Saturday, August 07, 2010

Choose your life insurance company carefully

You have to choose your life insurance company carefully, as you have to stick with them for 20 years or more. If you choose the wrong company, you will see a large part of your savings taken away from you. What are the factors to look for in choosing the company? Go to my website, click on "Ask Mr. Tan" and search for "Choose".

No dream too bold

Here is a National Day message from a Singaporean.

My view
I agree with his views. We have made commitments on the goals of Singapore, in our National Day songs and pledges. Many people share the same aspirations. We only need to match deeds with words - the mark of integrity.

Marketing flyers

Read this letter.

My view
I receive several marketing flyers every day from property agents trying to sell properties that I am not interested in or asking me to sell my property, which I am also not interested in. I throw away these marketing flyers without looking at them. I also ignore the flyers on new property launches of residential, commercial and industrial estates.

It is so wasteful to be spending so much money on marketing materials that go into the waste basket. The people who make money are the printers and the distributors of the materials. The property agents do not mind wasting this money, because they can make a big killing when the close a transaction, i.e. a few thousand dollars or tens of thousand. They only need to close one transaction every few months to earn a living.

Another wasteful practice is the marketing flyers sent by banks with their monthly statements and credit card statements.

Why is Singapore so wasteful? Why should the public pay so much in commission to the property agent? This inefficiency and wastefulness adds to the cost of living and the cost of doing business.

Tan Kin Lian

Existing Life Policy

A policyholder showed a benefit illustration to me. The policy was taken by the parent during the past 14 years. The cash value now is $6,515 and the total premiums paid for 14 years is $7,630. The policy has not reached the break-even point after 14 years, which makes it a poor investment for the parent.

The benefit illustration for the next 5 years should a guaranteed cash valu e of $9,605 and a total cash value, including the non-guaranteed portion, of $13,474. The yield for the next 5 years is 0.88% (based on the guaranteed value) or 8.81% (based on the non-guaranteed value). I advised the policyholder to continue the policy for the next 5 years and hope to get the non-guaranteed value at that time, rather than to terminate the policy now for a poor cash value.

If the non-guaranteed value of $13,474 is paid at the end of 19 years, the yield for the premiums paid over 19 years is 2.57%. This is not attractive, but it is at least better than taking a loss now (based on 14 years). Although the amount of $13,474 is not guaranteed, there is the likelihood that the actual payout will be close to this figure.

Tip: It is better to avoid taking a life insurance policy (other than a term insurance policy) in the first place, but if you have already taken the policy for several years, it is usually better to continue the policy, rather than to terminate it.

Tan Kin Lian

Read Practical Guide on Financial Planning

National Day and Foreigners

Read this article.

My view
It is all right for Singapore to welcome foreigners, especially those who have the intention of making Singapore as their home for the long term. However, the local Singaporeans, especially the males, should not be placed at a severe disadvantage on employment and national service liability.

I have raised this issue many times during the past 25 years, and the problems remain unresolved. This is bad for the future of our society - for the local and the new citizens.

Our national pledge refer to "equality and justice". We should not have practices that go against these principles. They are principles (not aspirations) that concern the governance and fabric of our society.

To all local and new citizens and residents, Happy 45th National Day.

Universal Life

I have written a FAQ to explain this new life insurance product which is popular in some countries and may become popular in Singapore. It is similar to a unit linked policy. Interest is credited on the savings in the policy, usually at a rate that is higher than savings with a bank. However, consumers should be aware about the charges, which are usually not explained by the agent. (Ask Mr. Tan or Latest)

Friday, August 06, 2010

DBS and computer glitch

Mr Tan,
I hope to solicit your comment on the forum titled “why not fines?” (ST forum 6 August 2010) for DBS service breakdown. I read with curiosity and I have some questions:

(a) Why there is no fine? Does it mean that the terms and conditions already provide covering for DBS for such service down time event? Maybe, as a result, MAS can only issue warning? Why there is a discrepancy in the treatment of structured notes where there is specific provision in the statute for mis-selling and MAS did not conduct independent investigation to individual cases? Is this a double standard in the handling of structured notes and this computer glitch? Have we over-blown the engineers error, while keeping silent when immoral act could have occurred in a large scale?

(b) MAS punished DBS by requiring to “set aside additional $230m against operational risks” (ST 5 August 2010). What is the meaning of this punishment? Who is entrusted to have oversight how this $230m is to be disbursed and accounted for? Who will ensure that DBS will not buy computers and charge the disbursement to this fund, hypothetically speaking? Who will have oversight that the fund spent benefit consumers specifically?

(c) What is the real accounting entry for setting up such a fund in response to the “punishment”? I guess it would be debit “fund for operational risk” and credit “retained earnings”. If there were the case, there will be no effect to the income statement of DBS and will have minimum impact to DBS. As such, this “punishment” may look more like an exercise of “journal entry”. I think MAS may have unintentionally sent a wrong impression on its resolve in dispensing this punishment.

From Cashew Nut

My view
I am not clear about the purpose of the "punishment" meted to DBS. By asking DBS to increase its capital, it does not really affect the bottom line. Anyway, it is likely that DBS already had more than sufficient capital to meet the "punishment".

Anyway, I do not think that DBS merits any punishment. They might have slackened and caused some inconvenience to its customers, but it was not deliberate. They have probably suffered a bad reputation already.

Pick the right stocks

Picking the right stock is a matter of practice and experience. Do you know how to read the trend of the market? The price of any stock is supposed to reflect all the available information. But, experience shows that certain indicators may influence the market for a period of time, before it is moved to other indicators.

But, where can you acquire the practice and experience, if you do not have the chance to manage a portfolio? You can practice with this simulation game. It is built to be realistic and reflect the real world. But, to acquire the skill, you have to practice and practice.

After reading the Guide, you can go to and click on Pro-Investor.

Tan Kin Lian

TKL Website - visitors

I received 640 visitors to my TKL website yesterday. It was a big jump, compared to an average of 300 during the past few days. The website has only been revamped for about three weeks. My previous website received only about 20 visitors a day.

The new website is based on a new structure, which I describe as "document centric". I believe that it is more useful to the public, compared to the HTML centric structure of most websites. The popular tabs are "Ask Mr. Tan", "Latest" and "Information".

I am keen to market my website structure to large organisations and government agencies that have many interactions with the public. Details are found in my website, under the category called "Consultancy".


Tan Kin Lian

US Presidential Citizen's Award

Read this article from the White House.

My view
Singapore has a similar award for citizens for National Day. Perhaps, we can make the award as exciting as the USA?

Invest in Bonds - SGX

SGX launches initiatives to enhance listing, trading of fixed income products
By Jonathan Peeris | Posted: 05 August 2010 1131 hrs 
Photos1 of 1

SGX Exchange
SINGAPORE : Singapore Exchange (SGX) has launched its first initiatives to enhance the listing, trading and distribution of fixed income products to build a more vibrant bond market in Asia.

These initiatives include drawing more Singapore-listed companies and other organisations to issue bonds for listing and trading on SGX.

The listing and trading of fixed income securities such as preference shares and convertible bonds will also be encouraged.

SGX also plans to halve the time taken to approve bond listings by streamlining the processes involved.

By the first quarter of next year, SGX expects to offer an on-exchange secondary market for individual and institutional investors to trade Singapore Government Securities (SGS).

SGX's Central Depository has been a custodian of individual investors' SGS holdings since April 1 this year.

A total of 1,229 bonds are currently listed on SGX.

In fiscal year 2010, 200 bonds were listed involving programmes to raise over S$100 billion.

SGX has also appointed Ms Tng Kwee Lian, formerly from UOB Asset Management, as Senior Vice President and Head of Fixed Income to drive the promotion of bond trading to high net worth and individual investors.

President of SGX Gan Seow Ann said SGX offers an unparalleled value proposition to issuers and investors of bonds.

That's because issuers can leverage on SGX's international distribution platform while market participants will have access to one of the world's leading trading venues.

- CNA/il

Life insurance sales

Life insurance sales saw a rapid growth during the first six months of 2010.,4574,398392,00.html

Blatant cheating

Mr. Tan,
In your earlier blog, you mention that a life insurance company have a deduction of 50% of the accumulated premium. Which company is this? What is the significance of this 50%? What is a fair amount of deduction?

The insurance company is a foreign company and the policy is investment-linked. When you buy a life insurance policy, you are entitled to receive a benefit illustration that discloses certain information about the product. You should look for the following information:

  • value of accumulated premiums - this is the amount that your premiums will accumulate to the maturity date, based on the assumed interest rate (3.75% or 5.25% or 9%)
  • effect of deduction - amount that is deducted from your accumulated premium to pay the cash value to you
In my book, Practical Guide to Financial Planning, I have given the benchmark on the amount that should be deducted from you and the balance that should be paid to you. For a 25 year policy, the maximum deduction should be 20% to cover the expenses of providing the life insurance protection (less than 10%) and the cost of investing the funds.

Most life insurance policy take away 35%, which I consider to be too high. For the specific policy mentioned above, the deduction is 50%, which I consider to be "blatant cheating". Imagine - if you work hard and save  prudently for 25 years and  the accumulated savings should be $500,000, do you like to see $250,000 taken away from you? Many people are not aware about this excessive deduction and would not have been willing to pay so much, if they knew.  

I will try my best to educate consumers in my blog and in my website, It is important for consumers to be educated on financial matters through my book and by attending the educational talks conducted monthly by FISCA,

If an insurance agent approaches you to buy a life insurance policy, you should be careful. Read my FAQ on "marketed financial products" here, The same tip applies to any financial product that is being marketed to you, such as land banking, structured products and properties.

Tan Kin Lian

Stamping a contract

Someone write to the Straits Times to complain about paying $25 to the Post Office as handling fee to stamp a contract? I was surprised. It seemed to be excessive. I wish to check the facts. Is this correct?

Read here.

If this is correct, here are a few issues:

  • What is the cost to the Post Office to provide this service? If a commuter pays $2 for a train ride, surely the work involved in the Post Office to handle the stamping is much lower? 
  • Is there a choice for commuters to stamp the contract through other channels, instead of the Post Office?
  • Is this abuse of monopolistic power? What is the role of the Competition Commission on such matter?
  • This seems to be adding to the cost of living and the cost of doing business
Tan Kin Lian

Invest in Bonds

I have written a FAQ Mr. Tan on investing in government and corporate bonds in Singapore. (Ask Mr. Tan)

Thursday, August 05, 2010

Motor insurance claims

Here are two letters written about inflated motor claims
Insurance companies need to take responsibility
Insurance muddle bears highway robbery

My view
I agree with the writers that insurance company managers can be more active in combating the inflated claims and to stop the unjustified increase in premium rates.

Opening of Youth Olympic Games

Read this article. I wonder if the facts are correct?

A different style of website,

I find your writeup on Dependent Protection Scheme and Home Protection Scheme to be quite useful. I went to the CPF website to check the information on these schemes and I found that it was quite difficult to locate them - all over the place and quite fragmented.

I like to download your FAQ and send it to my friend. Will I be infringing on your copyright? Do I need to get your permission?

You are welcomed to download the PDF and send them to your friends. These FAQs are written for this purpose. No need to ask for my copyright. Actually, I compile them from the information given in the CPF website, and I did not ask for their permission. I consider them to be public information.

I believe that it is more convenient for the public to search for information using the style of my website,, especially to read the Q&A in a PDF document. If you find it to be useful, you can help me to encourage other organisations to adopt the same style for their website.

Ask Mr. Tan

Dear Mr. Tan
I find the articles that you wrote for the Ask Mr. Tan to be very useful. I want to thank you for giving this valuable information for free. I shall tell my friends to visit your website. I look forward to read the new articles that you will be writing, as I find them to be easy to understand and useful.

I wonder, if people can read for free, maybe they will not buy your financial planning book? What do you think?

I hope that they will buy my financial planning book as a show of their appreciation. Also, the book contains more detailed examples and calculations that cannot be found in the FAQs at the website (which are quite concise.

Practical Guide on Financial Planning

Ask Mr. Tan


Eldershield is a long term disability scheme operated by the Ministry of Health.  All CPF members are required to automatically covered under the scheme unless they decide to opt out. Should you opt out? Here are the facts to help you to make a decision. (Ask Mr. Tan)

Dividend yield on shares

Dear Mr. Tan
Please see the message below from my agent. I need your expert advice whether it is okay to invest in the said endowment policy.

Our company just launched this 5 year endowment where you pay premiums for 2 years only. Returns will depend on your principal amount. You need to keep the policy the full 5 years to enjoy the interest rate mentioned in the brochure (about 2% p.a.). Surrender within the 1st 3 years and you get less than your principal back.

It is safe, provided that the insurance company does not go bust, but the return is not attractive. My wife was offered a similar product from another company but, after I made my analysis, she decided to invest in Suntec REIT and Starhub, which offered a better yield of above 7% (if I remembered correctly). Although the shares are risky, the risk is reduced for a person who is willing to invest for the long term and does not need to realise the cash in a weak market.

Read my book, Practical Guide on Financial Planning and the FAQs in my website, (click on Ask Mr. Tan).

Wednesday, August 04, 2010

A lot to cheer about

Read this letter.

My view
There are positive and negative aspects of our economic growth and progress. Here is one positive view.

New wave of immigrants

Read this report.

My view
It is a bad idea for Singapore to take in additional workers when the infrastructure and housing is inadequate.

A sad sight

Read this article.

My view
I am also looking forward to a change in Singapore

Purpose of education

Read this valedictorian speech of a high school graduate.

I excelled at every subject just for the purpose of excelling, not learning. And quite frankly, now I’m scared.

My view
I agree with her views. For a long time, I have said that the purpose of education is to learn and not to get good grades.

Read my views here (see item6).

Singapore population trend

Read this article

My view
Singapore has been experiencing a low birth rate and a rapidly aging population for the past two decades. To reverse this undesirable trend, the government has to review its past policies, such as national service liability, depressed wages, high cost of living and focus on elitist policies.

Arrest for offences

Read this blog

My view
The police should be active in arresting people who break the law. They should focus on the bigger crimes, such as cheating, rather than going for the petty offences, especially against people trying to make a living.

Bike hire in London

Read this article.

My view
I hope that this scheme works. The major of London is taking the lead to implement this system. I hope that our mayors in the towns in Singapore will follow this example.

Guidance on financial planning

Hello Mr. Tan,
I have been following your blog now for the past few months when I accidentally came across it on the internet. I would like to ask for your advise on insurance coverage for myself.

I am 38 yrs old this year and just got married. I would like to know the types of insurance coverage I should be looking at in terms of Hospitalization, Critical illness and Life.

Please read my book, Practical guide on financial planning, available at and the FAQs in my website, (Ask Mr. Tan).

Crowded MRT stations

Read this article.

My view
Prompt action has to be taken to improve the public transport system. The old approach will not work. I wrote a paper 3 years ago about some steps that can be taken. They are still relevant today. In fact, the critical situation make it necessary for urgent actions to be taken now.

World class transport system (no more)
Getting more people to take public transport

Subway on the street

US economy

Read this report.

My view
The US economy was able to achieve a modest recovery during the past year due to the large stimulus to the economy provided by the government. But, it did not solve the underlying problem of high unemployment and creating sustained consumer demand. When the stimulus runs out, the economy will go into recession again. What happens in US will also apply to the rest of the world. The big imbalances, the wide disparity in incomes, the property bubbles, the bloating financial sector - they all contributed to the current global economic mess. If these root problems are not solved, the global economy will continue to get worse.

Home Protection Scheme

I have written a FAQ to explain the home protection scheme offered by CPF to its members who uses their CPF savings to pay the monthly installments of their housing loan. Go to and search for "Home Protection".

High mark ups

Read this report.

My view
Business has to make a profit, but the mark up must be fair. Some products are sold at extremely high mark ups,  to take advantage of the ignorance of consumers or the pricing powers of suppliers (due to lack of choice for consumers). These unfair mark ups have to be regulated - a duty of governments.

Minimum wage in USA

Read this

My view
A minimum wage is necessary to ensure that the lowly paid workers earn enough to be above the poverty line and should be adjusted to the cost of living. It is necessary to protect workers from being exploited due to their weak bargaining position. I remember that Hong Kong has a minimum wage. Singapore is among the few developed countries that still do not have a minimum wage.

Tuesday, August 03, 2010

Dependent's Protection Scheme

Find out more about the Dependent's Protection Scheme offered by CPF to its members. Go to and click on Ask Mr. Tan or Latest.

The future of cities and transportation

Read this article.

My view
In the future, each town should be designed to be designed without private cars. People will travel by various modes of public transport, taxis and automated cars (without drivers). If they wish to travel outside the town, the can hire a car that is parked at the fringe of the town or take a long distance bus. There will be no travel congestion and people can travel within the town in comfort.

Here is an article about night parking in HDB car parks. We have inadequate car parks in Singapore for the growing number of private cars.

Monday, August 02, 2010

An awesome book

Hi Kin Lian
I just spent my Sunday afternoon reading your blog. Thanks for putting all these togather. Very informative. I am now on the verge of canceling my 3 year old life policy with GE. I decided to up my coverage under term as well. I have not read your book but will be more than happy to buy 10 as gifts. Do let me know the purchase procedure for such quantity order.

My view
I appreciate the wonderful gesture of CL in buying my books, after benefiting from the information obtained for free from my website. I hope that other readers will also buy the book to be given as a gift to their friends.

For those who have asked questions to me relating to their own situation, please make a donation to FISCA, if you find my answers to be useful and valuable. Read this FAQ:

Practical Guide on Financial Planning

Succession planning in Singapore

Read this article.

My view
We need to have leaders who knows the issues that affect ordinary people and not the same elites who are brought up in a sheltered, unreal environment.

Happy with Vivolife

Hi Mr Tan,
I took up a NTUC vivolife plan recently. I am 
paying 50 monthly for 10 years .I'm insured from death my entire life and total permanent disability plus critical illness till 65. How bad can that be when im only paying $5769 to insure my whole life?


You pay premium amounting of $5,769 for 10 years and get a cash value at the end of 10 years of less than the total premiums. So you do not get any yield on your savings.

The amount of insurance is quite small. In your case, the policy is not attractive, but it is not bad either. But, if you are happy with this policy, it is all right. 

If you buy a term insurance policy and invest the difference in a low cost fund, you can get a higher coverage and, quite likely, a higher yield at the end of 10 years.

CPF and reservist training

My friend, who run a small company, shared this story with me. He hired a Singaporean and had to pay CPF, which is not required for a foreign worker. So, the Singaporean worker cost more.

After joining for a few weeks, the Singaporean was quite apologetic in telling the boss, "I have three weeks of reservist training in November". It was a few months ahead, but he had to tell the employer early as the employer had to find someone to cover the daily work during while the Singaporean went on the reservist training. For a small company, this can be disruptive. The company is struggling to keep afloat, so this type of disruption is not helpful.

This are regular occurrences that have to be faced. They cannot be swept under the carpet.

Tan Kin Lian

Review of Life Insurance Policy

If you wish to ask for my assistance to review your existing life insurance policy or for a new policy that you plan to buy, read the FAQ entitled "Review of Life Insurance Policy: in my website.

Insured perils and acts of God

What are the perils insured under an insurance policy? What are acts of God and are these events excluded under all insurance policies?

The recent floods in Singapore seem to suggest that the losses are not covered, as they are caused by acts of God.

Read an explanation in the FAQ stored in my website. Search for "insured perils" or "acts of God".

Productivity and exploitation of workers

Read this article.

My view
I agree with the writer that higher productivity should lead to higher standard of living, instead of putting more people out of work. The exploitation of workers has led to a widening gap between the top incomes and the majority of lowly paid workers. This also measured by the GINI coefficient, of which Singapore has fared badly, and is worse than America.

Invest in financial education

When you send your child for music lesson, you have to pay $20 to $25 for one hour lesson each week. The course may take 3 months and will cost about $300. You have to add the transport cost and the time that you have to spend to fetch your child each week for the lesson. As a parent, you are happy to spend the money and time for the enrichment of your child. For this fee, the child has to join a class comprising of 6 to 8 students.

Are you willing to spend time and money for your own financial education? Would you spend $30 to attend a 3 hour talk arranged by FISCA? It is only $10 per hour, lower than the music lesson. Are you willing to spend the time? Do you feel that it is important for your future financial welfare? Are you willing to attend a few lessons, so that your understanding, instead of just one lesson?

If you think that financial advice should be given free to you by a person who sell you a financial product, be ready to lose $200,000. This is the typical amount of "effect of deduction" that is taken from you for the average amount of life insurance savings take is sold to a person. Do you want to save a few hundred dollars to lose a few hundred thousands?

If you think that financial education is just as important as music lesson, give your particulars in this survey. Make a commitment to be financially educated.  FISCA will contact you about the courses that are being organized. You can decide at that time, if you are ready to attend the course.


Sunday, August 01, 2010

Foreign policy

Read this article.

My view
Singapore was highly regarded by China many years ago. The situation appears to have changed significantly in recent years.

Future of Life Insurance Sales

An agency manager of a large insurance company sought my advice on his future career goals. He has worked in that company for more than 10 years and has accumulated over 1,000 clients who bought life insurance policies from him in the past. The insurance company has reduced the bonuses on most of these products which has caused him to face complaints from his clients.

The agency manager, who has several active agents under him, is now considering to move to another insurance company. He asked my views on the company to move to, and the future prospects of the life insurance industry.

We discussed the following issues for about one hour:
  • How will the move affect the existing clients?
  • How he can help the existing clients by remaining with the same company
  • Which life insurance company offer the best prospect for an agent or agency manager
  • Should he move to an independent financial adviser firm?
  • Can he provide advice to clients for a time based fee?
After the discussion, he became clearer about the options and will be giving more thought to the matter. He appreciated the advice and my time and decided to made a donation of $100 for FISCA (financial services consumer association).

Tan Kin Lian

Talk on insurance

A reader want me to give a talk on insurance. I can summarize the key points as follows:
  • Buy 25 year term assurance for 5 to 10 years of your salary. 
  • Opt for SAF group insurance or other similar group insurance or personal accident insurance
  • Buy insurance for your vehicle (compulsory) and for your home (optional for HDB flat). 
  • Buy MediShield insurance, but it is all right to be self-insured
  • Invest your savings (15% to 25% of your earnings) in a low cost investment fund
  • Avoid all types of high cost life insurance policies (i.e. no need to spend time to study them)
  • Get three quotes for your insurance directly from the website of insurance companies
There is  no need to attend a talk to learn about the different types of life insurance polciies, as most of these products are high cost and not suitable for consumers. Apart from term or accident insurance, it is better to have adequate savings in a low cost investment fund that can be withdrawn in an emergency, without any loss.

But I am now planning a FISCA talk on the following types of insurance: motor, fire, personal accident, term insurance, Medishield, private Shield, Eldershield, CPF Life, home protection (for HDB flats), depedent protection (under CPF). I need a knowledgeable person to work with me on these topics by searching the internet. If you are interested, send e-mail to

Invest in Property

Investing in property is a hot topic. Many people have seen the property price appreciated significantly in recent years and are worried that the price will increase further, due to limited supply and high demand.

I have written a FAQ to give my views about how to approach this situation and to avoid paying too much for a property that may become a burden to your finances for many years.  Go to my website and search for "Property".

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