FAQ: Ideal Policy (revised)

FAQ: Ideal Policy
Earn up to $30,000 more, compared to similar plans in the market


1. What is Ideal Policy?

It is an investment linked plan for investing your regular savings, e.g. from your monthly earnings. You can earn an attractive return (not guaranteed) from an investment fund.

2. What are the key features of the Ideal Policy?

The attractive features are:

- The regular savings are invested in a large, well diversified fund
- 85% of the savings are invested during the first 3 years, 100% thereafter
- The charges are among the lowest in the market
- You are insured for 60 months of your savings, at no additional charge

3. What is the projected return?

The future return on your investment is not guaranteed. It will depend on the actual return from the investments of the fund over the period that you have invested.

Over the past ten years, the average return from investing in global equities is about 8% per annum.

The following tables shows the projected amount (not guaranteed) at the end of 30 years for a regular investment of $200 per month:

Assumed net return  2.5% p.a.  5% p.a.  7% p.a.   9% p.a. 
Total savings       $72,000    $72,000  $72,000   $72,000 
Gain (estimated)    $27,700    $81,600  $149,200  $251,300 
Projected amount    $99,700    $153,600 $221,200  $323,300

Assumed net return - after deducting fund management fee
Gain (estimated) - after deducting upfront and other fees

If you earn a net return of 7% per annum from your fund, you will get more than 3 times of your original investment and more than 2 times compared to a safe investment that earns 2.5% per annum.

4. Is it risky to invest in a fund?

By investing in an equity or balanced fund, you can earn a higher return.

You can minimise your risk by investing in a large, well diversified fund that is benchmarked against the market. The large fund is well diversified in many investments. If a few investments turn bad, they are likely to be offset by the good performance of other investments. .

If you invest for 10 years or longer, you will be able to average out the performance in good and bad years and earn an average long term return. This return should be much higher than safe investments, such as bank deposits or the Central Provident Fund.

5. Will NTUC Income give a better return, compared to similar funds in the market?

All large, well diversified funds should earn a similar return over the long term, provided that they are well managed and are invested in the same risk category.

The advantage of investing in a fund managed by NTUC Income is our low upfront and annual fee. We have among the lowest charges in the market.

Our upfront fee (i.e. spread) is only 3.5%, compared to 5% charged by most other funds. Our annual fee is about 1%, compared to 1.5% to 2% charged by other funds.

We invest a larger proportion of your savings, compared to similar plans in the market. The difference is nearly 1 year of your savings. This is due to the lower commission rate that is paid to our adviser.

The difference in fees can amount to 20% over an investment period of 30 years. If you invest $200 over 30 years to get a return of (say) $150,000 on maturity, the difference in fees can amount to $30,000. You can get $30,000 more from NTUC Income, due to our low charges.

The other funds will take an additional $1,000 a year from you to pay higher commission to their agent or to give higher profit to their shareholders. The total in 30 years could amount to $30,000.

6. What funds are available from NTUC Income?

NTUC Income offers several funds.

A popular fund is the Combined Growth Fund. It has a fund size of $3,800 million and is invested in 900 equity and bond instruments. They are managed by 9 top fund managers globally. The benchmark return during the past ten years was 6.5% per annum. The actual return during the first three years (2003 to 2005) was an average of 16% per annum.

Note:

-The future return is not guaranteed.
-Past performance is not indicative of future return.

7. Is there any life insurance cover?

In the event of death of before age 60, the policy pays a sum assured of 60 months of your regular savings, or the value of your investments, whichever is higher. This insurance cover is provided as part of the upfront fee. There is no additional charge.

If you wish to have additional insurance, you can purchase our low cost term assurance. Our premium rates are about 30% lower than the market. For example, a male aged 30 can insure for $150,000 on a 30 year decreasing term assurance, at an additional monthly premium of only $13.05.

8. What are the other important features?

This plan allows you to:

- make a monthly savings of $50 or more
- change your monthly savings at any time
- stop your savings temporarily (i.e. no penalty)
- make partial withdrawal at any time

9. Interested?

Call 62 INCOME (6246 2663)
Visit our Insurance Business Centre at Bras Basah Road or Tampines Point.
See your insurance adviser.

/end

Is the market too high?

Someone asked me, "Is the market too high for investing my money now?"

Here is my advice:

1. For people who are 60 years or older

It is a good time to buy a life annuity. You can get an attractive payback (5% or more) with a bonus that can add another 2% to 3% to the return (not guaranteed). The bonus will be compounded.

If you have invested in a fund previously and made a good gain, make the switch now.

2. For those who are 45 to 60 years

I suggest that you invest in our growth plan. It is for a lump sum investment (using your CPF, SRS or FD). It has a guaranteed return of at least 2% per annum. With bonus, it is likely to earn about 4% to 4% p.a. It is quite safe.

3. If you are younger than 45 years

It is still a good time to invest in our combined fund or global equity fund. As you are investing for 20 years or longer, you will average out the good and bad years.

If you feel that the market is too high now, you can invest your savings in 3 installments over the next 6 to 12 months. You can invest one-third now.

You can keep the remaining savings in the CPF or in our money market fund (which earns 2.5% to 3% and has no lock-in period).

These investments are also available from other insurance companies. But, NTUC Income offers a better return compared to the market, as our charges are lower and most of the investment gain are given back to our customers.

FAQ: Flexi-Link Policy (revised)

FAQ: Flexi-Link
Earn up to $30,000 more, compared to similar plans in the market

1. What is Flexi-Link Policy?

It is an investment linked plan for investing a lump sum. You can invest your saving in the Central Provident Fund, Supplementary Retirement Scheme or fixed deposits, to earn a higher return (not guaranteed from an investment fund.

2. What are the key features of the Flexi-Link Policy?

The attractive features are:

-100% of the lump sum is invested in a large, well diversified fund
-The charges are among the lowest in the market
-You are insured for 125% of the savings or value of investments (if higher)
- You can invest as long as you wish (i.e. no lock-in period)

3. What is the projected return?

The future return on your investment is not guaranteed. It will depend on the actual return from the investments of the fund over the period that you have invested.

Over the past ten years, the average return from invesing in global equities is about 8% per annum.

The following tables shows the projected amount (not guaranteed) at the end of 20 years for a lump sum investment of $50,000:

Assumed net return  2.5% p.a  5% p.a.  7% p.a.   9% p.a. 
Initial investment  $50,000   $50,000  $50,000   $50,000 
Gain (estimated)    $31,900   $78,000  $136,000  $220,000 
Projected amount    $81,900   $128,000 $186,000  $270,000 

Assumed net return - after deducting management fee
Gain (estimated) - after deducting spread and policy fee

If you earn a net return of 7% per annum from your fund, you will get more than 3 times of your original investment and more than 2 times compared to a safe investment that earns 2.5% per annum.

4. Is it risky to invest in a fund?

By investing in an equity or balanced fund, you can earn a higher return.

You can minimise your risk by investing in a large, well diversified fund that is benchmarked against the market. The large fund is well diversified in many investments. If a few investment turn bad, they are likely to be offset by the good performance of other investments. .

If you invest for 10 years or longer, you will be able to average out the performance in good and bad years and earn an average long term return. This return should be much higher than safe investments, such as bank deposits or the Central Provident Fund.

5. Will NTUC Income give a better return, compared to similar funds in the market?

All large, well diversified funds should earn a similar return over the long term, provided that they are well managed and are invested in the same risk category.

The advantage of investing in a fund managed by NTUC Income is our low upfront and annual fee. We have among the lowest charges in the market.

Our upfront fee (i.e. spread) is only 3.5%, compared to 5% charged by most other funds. Our annual fee is about 1%, compared to 1.5% to 2% charged by other funds.

The difference in fees can amount to 20% over an investment period of 20 years. If you invest $50,000 over 20 years to get a return of (say) $150,000 on maturity, the difference in fees can amount to $30,000. You can get $30,000 more from NTUC Income, due to our low charges.

The other funds will take an additional $1,500 a year from you to pay higher commisison to their agent or to give higher profit to their shareholders. The total in 20 years could amount to $30,000.

6. What funds are available from NTUC Income?

NTUC Income offers several funds.

A popular fund is the Combined Growth Fund. It has a fund size of $3,800 million and are invested in 900 equity and bond instruments. They are managed by 9 top fund managers globally. The benchmark return during the past ten years was 6.5% per annum. The actual return during the first three years (2003 to 2005) was an average of 16% per annum.

Note:

-The future return is not guaranteed.
-Past performance is not indicative of future return.

7. Is there any life insurance cover?

In the event of death of before age 60, the policy pays a sum assured of 125% of the invested sum (less withdrawals) or the value of the investments, whichever is higher. This insurance cover is provided as part of the upfront fee of 3.5%. There is no additional charge.

If you wish to have additional insurance, you can purchase our low cost term assurance. Our premium rates are about 30% lower than the market. For example, a male age 30 can insure for 20 years at a monthly premium of only $13.40.

8. What are the other important features?

This plan allows you to:

- make an initial investment of $5,000 or more.
- top up at any time, $1,000 or more.
- make partial withdrawal at any time, of $500 or more (without any charge).
- arrange for a fixed monthly withdrawal to be credited to your bank account

9. Interested?

Call 62 INCOME (6246 2663)
Visit our Insurance Business Centre at Bras Basah Road or Tampines Point.
See your insurance adviser.

/end


--
Tan Kin Lian (Gmail)

What is the financial stability of NTUC Income?

Dear Mr Tan,

I am a policy holder with NTUC. Although my policy is just a small amount, I like to find out about the stability of NTUC in view of further business with NTUC.

I understant that NTUC is a cooperative. What do you mean by that, compared to the other insurers and investments companies? Does it also mean the government is linked to NTUC and they will bill NTUC out in the event of financial crisis?

AN

------------------

Dear AN

Please read about our corporate profile at:

Corporate Profile

NTUC Income is rated AA by Standard & Poors. This is the strongest financial rating among all insurance companies in Asia. There must be a few thousand companies in this category.

We are NOT owned by the government. We do not need the government to bail us out in the event of a financial crisis.

With our strong financial rating, we will be able to face any financial crisis better than most other insurance companies, including those that are owned by multi-national companies.

Do you need me to introduce an adviser or consultant to talk to you?

Tan Kin Lian

Earn $30,000 more by investing through NTUC Income

I gave our FAQ on the Ideal plan to many young people. I explained the following:

- you can save $200 a month for the next 30 years

- you should invest the savings in a large, well diversified fund to get an attractive return, expected to be 6% per annum (not guaranteed)

- you can invest with NTUC Income or with any other insurance company.

- if you invest with NTUC Income, you can earn $30,000 more.

The reason? The other company take away about $1,000 more from your yield yearly to pay higher commission to their agents, and to make profit for the company. NTUC Income keeps this money for you. Over 30 years, you can get $30,000 more.

Many people were surprised that there is such a big difference. They decided to save and invest with NTUC Income.

Ideal plan

Logic9 (Sudoku): 3 tips to solve difficult puzzles

I have 3 tips to solve the difficult puzzles.

- find the missing number
- 3 box rule
- eliminate the blanks

I have taught about 100 people. They all enjoyed it. About 2% of the population know how to solve this puzzle. Join this exclusive group of genius.

I shall be giving a public talk in December on how to solve these puzzles. Watch out for details. Attend the talk, and get a free copy of the Logic0 pocketbook (worth $5).

Many motorists switch after first year

Each month, about 1,200 motorists switched their insurance to NTUC Income after the first year. 60% switched to us directly; the remaining 40% switched through our agents.

They enjoy a saving of up to 30% on their premium, by switching to us. The premium charged by their previous insurer, who had a tied arrengement with the motor distributor for the first year, is about 30% higher.

We encourage motorists to switch to NTUC Income after the first year, to enjoy this big saving.

Do not wait until your insurance expires. You can call us now and register with us, to enjoy the saving. We will contact you to remind you about the renewal of the insurance, and to remind you about the saving in premium.

Call 6788 1111

Motor Insurance

Happy with review of claim

Our policyholder met with an accident. A claim was paid by us to the third party. He lost his No Claim Discount.

Upon a review of the claim, we decided to waive the penalty and retain the No Claim Discount. The policyholder sent this e-mail to me.

Dear Mr. Tan

I received the revised renewal letter. Since then I have also renewed my insurance, very conveniently over the phone. Thanks once again for promptly resolving my concern. Much appreciated!

So far among all insurance companies, my dealings with NTUC Income have generally been the most efficient. I am sure having accessible and electronic communication email, blog..) savvy management is helping.

NJ

Performance of Investment Funds

Standard & Poors assess the performance of funds (during the past 36 months) relative to other funds in its category. It awards 5 stars for the best funds, down to 1 star for the worst funds.

Here are the results as at end September 2006.

Stars  Inc  Pru  AIA  GE   JH  Manu  Axa  Av
  5     1    0    0    1    1   1     0    0 
  4     5    4    2    2    1   1     0    1
  3     1    2    2    3    6   4     1    1
  2     2    1    3    7    5   1     3    3
  1     0    0    2    3    1   0     2    1
Total   9    7    9   16   14   7     6    6

NTUC Income has the highest proportion of its funds in the top two ranks (i.e. 6 out of 9 funds). This is followed by Prudential with 4 out of 7 funds.

Most of the other insurers have more funds in the bottom two ranks than the top two ranks. They have more funds that perform below average.

The better performance of NTUC Income's funds is probably due mainly to our low charges.

Here is another observation. Each insurer has some funds that perform better than average and others that perform worse than average. It is difficult to choose the right fund by looking at the "manager".

If you track the performance of each fund, you are likely to see that the same fund may perform better in some years and worse in other years.

Lesson: Choose a large, well diversifed, low charge fund and invest for the long term. You will get a better than average return.

Get a better deal from NTUC Income on your HDB loan

Dear Mr Tan

I took a loan of $225,000 on my HDB flat and pay a fixed rate of interest of $9,500 a year for the first three years. I have to deposit $100,000 in a current linked account with the bank to earn a total interest of $10,500 for the first three years.

Can you recommend a better package for me from NTUC Income?

EG

---------------

Dear EG

It seems that you are paying interest at 4.2% on your HDB loan and you get interest at 3.5% on your current linked account.

Your net borrowing is $125,000 (i.e $225,000 less $100,000) and you pay an interest of $6,000 (ie $9,500 less $3,500) on it. Your effective interest rate appears to be 4.8%, fixed for 3 years.

NTUC Income charges a fixed interest rate of 4.15% for 5 years. See:

HDB Loan

Tan Kin Lian

Structured product withdrawn in the UK

Dear Mr Tan,

My father nearly bought a structured product a few years ago in the UK. It offered a "guaranteed 10%", which sounded good as risk-free interest rates were about 6%.

In the small print, it was stated that the amount paid on maturity after 10 years was far from "guaranteed". It emphasised in big print that you might get more, but my father missed the small print which said that you might get less.

The money (less charges) was to be invested in some sort of balanced fund - including both bonds & equities - with a 10% draw-down facility each year.

In the (unlikely) event of the company achieving a 12% return, the policyholder would get money back after 10 years - or even more if returns were higher - but if returns were less, a lower amount would be returned at the end - with a minimum of zero.

All that was guaranteed was a return of the Principal without interest over 10 years, or on death within the 10 year period.

This product was marketed by some "reputable" UK insurance companies. They dropped the product after the press and consumer groups criticised the misleading sales literature. It was a very simple product - made to look like something it was not.

The lesson is that nothing comes free. If a product looks "too good to be true" - you have been misled by the marketing literature or by the salesperson.

NR

Is it risky to invest in structured products?

Some structured products have high risk. Find out more from:

Risk of Structured Products

Logic9 (Sudoku) trains the mind

Sudoku is a number game that is popular around the world. You enter each row, column or box (3X3) with the numbers 1 to 9 (each number appear only once). It appears in Today paper and in MyPaper.

NTUC Income has created puzzles under the name of Logic9. You can view the game at
Logic9.

The game is good for young and old. It trains children to be familiar with numbers and strengthens their mathematics. It trains the elderly to keep their mind alert, and prevents dementia (so it is claimed).

If you play the CD version of Logic9, you have the following option:

- use numbers, train the left brain
- use symbols (eg flowers, animals), train the right brain
- try level 5 to 8, train your mind to be flexible and adapt to the uncertain.

You can buy the CD and pocketbooks at NTUC Income branches, and bookstores for only $5.

The pocketbook is suitable for use in the bus, train or plan. It contains 128 puzzles at 4 levels. 2,000 copies are sold each month.

My financial advice is free, but worth a lot of money

My financial advice is free. But is worth a lot of money to you.

Buy term insurance for your life insurance needs and invest the rest of your savings in a large, well diversified fund, with low charges.

This advice is worth many ten of thousand of dollars to any ordinary consumer. You do not need to pay any money to me for this advice.

Some advisers tell you to buy a product that give a high commission to them, and a large profit to the financial institution. These charges come out from your investments.

Do not fall for complex products that give uncertain guarantees. Watch out for the warnings, such as "you may lose part or all of your principal".

Do not ask a financial adviser to help you to select the best funds. Past performance is not a guarantee of future performance. You will pay a large "trailer fee" for an advice that is probably worthless.

The term insurance product from NTUC Income saves you 20% or more, compared to similar products in the market.

Low cost Term Insruance

The combined fund is a large, well diversified fund with low charges. You can invest a lump sum or monthly savings.

Invest a lump sum
Invest your monthly savings

And, here are my financial planning tips:

Financial Planning Tips

Unhappy about inflated claim from a third party

Hi Mr Tan Kin Lian,

Can you help me to investigate this traffic accident claim from NTUC.

My wife met with an traffic accident with a motorbike. The motorbike has since lodged a 3rd party claim against me.

I am a shocked by the value that is being claimed and am wondering if this is a
case of inflated claims from a dishonest workshop.

I have taken photos of the damaged bike and understood from friends that a used bike of similar features cost an approximately $3000. The value that is being claimed is $2000. Repairs cost from bike workshops have quoted a nominal amount of below $300 based on the photos.

(Details of the case deleted)

Is there any way for me to understand why the 3rd party claim will be so expensive? How do I know if these claims are valid ? I am finding it difficult to resolve this matter.

It seems that the dishonest workshop will profit from this exercise. NTUC will suffer a bad reputation by allowing such workshops to make tihs claim. I feel that your policyholder has been dishonest from the start as he demanded payment from my wife.

GL

--------------------

Dear GL

Can you show me the letter that you have received. Is it from NTUC Income or from a workshop directly?

If it is from a workshop engaged by my policyholder, this matter will be outside of our control.

I suggest that you should let your insurance company handle this third party claim.

Tan Kin Lian

Happy with injury settlement

Dear Mr Tan Kin Lian

I would like to express my gratitude regarding the compensation related to my injury as a result of traveling in the TIBS bus.

The matter has come to a conclusion recently. I would like to have a special mention of Mr DP, the representative of your Company.

Mr DP was amazingly very efficient and professional. He called me for an appointment immediately after TIBS officer told me that TIBS submitted my claims to Income.

Mr DP did all the necessary work before he presented the documents to me. During the meeting he explained patiently and clearly to me about the clauses and details. He was precise and yet carry very good manner and present himself very professionally.

I received the payment promptly without any delay.

Congratulatutions for having a good representative like Mr DP.

DT

I wish to invest more in NTUC Income shares

Dear Mr Tan

My husband and I have invested 5000 Income shares ($50,000) each in 2004. We are both happy with the return.

This is the core part of our retirement planning. Both of us are in our mid forty. We would like to invest more into Income shares. When will you be re-opening for new subcription.

CH

--------------

Dear CH

Congratulations> You and your husband have made an excellent investment.

We do not plan to invite new subscription for the share capital for the immediate future.

I will let the coop secretary know about your interest, and to keep you in the waiting list (in case some shareholders wish to sell their shares).

Tan Kin Lian

What is the right time to invest in the Global Equity Fund?

Dear Mr Tan,

I hope the funds managed by NTUC especially the Growth Fund will continue to perform well after 1 April 2007!

You mentioned that you were going to purchase the Global Fund. What level do you intend to make this investment?

I have taken profit on 20% of my Growth Fund and am contemplating purchase the Global Fund. Please advise.

OL

--------------

Dear OL

I have withdrawn my ST Trakker Fund and re-invested it in the money market fund (ie Flexi Cash).

Tentatively, I will wait for the global equity market to correct by about 10% from its peak, before I re-invest in the global equity fund.

If this does not occur, I may re-invest in 3 installments during 2007.
This is a personal opinion. I am not really good at market timing.

Tan Kin Lian

Do you think that she is pretending to be ill?

Somebody passed this joke to me. Any resemblence to a recent event is entirely co-incidental.

A worker asked the supervisor for the afternoon off, as he has to see his grandmother who is ill.

The supervisor said, "It appears that, whenever there is a soccer match, your grandmother becomes ill?"

The worker replied, "Do you think, maybe, that my grandmother is pretending to be ill?"

Buy Term Insurance

Sunday Times have an article about Term Insurance. It provides a large insurance cover at a very low cost.

NTUC Income offers the lowest premium for term insurance. We are about 30% lower than the market. It is based on a survey publised in the Business Times a few weeks ago.

Buy Term Insuarance. Buy from NTUC Income and pay less.

NTUC Income pays claims promptly

Hi Mr Tan,

I read your blog. I wish to give this feedback to you.

I heard from many Financial Advisers that NTUC is always very slow in their administrative processes, especially with regards to claims. Some claims can go up to half a year and they are still unsettled.

As a leading cooperation, is this acceptable? I wonder if you are aware of this happening on the ground.

JHN

----------------

Dear JHN

95% of our life insurance claims are settled within 7 days. We pay more quickly than other insurance companies. This is published in our magazine and our website.

The financial adviser wants to scare you to avoid buying your insurance from NTUC Income. The reason is clear. If you buy from them, and they sell your a plan from another insurance company, they will earn a large commission. It could be up to 1 years of your savings.

I will leave you to make the best judgement.

Tan Kin Lian