Saturday, November 25, 2006

Middle East Fever

A few days ago, the newspapers reported the recent visit by Mr Lee Kuan Yew to the Middle East.

Over the next few weeks, there will be several delegations from Singapore led by our government leaders to the Middle East.

I am in close contact with two organisations in the Middle East to introduce the concept of the "Insurance Company for the 21st Century" to several countries in the Middle East and North Africa.

I expect to be quite busy in this region, after leaving NTUC Income.

Friday, November 24, 2006

Better to buy annuity certain (ie i-Gift)

Dear Mr. Tan,

I am interested in the annuity, with no capital protection. When it will be ready for roll-out? I am age 37.

Two years back I bought a life annuity policy from UOB, because UOB doesn't have age limit. I intend to buy another annuity policy in near future. I hope that Income will lower the age limit with this new product.



Dear C

I suggest that you buy our 20 year annuity certain (i-Gift). It is extremely popular and is available now.

Details at: i-Gift

I will ask our product specialist to contact you.

Tan Kin Lian
Hi Mr Tan Kin Lian,

Sad to hear that you will be leaving NTUC Income. Your years of contribution have made NTUC Income not only a household name but a well established organisation. While you are still in NTUC Income, I would like to seek some valuable advice for my wife retirement.

She will be reaching 55 years of age next month. She has very little saving in her CPF, about 10K, as she had stopped working after getting married. I have a saver plan of 50K in a local insurance company (not NTUC Income) which will be maturing next month. The matured value is about 61K.

I am not sure whether to use it to top up her retirement account or to buy an
annuity. Is there any other better option? Incidentally I have already retired and have bought an annuity from NTUC Income.

Grateful if you could advise me on a practicable approach.



Dear CJM

My colleague will arrange for our product specialist to advise you. He will give you two options (i.e. i-Gift and life annuity) and compare with the retirement account.

If you are allowed to top up the CPF retirement account and earn 4% per annum, I think that this is probably the best deal.

Tan Kin Lian

Is this a good plan?

Dear Mr Tan,

I wish to seek your opinion on my following whole life plan.

Quick summary:
I bought this policy in year 2000 through an Insurance broker.

- Plan: Enhanced living assurance
- Premium: S$1924 per year
- Start date: 23/5/2000 age 33
- Premium cessation date 22/3/2052 (ie age 85)
- Sum assured: S$100000
- Annual reversionary bonus: $10/$1000 sum assured plus 1% of accumulated bonus.

Projection at time of purchase:
- At age 65: total premium S$61,568
- Death benefit: guaranteed S$100,000 non guaranteed S$84,361
- Surrender value : guaranteed 57400 non guaranteed S$33,190

Current policy status as at year 2006:
- Total premium paid-up S$11,544
- Total bonus declared S$6,152 (meet expectation at in quotation)
- Death benefit :guaranteed S$100,000 non guaranteed S$6,152
- Surrender value : guaranteed S$8,000 non guaranteed S$2,251

I have seriously considered surrendering this policy and go into term policy.
Appreciate your kind advise if this is a wise choice for me.



Dear LYF

Let me get my colleague to take a look at it. We will reply to you within a few days.

The living assurance covers 30 critical illness. What does the "enhanced" cover?

My initial response is that it is better for you to continue with the current policy as it provides covers "enhanced" critical illness for the whole of life. If you buy a decreasing term assurance, including cover for critical illness, it will expire at a certain age, e.g. 65 years.

Let me see if the accumulated savings at that time is more than sufficient to offset the loss of coverage

Tan Kin Lian

Thursday, November 23, 2006

Consistency in service standard

Mr Peh,

Just a brief note to thank you once again for your assistance in resolving the matter.

I thought I would give you some feedback on my dealings with your colleagues during this matter.

Although I still have my concerns regarding the issues, and did not always agree with the position adopted or the responses, which sometimes came across as inflexible or did not directly address the issues raised, at all times your colleagues conducted themselves very professionally and politely.

I came away with a very positive impression of the consistency in service standards, and would like to compliment your team on what appears to be a very good customer service culture.



Dear LBC

Thank you for your positive feedback on service rendered by my colleagues. I am glad that our colleagues from Service Quality Unit and Life Insurance Department delivered consistent service standard in dealing with the matter.

As for your compliment of good customer service culture, the credit should go to our CEO Mr Tan. He leads by example in dealing with customers and we try to follow the standard set by him.

We appreciate your time and effort in giving us your feedback. Thank you.

Peh Chee Keong

Are you getting a good deal on your insurance policy?

I get a few enquiries each day from the public. They ask for my views about the insurance plan that that they have taken from another company.

I will do my best to give an impartial analysis. If you are interested in a second opinion, you can send the following facts to me:

- how much is the premium
- how long do you have to pay
- what is the sum assured
- what is the amount that you can get on maturity

I will try to see if you got a good deal.

If your policy has recently matured, you can send the details to me. I shall tell you about what is the return, if you had invested the same sum in a similar policy from NTUC Income.

Send to

I invested $500,000 in Flexi Cash

I have decided to withdraw my savings from the CPF, as I am now passed 55 years. I just invested $500,000 in Flexi Cash.

During the past 3 months, Flexi Cash earned 3.5% annualised. This is an attractive rate of return.

I will wait for the right time to transfer from Flexi Cash to other funds, such as the Global Equity or Combined fund.

Poor return from competitor's policy

A consumer asked for my view about this "cash" policy taken with another insurance company:

- monthly premium $225
- term of policy: 21 years
- annual payout (from 2nd anniversary) $1,500
- sum assured $30,000

On subsequent enquiry, it seems that this is a participating plan, and the projected maturity benefit (not guaranteed), is $38,000.

Based on the projected benefit and annual payment, this plan offers a return of only 1.3% per annum for 21 years, which is rather low.

I advised the consumer to check with his insurance adviser on the guaranteed return, and on the likelihood of getting better than guaranteed.

The consumer is now considering to buy a term insurance from NTUC Income and to invest the remainder of the monthly premium in our Combined Fund. It should give a much better return.

Wednesday, November 22, 2006

Flexi Cash earned 3.5% annualised

Our Flexi Cash (invested in money market fund) earned 3.5% annualised during the latest 3 months.

The bid prices are:

2/5/06 -- $1.028
1/8/06 -- $1.035 (0.68% over 3 mths)
1/11/06 -- $1.044 (0.87% over 3 mths)

Interest rate is creeping up. The money market fund is now earning higher. Wow!

Beware of insurance advisers "churning" your policies

Some insurance advisers have an unethical practice of "churning" the life insurance policies of their clients.

They advise their clients to stop their current policy and buy a "better" product. Being more knowledgeable, they are usually able to present a "convincing" case. Usually, the presentation is misleading.

The unsuspecting client take the advice of the adviser, who has the chance to earn a large commission on the sale of the new policy. The client is worse off, as they have to incur a large upfront cost, which may amount to two years of premium.

NTUC Income has measures to prevent the "churning" of life insurance policies. Our policies stay with us for many years.

Some other companies have policies that are churned every few years. The duration of their policies are usually much shorter.

Beware about churning. If your insurance adviser shows you how you can be better off by terminating an existing policy to buy a new policy, he is churning.

Sunday, November 19, 2006

This structured product is bad for consumers

Here is another example of a structured product that is bad for consumers.

- guarantees a full return of your principal at the end of 6 years
- gives a potential large gain (through a complicated investment strategy)

To give the full refund of principal, the manager invests 80% of the fund in safe bonds (which now earns about 3.5% p.a) . To give the potential large gain, they invest 10% to 15% of the fund in speculative investments, such as options or derivatives.

The chance of making a big gain from the speculative investments is small. It is like gambling.

This structured product imposes an additional cost of 5% to 10% to pay fees for the fund arranger and the distributors (usually banks). These fees have to be paid by the investors (i.e you).

With this type of structure, most investors find that their return on maturity is usually lower than the return on bonds (due to the high fees).

If the investor had invested directly in an equity fund, they would have received spectacular returns over the past three years. The investors in structured products have come out quite badly.


There is now a new variation of structured products, which now give an attractive payout, say 5% per annum. Many investors do not realise that this return is actually taken out of your principal. They were misled into thinking that the structured product was able to earn this return.

Many investors are now stuck with these types of bad products. If they wish to withdraw from the investments, they have to suffer a loss now (due to the high fees).

My wife is very happy with her investments

For many years, my wife invested her savings in fixed deposits to earn interest rate at around 4%. When interest rate dropped, she was asked by the bank to invest in various types of special investment products and funds. Like countless other people, she had a bad experience with most of these investments.

During the past two years, she has been investing her savings into the combined fund from NTUC Income.

Recently, she found to her delight and surprise, that the investments had gained $40,000. She had never enjoyed this type of gain (must be more than 15%) on her other types of investments over the years.

1. Do not invest in structured or guaranteed products
2. Take the investment risk, but invest for many years (to average out the good and bad years)
3. Invest in a large, well diversified fund
4. Invest in a fund with low fees (and keep most of the gains for yourself)
5. Invest with NTUC Income

FAQ: Is it safe to invest, when the stock market is high?

1. Is it safe to invest when the stock market is high?

At present (November 2007), the stockmarket is at an all time high. If you look forward, the projected price earning ratio (PER) is 15 times. This is an acceptable level. It is not low, but it is not high.

You have the following option to invest your savings:

- life annuity
- growth policy
- flexi-link policy

2. What is most suitable for people above 60 years?

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, it is a good time to make the switch.

3. What is most suitable for people for investing a lump sum?

If you do not wish to take market risk now, you can 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 5% p.a. It is quite safe.

If you wish to take some risk and invest for 10 years or longer, you can take up a flexi-link policy and invest your lump sum in the combined fund or global equity fund. It is likely to earn an attractive return (say, 6% or more, but ths is not guaranteed). If you invest for many years, you will average out the return from the good years and the bad years.

If you feel that the stock market is too high, you can invest your savings temporarily in a money market fund or keep it in the CPF for the time being. You can take a flexi-link policy with a small investment. You can top-up the investments in the flexi-link policy in installments over the next 6 to 12 months.

The money market fund earns a market interest rate, which is currently about 2.5% to 3% per annum. There is no lock-in period. You can transfer the money from this fund into the flexi-link policy at any time, without any penalty.

4. What is most suitable for investing monthly savings?

If you are investing your monthly savings for many years, you should take up the ideal plan and invest the savings in the combined fund or global equity fund.

As you are making small investments over many years, you do not need to worry about the level of the market now. You will be averaging out the cost of your investments over the years.

You will also get a good return, by averaging out the return form the good years and the bad years.

5. Can I get a better return from NTUC Income, compared to similar funds elsewhere?

You should choose a large, well diversified fund. Choose a global equity fund or a combined fund with a mix of equities and bonds.

All well managed and diversified funds should produce about similar returns over many years. Some funds may perform better in some years, and worse in other years. It is difficult to identify the funds that will perform consistently better than other funds over the long term, unless they are actively managed in a speculative manner.

It is better to choose a fund that have low fees. This allows most of the return to be given to the investor. For an actively managed fund, you should choose a fund with an annual fee of 1% or lower.

NTUC Income has several large, well diversified funds with an annual fee of 1% or lower. Most of the other funds in the same asset category have an annual fee of 1.5% to 2.5% or even higher.

A difference of 1% in the annual fee will amount to a lot of money after 10 to 20 years. If your investment grows to $200,000 with another fund with high charges, the same investment in a similar fund from NTUC Income can, for example, give you $30,000 more, due to our lower charges (based on a difference of 1% for 15 years).

End of FAQ

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