Saturday, March 07, 2009
Friday, March 06, 2009
When you buy a life insurance policy, you are taking a big risk. You do not know what will be the inflation and mortality rates in the future. In spite of this, you are required to commit a fixed premium payable for many years into the future.
The insurance company does not know the future rates either. So, they have to take a risk. If they guarantee you a favourable rate and the trend goes against them, the insurance company can declare bankruptcy. You will lose a large part of your savings.
If they declare a conservative rate and there is high inflation, you will lose out. The money that you have saved for many years will be paid back to you in depreciated dollars. The insurance company keeps the excess as their exceptional profit.
To overcome this uncertainty, many insurance companies have to operate on a participating fund. The insurance company guarantee a low rate of return on the participating policies, and promises to pay back a large part of the yearly surplus to the policyholder in the form of a non-guaranteed bonus.
This arrangement is fine, provided that the insurance company can be trusted to treat its policyholders fairly in the distribution of the bonuses. But you have to take another risk - can you trust your insurance company to give you a fair rate of return?
If this happens to you, you have a recourse. There are regulations in Singapore to ensure that the policyholders are fairly treated. If you have bought a participating policy and have been given a poor rate of return, compared to other policyholders who have bought a new series of products, you can lodge a complaint with the regulator, which is the Monetary Authority of Singapore. They will take up the complaint on your behalf and will ask the insurance company to justify its stand.
If you are going to make a long term commitment in a life insurance policy, you should choose an insurance company that can be trusted to act fairly in the interest of its policyholders. There is a lot of uncertainty at this time on which insurance company can be trusted to observe this principle. It is best that you do not put your long term savings in a life insurance policy, as you are subject to the risk of being denied a fair rate of return.
It is better to buy accident or term insurance to cover your risk and to keep your savings in a low cost exchange traded fund. Many of these funds are offered in the market.
You can get more details by reading the FAQs in my website.
Tan Kin Lian
I was deeply troubled by a 20 year limited premium policy that bought from NTUC Income 2 years ago. I bought the policy for my daughter to provide her with lifetime coverage by paying the policy premium for 20 years.
Recently, NTUC Income no longer accept new policy for the product and was replaced it with a similar limited premium product called Revo Life. My agent said that my existing policy is inferior to the new Revo Life:
1. My existing policy is more costly for the same amount of coverage
2. Revo Life took a much shorter period to breakeven
3. Revo Life provides extra benefit of 3X payments on accident coverage.
Why is the original product more costly with less coverage, where the contract already specified the % of premium that represented the distribution cost in maintaining the policy.
Could this be due to some miscalculation that caused the higher cost in initial policy?
As the consumer has not been notify of this difference, people who purchase the original 20 years limited will continue to pay more for less for the remaining year!
Do you think the consumer have the right to ask for some kind of bridging arrangement to the newer policy with minimum loss? I was suggested by the underwriter (through my agent) that I should cancel my policy (with a huge loss of course) and buy the new policy. Do you think this is a fair suggestion?
You should ask the agent to present a detailed comparison of the cash value of the old policy and the new policy after 5, 10, 15, 20 years and the premium. You can read the FAQ in my website, www.tankinlian.com/faq
You should also consider this point. By stopping the old policy and taking a new policy, you are suffering the high front end charge again (which can take up more than one year of your savings).
Normally, it is unethical for an agent to advise a client to stop an old policy and take up a new policy, as it is against the interest of the client. This is called "twisting a policy". You can lodge a complaint to NTUC Income against this unethical practice.
It is not correct for an insurance company to introduce a new product that offer a better return compared to an old product. This is unfair to existing customers. It is their duty to ensure that existing customers are given a fair return, through higher bonus, compared to new customers. You can ask NTUC Income's management to give their comment on this point.
Thursday, March 05, 2009
Lau Wai-lan, 45, is suing the bank for misrepresentation, unconscionable conduct and negligent investment advice. She is being assisted by the Democratic Party.
Lau is a single mother of three. She received secondary education but suffered a chronic brain injury in 1994 and has not been able to work since. Her sister, Lau Wai-ping, said Lau has been under immense mental stress since the failure of Lehman Brothers.
She has twice attempted suicide and is now on a regime of tranquilizers.
"We sent a few letters to the bank and the Securities and Futures Commission in October, but we received no assistance. This is our last resort," Lau Wai-ping said.
In 1995, Lau Wai-lan divorced her husband and sold her assets for HK$6.2 million. She put the money in a Bank of China fixed-time deposit and used the interest to support her three children, who are now aged eight, nine and 15.
On January 6, 2006, Lau claimed she was persuaded by a staff member she had known for several years to put HK$3 million into a 4 percent fixed-term deposit account at the Tai Wai branch of the bank.
But two weeks later, Lau broke the deposit to invest in the minibond series 23 HKD fixed- rate callable credit-linked notes due 2011 after being allegedly assured the investment was "low risk" and "safer than a bank deposit with triple A guarantee." Lau was also guaranteed a 5.1 percent interest rate.
On August 16, she transferred another HK$3 million in savings from her Citibank account and invested in minibond series 27.
Lau Wai-ping insisted her sister always reminded staff of her physical status and asked them not to introduce her to high-risk products.
In the writ, Lau maintained she was never told she might not obtain any refund of the principal at the end of the investment period. She was also not informed of any commission or financial interests involved.
The writ said the bank should perform a duty of care towards Lau, as well as provide proper advice and assistance. Lau was also rendered unable to make informed decisions as to what was in her own best interests.
Wednesday, March 04, 2009
People often ask me why I take such risks and tell me it is a matter of time before I am bumped off. Of course I know that: it is inevitable. But if we do not speak out now, there will be no one left to speak for those who cannot, whether they be ethnic minorities, the disadvantaged or the persecuted. An example that has inspired me throughout my career in journalism has been that of the German theologian, Martin Niemoller. In his youth he was an anti-Semite and an admirer of Hitler. As Nazism took hold in Germany, however, he saw Nazism for what it was: it was not just the Jews Hitler sought to extirpate, it was just about anyone with an alternate point of view. Niemoller spoke out, and for his trouble was incarcerated in the Sachsenhausen and Dachau concentration camps from 1937 to 1945, and very nearly executed. While incarcerated, Niemoller wrote a poem that, from the first time I read it in my teenage years, stuck hauntingly in my mind:
First they came for the Jews
and I did not speak out because I was not a Jew.
Then they came for the Communists
and I did not speak out because I was not a Communist.
Then they came for the trade unionists
and I did not speak out because I was not a trade unionist.
Then they came for me
and there was no one left to speak out for me.
If you remember nothing else, remember this: The Leader is there for you, be you Sinhalese, Tamil, Muslim, low-caste, homosexual, dissident or disabled. Its staff will fight on, unbowed and unafraid, with the courage to which you have become accustomed. Do not take that commitment for granted. Let there be no doubt that whatever sacrifices we journalists make, they are not made for our own glory or enrichment: they are made for you. Whether you deserve their sacrifice is another matter. As for me, God knows I tried.
They need the support from noteholders of the Pinnacle Series 9 and 10 to sign electronically on a letter to be sent to MAS. They like to ask the noteholders to write to firstname.lastname@example.org with their name and email address.
WASHINGTON (Reuters) - President Barack Obama said on Tuesday the Bush administration had tried to undermine organized labor and he assured U.S. labor leaders they would always have a "place at the table" under his presidency.
"We need to level the playing field for workers and the unions that represent their interests," Obama said in prepared remarks for a video address to the executive board of the AFL-CIO, the largest U.S. labor federation, meeting in Miami.
I have written a book entitled "How to survive unemployment" and it will be launched on:
Time: 5.15pm - 6.45pm
Place: Bishan Library Level 2
Please pick up a copy of the autographed book if you are coming. The price per copy is only $11.00. The price at major bookstores will be higher.
MANY businesses are suffering from a severe drop in consumer spending. They are not able to earn enough revenue to pay their wages and other expenses.
These businesses are not able to get the bank credit needed to tide them over until the economy recovers. The banks are reluctant to take the credit risk, even though the Government has agreed to underwrite 80 per cent of any loss.
The Jobs Credit scheme may help these businesses to reduce their operating costs by 5 per cent to 10 per cent, but will not be sufficient to stem the losses. These businesses will then have to retrench their employees.
Many thousands of employees face the prospect of losing their jobs in the near future. The $20.5 billion resilience package will not help them. Job fairs will also not help.
I suggest that a relief loan scheme be introduced. This scheme is to be administered by a government agency and will allow a worker who has suffered a loss or drop in earnings to apply for a loan to cover the shortfall (subject to a monthly cap).
This loan will be subject to an interest rate of 2.5 per cent and can be drawn for a period of up to 24 months. The loan has to be repaid from future earnings or withdrawal from CPF savings.
This is a loan, not an unemployment benefit. It will provide financial relief to affected people who will then not need to rely on credit cards or loan sharks and bear a high interest burden. It will also reduce the bad debt burden from the banking system.
There will be some abuse of this relief loan, but practical measures can be implemented to reduce the abuse. For example, the applicant may be required to sign a statutory declaration and get the endorsement of a responsible community leader.
Some people may not be able to repay the loan, no matter how hard they try. These cases can be investigated at a later date and a portion written off. It can be decided by practical judgment.
I hope that a relief loan scheme can be introduced immediately to alleviate the hardship and suffering of many families. It will also help to maintain a modest level of consumer spending and keep the domestic economy going as best as possible, until the global economy recovers.
Tan Kin Lian
I suggest that we use technology to solve this problem. The approaching bus can transmit its service number electronically to a display located at the bus stop. This display can display not only the bus number but also the main rout and destination of the bus. It will be a good service to the passengers and may encourage more people to take the bus.
I hope that the bus operators will take up this suggestion. Perhaps the Land Transport Authority can provide the encouragement by paying for the infrastructure cost.
Tan Kin Lian
Tuesday, March 03, 2009
Sunday, March 01, 2009
By Samantha Washington
BBC Radio 4's Money Box
As guarantor, Lehman going bust did not result in compensation
Thousands of people who put their money into investments that promised their capital was secure face losing some or all of their money.
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03/01 - 03/08
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- Twisting a policy
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- Performance of the Government
- HK: Minibond mom hits bank for $6m
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- There was no one left to speak for me
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- Obama: Bush government tried to undermine unions
- Buy a property report for $25
- Book launch: How to survive unemployment
- Consider a relief loan for needy workers
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