Saturday, December 02, 2006

Pleasant climate in Dubai

We think of the Middle East as a extremely hot place.

This occurs for only 2 months in a year. The temperature could go as high as 45 degrees. Most people stay indoors, in air conditioned homes, cars or shopping malls.

The other months of the year can be quite pleasant. I am now in Dubai, enjoying the cool weather of 20 degrees. It is nice to walk outside in the evenings.

Friday, December 01, 2006

Telephone charges are high in Dubai

Telephone charges are high in Dubai.

It cost about S$6 per minute to make an international call. It cost S$1 per minute to make a local call to a mobilephone (minimum of S$3).

These charges are 10 to 20 times of similar charges in Singapore.

Thursday, November 30, 2006

Experience the Arabian nights

I visited a restaurant outside of Dubai, near the desert. The experience was stimulating, beyond my imagination.

There was good food, music, belly dancing, and local art and culture, riders on horse backs. I learned to smoke from a water pipe. The atmosphere was like a story out of the Arabian nights.


Traffic Congestion in Dubai

Last night, I visited a restaurant outside of Dubai, near the desert. The journey was supposed to take 1 hour. It took nearly 2 hours, due to the congested traffic during the rush hour (5 pm to 9 pm).

My friend in Dubai said that the traffic situation will improve in 2010, when a new set of roads are ready. In the meantime, they have got used to the congestion.

Capital Protected Fund gives poor return

Dear Mr Tan,

I am a NTUC policy holder. I also have investments in some unit trusts.

I recently stumbled on your blog and have been reading your articles. I am very interested in the combined funds. May be it is a bit too late for investment at this age (I have retired).

I need your help on the closed funds. I have the intention to sell as the unit trust (closed fund) is now in the positive and with this money go into combined fund. Presently, the return is about 1% p.a. for the past 4 years and maturing sometime next year. It is a capital protected fund and there is a payout if it crosses certain price. Other than that, there is no mention whether subscriber of the fund will get anything else if the fund is doing well. It is moving very, very slowly. Should I sell now?

For the combined fund, should I start small with $1,000 and every month buys $100 of units or with a lump sum, say $10,000 noting that the funds are not cheap now.



Dear LC

I am not familiar with the structure of your protected fund. I suggest that you should ask your fund manager to give you an estimate of the likely payout on the maturity date, assuming that the market stays at the current level, and assuming that the investments increase by 5% per annum.

For your investment into the combined fund, I suggest that you invest $1,000 a month over 10 months, to make a total investment of $10,000. This will help to spread out the investments and get an average price for your investments. In the meantime, you can invest the money in the money market fund and transfer it gradually over the next 10 months.

Alternatively, you can put the entire investment in the money markt fund and wait for a market correction to move into the combined fund. I am adopting this approach for my personal investments.

Tan Kin Lian

Higher bonuses from 1 January 2007

NTUC Income will be increasing its bonus rates for policyholders from 1 January 2007.

The revised bonus rates will increase the cost of bonus for 2006 by 26%, or an additional $70 million. The key changes are:

- the bonus rates for Whole life plans will incease by $3 per $1000
- the bonus rates for Harvest plans (incepted before Sept 2005) will increase by $1 per 1000 sum assured
- the compounding rate of the accumulated bonus for these policies will increase by 0.3% and0.1% respectively
- the bonus rates for participating annuity plans will increase by 0.25%

The revised bonus rates for these plans will increase the return on these plans. A total of 405,000 policies, representing 54% of the total portfolio, will benefit from this increase.

The bonus rates for endowment plans will remain the same, as they are already enjoying a fairly high rate of return.

The special bonus on surrenders will also be increased to 15% (for durations of 10 to 19 years) and 25% (for durations of 20 years or longer). This will benefit all plans, including the endowment plans. It will give a higher return to policyholders who decide to terminate their policies earlier, usually for financial reasons. We wish to give a better return to these policyholders as well.

Wednesday, November 29, 2006

Over 100 i-Gifts sold each week

The i-Gift sells very well. The results are much better than expected. Over 100 policies are sold each week.

i-Gift is a product that offers a guaranteed income for a fixed term. It is actually an annuity certain.

The average investment is about $50,000. 80% of the investors choose 5 year term, while the other 20% choose 10 and 15 year term.


It is popular as it offers a guaranteed return of more than 3%.

The current tranche will be withdrawn soon. The next tranche will offer a lower return, as interest rates have declined recently.

Our policyholders get $3,000 more on maturity

A total of 31,000 endowment policies matured during 2005 and 2006. The total payout was $740 million, or an average of $23,800 per policy.

We give about 15% to 20% more to our policyholder, compared to a similar policy taken with another insurer. This works out to an average of $3,000 more.

We are able to give a better return to our policyholder due to our lower commision to agent and lower profit distributed to shareholders. We are a cooperative society.

Each month, more than 1,000 policyholders enjoy this benefit, without realising it. We will be more active in communicating this fact to our policyholders.

Re-invest into the Combined Fund

Dear Mr Tan

I bought this policy from Co X in year 2000 through an Insurance broker.

a) Enhanced living assurance, S$1924 per year
b) Premium payable for 52 years from age 33
c) Sum assured: $100,000 with annual reversionary bonus of $10/$1000 sum assured plus 1% of accumulated bonus.
d) From the sale quotation, at age 65 total premium paid-up S$61,568, surrender value : guaranteed 57400 non guaranteed S$33,190
e) Current policy status: total premium S$11,544, surrender value : guaranteed S$8,000 non guaranteed S$2,251

I have seriously considered surrendering this policy and go into term policy. What is your advice.



Dear PL

If you surrender the current policy and invest the cash value in our Ideal Combined Fund, you are likely to get the following:

a) Single premium: $10,251
b) Regular premium of $1,924 per year, $250 is used for decreasing term assurance, $1,674 is invested in the Combined Fund

Projected benefit at age 65 (not guaranteed)

- $125,900 based on return of 5% a year
- $181,600 based on return of 7% a year

The accumulated savings at age 65 is higher than that projected value ($90,000) under your current policy at age 65.

Tan Kin Lian

Set aside money for your grandchild

A friend wanted to set aside some money to be given to a grandchild when he reaches the age of 25 years.

Here is a suggestion. Take the Flexi-Link policy in the name of the grandparent, and nominate the child as the beneficiary.

The grandparent will have control over the policy during her lifetime.

On the death of the policyholder, we will transfer the policy in the name of the beneficiary and continue it for the remaining term. If the beneficiary is still a minor, the parent can act as the guardian.

Increase in bonus rates from 1 January 2007

NTUC Income is making an increase in its bonus rates for our living, protection and certain harvest plans from 1 January 2007. The revised bonus will represent an increase of 26% in the cost of bonus for 2006, or an additional $60 million (estimated) a year.

The revised bonus rates will also apply to all existing policies under these plans and new policies taken from this year.

Currently, NTUC Income offers the best return in the market for our popular plans. With the revised bonus rates, our plans will become more attractive.

The special bonus on policies surrendered after 10 years will also be increased.

More details will be announced soon.

Advice on Home Financing

Dear Mr Tan,

I have read the numerous financial advice you gave on your blog, a very generous act of you to provide such valuable insight to the various investment and insurance schemes in the market.

I think NTUC Income, under your leadership, is one of the very few that really take good cares of the money invested by its customers.

I have a condo apartment which is fully paid up, and currently rented out to earn a modest rental. The condo has about 75 years lease remaining.

I am living in a landed property which I have bought 10 years ago. It has an outstanding mortgage loan, currently at 4% interest rate. The outstanding loan is about half of the market value of the property. The rental income from my condo is sufficient to cover the interest charge on this property.

I need to raise cash to finance my children's university education abroad. I am thinking of 2 options:

1. Refinance the condo and use part of the money to pay off the mortgage loan on my house. I can use the rental income to offset against the interest charge. If I sell the condo later, I have to return all the proceeds from sales to CPF (i.e. cannot be used to redeem the loan on my landed property).

2. Sell the condo, return the proceed to CPF (as it was used to pay for the condo), apply to withdraw my CPF to replay the loan on my landed property.

As the property market is slowly moving up, selling the condo now will not fetch me the best price. However, the value of the condo will also drop as it approaches 70 years. It is unlikely that the project has any enbloc potential.

I would appreciate it if you can enlighten me on your views on the options available for me, and whether NTUC has any suitable financing scheme that I can consider in refinancing my properties.



Dear WF

Apart from selling your condo now (which you are reluctant to do so, as the property market is now on the uptrend), you have the following options:

a) refinance the loan on your landed property and have an additional sum that is sufficient to provide financing for your children's education

b) take a new loan on your condo

You can take a normal loan (which requires monthly repayment) or a reverse mortgage loan (which does not require any payment). The reverse mortgage is available only to people beyond a certain age.

I will get my loan officer to contact and advise you.

Reverse Mortgage

Tan Kin Lian

Tuesday, November 28, 2006

Dubai does not require any entry card

I arrived in Dubai early this morning. I was surprised that there is no need to fill in any entry card.

In all the countries that I visited, I am always required to fill in a card for immigration and for customs. Even Singapore require tourists to fill in a card for "statistics" purpose.

Dubai is the only place that does not require this unnecessary hassle. Well done to Dubai!

Monday, November 27, 2006

Is high property prices good or bad?

High property prices is good for property owners. But it is bad for the future generation, as they have to pay more for their property.

A property bubble may burst and cause losses to many people who bought their property at the peak.

The best situation is a situation where the supply and demand for property is properly managed, so that the property prices will appreciate gradually with the economic growth, and excessive speculation is avoided.

I hope that the current enthusiasm in our property market do not get out of control.

Avoid driving to work

For the past 30 years, I have a driver who drives me to work and back home. This allows me to think and plan business strategy. When I am in the office, my driver helps in handling the mail in the office services department.

I figure that it is less expensive to have a driver, than to have an expensive CEO to be driving around and to spend time in parking the car.

When I leave NTUC Income, I will continue to use a different type of driver, ie the bus or train driver. This allows me to continue to think and plan, instead of watching the road.

How to overtime the Time Bomb

Two years ago, a journalist wrote about the "time bomb" in several investment-linked products. The key feature of these products is the higher cost of the life insurance cover as each year passes by. At some stage, the cost of the cover is more than the monthly premiums.

The products sold by NTUC Income do NOT have this feature. If you have invested in the products of some other insurance companies that have the "time bomb", this is what you can do.

- Ask your insurance company to confirm that you are allowed to cancel the life insurance cover at any time. In most cases, this is allowed.

- Check the premium rates for the life insurance cover for the future years, until you reach age 65.

- Compare the total premium with the low-cost term insurance cover offered by NTUC Income for the same sum assured and number of years. You will probably find our premium rates to be (perhaps) 30% lower.

If your insurance company insists that the life insurance cover cannot be terminated separately, you can consider to terminate the policy entirely and re-invest your money in our Flexi-Link plan.

You can buy the term insurance separately.

Low cost Term Assurance

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