3% to 3.15% (returns variou with different lock-in period), with minimum of $25,000.
Say if I don't forsee an immediate use of my cash, would iSavvy suit me better?
When you have decided to invest your $100k into Flexi-Cash, have you too considered the merits of iSavvy? (being higher returns)
MT
-----------------
Dear MT
The advantage of Flexi-cash is its flexibility. I can withdraw my money at any time, without any penalty. This allows me to invest in an equity fund at the right time, eg if the market has corrected.
Another advantage is that the return is flexible. If the interest rate in the money market goes up, the return in flexi-cash will also go up. As interest rate is expected to increse, it will be to the advantage of the saver to be on "floating rate".
For the small difference in return, compared to the "locked up deposit" from Maybank, I prefer to be in flexi-cash.
Tan Kin Lian
Wednesday, November 01, 2006
It cost only $10 a month to insure for $100,000
i-Term, 10 years term, male, non-smoker
monthly premium for $100,000
Age LTA DTA %
20 9.20 6.50 70
30 10.10 6.70 66
40 18.90 12.80 68
50 45.30 37.40 82
60 135.70 107.90 80
69 328.60 264.80 80
Premiums are based on age at entry.
A male at age 30 can insure for $100,000 for 10 years at a premium of $10.10 a month. If he opts for decreasing term assurance (where the assured reduces by 10% each year), the premium is only $6.70. By choosing a decreasing term, the premium reduces by about 20% to 30%, depending on entry age.
More people join Incomeshield
With the introduction of the Enhanced Incomeshield, more people are joining us. Each month, we receive 5,200 new applicants (as compared to 3,000 previously).
About 2,000 policyholders leave us each month to join other plans (a decline from 3,500 previously).
We are able to clear the new applications promptly, if they do not have any pre-existing medical condition.
For those with medical conditions, we are not able to clear them as they require to be underwritten. We are still short handled. I apologise for the delay.
About 2,000 policyholders leave us each month to join other plans (a decline from 3,500 previously).
We are able to clear the new applications promptly, if they do not have any pre-existing medical condition.
For those with medical conditions, we are not able to clear them as they require to be underwritten. We are still short handled. I apologise for the delay.
Invest in a life annuity
Life Annuity for single premium of $100,000
With-CP: with capital protection, ie refund of balance of capital sum on early death
No-CP: no capital protection, ie no refund on early death
Participating: a bonus will be added to increase the annuity each year. The amount of bonus depends on the investment yield of the annuity fund. It is not guaranteed, but is expected to average about 2.5% per year.
Immediate Annuity (Participating)
Age Male Female
With-CP No-CP With-CP No-CP
55 $391.60 $428.20 $366.60 $391.20
60 $428.60 $488.40 $400.90 $439.10
65 $473.60 $567.40 $443.30 $504.10
70 $528.50 $672.10 $496.10 $593.70
With-CP: with capital protection, ie refund of balance of capital sum on early death
No-CP: no capital protection, ie no refund on early death
Participating: a bonus will be added to increase the annuity each year. The amount of bonus depends on the investment yield of the annuity fund. It is not guaranteed, but is expected to average about 2.5% per year.
Buy a life annuity
I advice a retiree to invest in a life annuity. You can get a better return (compared to bank deposit) and the payment is guaranteed for a lifetime.
A male at age 65 can invest $100,000 to buy a capital-protected life annuity that pays $473.60 per month (or 5.7% per annum). Each year, a bonus may be added to the life annuity, depending on the yield of the annuity fund. I expect the bonus to average around 2.5% over the long term. This means that the annuity payment is likely to increase by about 2.5% a year. This is helpful to offset the increase in the cost of living.
Under the capital protected life annuity, the balance of the capital sum (after deducting the annuity payments) will be refunded to the estate in the event of early death. Only the interest is forgone. If the annuitant lives longer and has received more than than the capital sum, there is no refund.
The annuitant has the option to buy a non-protected life annuity, which pays a higher monthly income. For a male at age 65, the non-protected annuity pays $567.40 per month (or 6.8% per annum). This is nearly 20% more than a capital-protected annuity. This annuity will also enjoy bonus.
I advise the retiree to buy a non-protected annuity, as it pays more to the annuitant. The annuitant probably have a property or other assets to pass to the children. The annuity should be kept mainly for the retiree. By accepting a non-protected annuity, the payout will be higher.
The amount of annuity depends on the age at the time of purchase, and on the gender of the annuitant. The difference between capital protected and non-protected also varies according to each person.
FAQ on Life Annuity
A male at age 65 can invest $100,000 to buy a capital-protected life annuity that pays $473.60 per month (or 5.7% per annum). Each year, a bonus may be added to the life annuity, depending on the yield of the annuity fund. I expect the bonus to average around 2.5% over the long term. This means that the annuity payment is likely to increase by about 2.5% a year. This is helpful to offset the increase in the cost of living.
Under the capital protected life annuity, the balance of the capital sum (after deducting the annuity payments) will be refunded to the estate in the event of early death. Only the interest is forgone. If the annuitant lives longer and has received more than than the capital sum, there is no refund.
The annuitant has the option to buy a non-protected life annuity, which pays a higher monthly income. For a male at age 65, the non-protected annuity pays $567.40 per month (or 6.8% per annum). This is nearly 20% more than a capital-protected annuity. This annuity will also enjoy bonus.
I advise the retiree to buy a non-protected annuity, as it pays more to the annuitant. The annuitant probably have a property or other assets to pass to the children. The annuity should be kept mainly for the retiree. By accepting a non-protected annuity, the payout will be higher.
The amount of annuity depends on the age at the time of purchase, and on the gender of the annuitant. The difference between capital protected and non-protected also varies according to each person.
FAQ on Life Annuity
Put your cash in money market now
Dear Mr Tan,
I have been caught with some bad experience both with insurance and investment but nothing serious to affect my life savings.
Being in my fifties, I runs a small business and have enough saving for my retirement which have for some years been kept in USD and SGD deposits earning very poor interest and suffering depreciating USD exchange rates.
I am afraid to invest in stock or funds at this moment thinking it is too high. Do you think I should wait or do something now with my savings? I am more thinking of protecting my nesteggs, avoiding it being eroded by inflation, poor interest rates and depreciating exchange rates.
I am of course feeling sorry to myself that I missed the current booming market.
P
---------------------
Dear P
It may be better to wait for the market to correct, before investing in the equity fund. In the meantime, you can put your money in the money market fund (ie flexi-cash) plan to earn about 2.5% to 3% per annum. There is no lock-in period.
Flexi-Cash
When the market correct, which I hope may happen within the next 12 months, you can invest in an equity fund.
This is what I did for the cash in my bank account. I put in the flexi-cash and will wait for a market correction.
If the market does not correct, I will be happy to get 2.5% to 3% per annum. This rate will change with the money market.
Tan Kin Lian
I have been caught with some bad experience both with insurance and investment but nothing serious to affect my life savings.
Being in my fifties, I runs a small business and have enough saving for my retirement which have for some years been kept in USD and SGD deposits earning very poor interest and suffering depreciating USD exchange rates.
I am afraid to invest in stock or funds at this moment thinking it is too high. Do you think I should wait or do something now with my savings? I am more thinking of protecting my nesteggs, avoiding it being eroded by inflation, poor interest rates and depreciating exchange rates.
I am of course feeling sorry to myself that I missed the current booming market.
P
---------------------
Dear P
It may be better to wait for the market to correct, before investing in the equity fund. In the meantime, you can put your money in the money market fund (ie flexi-cash) plan to earn about 2.5% to 3% per annum. There is no lock-in period.
Flexi-Cash
When the market correct, which I hope may happen within the next 12 months, you can invest in an equity fund.
This is what I did for the cash in my bank account. I put in the flexi-cash and will wait for a market correction.
If the market does not correct, I will be happy to get 2.5% to 3% per annum. This rate will change with the money market.
Tan Kin Lian
Consumers need advice "untouched by selfish agenda"
Dear Mr Tan
Like many faceless citizens, I am a fan of yours, more so after reading your blog and viewing your new website.
I have also been very impressed with Larry Haverkamp (Dr Money).
Both of you are a rare breed to whom all of us should go to for financial advice because I find the information from both of you so untouched by selfish agenda unlike others whom I understand of course have to make a living and so must try to sell whatever they can get the most profit out of.
All the regulations such as 14 days cooling off period are just something for the promoters to overcome.
I wonder if it is possible for more professional in your trade to model themselves after you and Mr Haverkemp.
I have no doubt we would be better off as a commercial city and society with more real value and respect given to the consumers at large.
Currently its seems that being a professionals are more like having a licence to profit as much as possible from the consumers who of course cannot be more sophiscated or more informed than the professionals and thus are generally at their mercy.
There must be a big untapped market for unbiased information to guide consumers around with their insurance, investment and other aspects of our life.
I hope by your examples, you may have shown the way for other professionals to follow as to how to really help their customers and at same time make a reasonable profit, making it a win win situation for all instead a zero sum situation of taking as much as possible from the customers and leaving their customers the risks of investment and insurance policies drawn up by the professionals as much as the laws allowed them for their interests instead of being fair to their customers.
Lastly, I am surprised that you have been able to actively engaged the readers of your blog and keeping it so updated despite your currently responsibilities in running Income and giving lectures etc.
I hope to attend one of your lectures before you leave. Meantime, you may put this and your reply on your blog if you wish.
My best wishes to you and congratulations on your success in this regards.
Warmest regards
BP Pan
Like many faceless citizens, I am a fan of yours, more so after reading your blog and viewing your new website.
I have also been very impressed with Larry Haverkamp (Dr Money).
Both of you are a rare breed to whom all of us should go to for financial advice because I find the information from both of you so untouched by selfish agenda unlike others whom I understand of course have to make a living and so must try to sell whatever they can get the most profit out of.
All the regulations such as 14 days cooling off period are just something for the promoters to overcome.
I wonder if it is possible for more professional in your trade to model themselves after you and Mr Haverkemp.
I have no doubt we would be better off as a commercial city and society with more real value and respect given to the consumers at large.
Currently its seems that being a professionals are more like having a licence to profit as much as possible from the consumers who of course cannot be more sophiscated or more informed than the professionals and thus are generally at their mercy.
There must be a big untapped market for unbiased information to guide consumers around with their insurance, investment and other aspects of our life.
I hope by your examples, you may have shown the way for other professionals to follow as to how to really help their customers and at same time make a reasonable profit, making it a win win situation for all instead a zero sum situation of taking as much as possible from the customers and leaving their customers the risks of investment and insurance policies drawn up by the professionals as much as the laws allowed them for their interests instead of being fair to their customers.
Lastly, I am surprised that you have been able to actively engaged the readers of your blog and keeping it so updated despite your currently responsibilities in running Income and giving lectures etc.
I hope to attend one of your lectures before you leave. Meantime, you may put this and your reply on your blog if you wish.
My best wishes to you and congratulations on your success in this regards.
Warmest regards
BP Pan
Our agents give better value to customers
Dear Mr Tan
It is mentioned that the consultants at the business centres do not earn a commission.
What about insurance agents who are not from the business centres? Are they also paid a salary and do not earn any commission?
Regards
OC
------------
Dear OC
Our insurance agents (or advisers) are paid a commission on the insurance policies that they sell. Our agents earn a lower commission rate (compared to agents from other insurance companies). We are able to offer products that with lower premium and better return to our policyholders.
Please read the following FAQ:
Endowment
Ideal
Flexi-link
Do you wish to visit our business center or have an adviser to contact you?
Tan Kin Lian
It is mentioned that the consultants at the business centres do not earn a commission.
What about insurance agents who are not from the business centres? Are they also paid a salary and do not earn any commission?
Regards
OC
------------
Dear OC
Our insurance agents (or advisers) are paid a commission on the insurance policies that they sell. Our agents earn a lower commission rate (compared to agents from other insurance companies). We are able to offer products that with lower premium and better return to our policyholders.
Please read the following FAQ:
Endowment
Ideal
Flexi-link
Do you wish to visit our business center or have an adviser to contact you?
Tan Kin Lian
Hard boiled eggs
Do you know how to make hard boil eggs which are easy to peel off the shell?
Here is an advice from an experienced hand.
1. Place eggs in single layer in pot/saucepan.
2. Cover with at least one inch of water over tops of shells.
3. Cover pot with lid and bring to a boil.
4. As soon as it begins to boil, remove from heat and let stand.
5. When cooked to desired level, drain off hot water.
6. Immediately cover with tap/cold water.
7. Hard-cooked eggs: let stand in tap/cold water until completely cooled.
Here is an advice from an experienced hand.
1. Place eggs in single layer in pot/saucepan.
2. Cover with at least one inch of water over tops of shells.
3. Cover pot with lid and bring to a boil.
4. As soon as it begins to boil, remove from heat and let stand.
5. When cooked to desired level, drain off hot water.
6. Immediately cover with tap/cold water.
7. Hard-cooked eggs: let stand in tap/cold water until completely cooled.
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