Well, it seems that Republicans are going all in on the idea that a big reason we have high unemployment is that unemployment benefits reduce the incentive to seek work. Aside from the sheer cruelty, it’s really bad economics, but whatever. And I found myself remembering a passage near the beginning of The Treasure of the Sierra Madre:
Anyone who is willing to work and is serious about it will certainly find a job. Only you must not go to the man who tells you this, for he has no job to offer and doesn’t know anyone who knows of a vacancy. This is exactly the reason why he gives you such generous advice, out of brotherly love, and to demonstrate how little he knows the world.
Paul Krugman, New York Times
Saturday, March 13, 2010
Issues relating to productivity
To be productive means to be able to produce more units of output in a given time, i.e. to reduce the cost of producing each unit. One can produce more by working faster, but this is likely to result in mistakes and poorer quality. It usually means to find a better way to produce the goods, while maintaining the quality of the product.
The best way to reduce cost is to eliminate waste, which adds to the total cost of productivity. There are many activities that are wasteful and costly and do not add to the value of the products, such as impractical compliance with safety, health and security. While these functions are important, they have to be examined carefully in terms of cost and usefulness, and are not to be complied blindly. Many activities in Singapore have this hidden burden of compliance, which adds to the cost of production.
If the goods are to be produced using a new method, we must be prepared to make a change. Many people are not willing to take the responsibility to make a change in Singapore. They prefer the safety of sticking to the old ways. This tendency to play safe is a negative trait of Singapore and is likely to impede our progress towards productivity.
I am not advocating that we go to the other extreme to abandon safety, health, security or to take short cuts in our production. I am asking that we must have an open mind to examine these issues. If we continue to be risk adverse, and to play safe, we will not be able to achieve th quantum leap in productivity.
Here are my views about improving productivity in Singapore.
Tan Kin Lian
The best way to reduce cost is to eliminate waste, which adds to the total cost of productivity. There are many activities that are wasteful and costly and do not add to the value of the products, such as impractical compliance with safety, health and security. While these functions are important, they have to be examined carefully in terms of cost and usefulness, and are not to be complied blindly. Many activities in Singapore have this hidden burden of compliance, which adds to the cost of production.
If the goods are to be produced using a new method, we must be prepared to make a change. Many people are not willing to take the responsibility to make a change in Singapore. They prefer the safety of sticking to the old ways. This tendency to play safe is a negative trait of Singapore and is likely to impede our progress towards productivity.
I am not advocating that we go to the other extreme to abandon safety, health, security or to take short cuts in our production. I am asking that we must have an open mind to examine these issues. If we continue to be risk adverse, and to play safe, we will not be able to achieve th quantum leap in productivity.
Here are my views about improving productivity in Singapore.
Tan Kin Lian
Pay TV operators to carry contents of third parties
The Media Development Authority has announced that they will require pay TV operators to carry the contents of third parties, but this will only apply to future contents.
This is a good move, but does not go far enough. The biggest damage is going to occur in respect of existing content, specifically the English Premier League. Over the next few months, many households will have to go through the expensive exercise of switching their platform (from Starhub to Singtel) or installing a new set of cables. It is wasteful and inconvenient.
Singtel is likely to face serious resource issues in meeting the heavy demand and also in addressing the technical issues of connectivity and customer experience. Already, they faced glitches. This is bound to increase significantly.
MDA or the acting minister for information, communication and the arts should take the bold step of mandating that this requirement apply to existing contents as well, to take effect from (say) 1 June 2010. It will be doing a favor for Singtel. They will be able to reach out to a wider audience of viewers and earn additional subscriptions to meet their heavy payment for the EPL content.
Starhub has earlier announced that they will carry the EPL content for free on its cable platform. Singtel should take up this offer, in the interest of Singapore (i.e. to reduce waste). I congratulate Starhub for its gesture in the interest of the public (although some people say that it is done for commercial reason).
MDA has announced that a new generation set top box will be provided in the future. Any advantage that Singtel can earn by forcing consumers to move to its Mio platform will be temporary and will probably be yield sufficient commercial advantage (but I could be wrong).
I hope that MDA and the acting minister will take the bold step now, instead of waiting for the damage to be done.
Tan Kin Lian
This is a good move, but does not go far enough. The biggest damage is going to occur in respect of existing content, specifically the English Premier League. Over the next few months, many households will have to go through the expensive exercise of switching their platform (from Starhub to Singtel) or installing a new set of cables. It is wasteful and inconvenient.
Singtel is likely to face serious resource issues in meeting the heavy demand and also in addressing the technical issues of connectivity and customer experience. Already, they faced glitches. This is bound to increase significantly.
MDA or the acting minister for information, communication and the arts should take the bold step of mandating that this requirement apply to existing contents as well, to take effect from (say) 1 June 2010. It will be doing a favor for Singtel. They will be able to reach out to a wider audience of viewers and earn additional subscriptions to meet their heavy payment for the EPL content.
Starhub has earlier announced that they will carry the EPL content for free on its cable platform. Singtel should take up this offer, in the interest of Singapore (i.e. to reduce waste). I congratulate Starhub for its gesture in the interest of the public (although some people say that it is done for commercial reason).
MDA has announced that a new generation set top box will be provided in the future. Any advantage that Singtel can earn by forcing consumers to move to its Mio platform will be temporary and will probably be yield sufficient commercial advantage (but I could be wrong).
I hope that MDA and the acting minister will take the bold step now, instead of waiting for the damage to be done.
Tan Kin Lian
Puzzles for school holidays
Try to occupy your children with these puzzles during the school holidays. It is fun and challenges their creativity. The puzzles are FREE. Click here.
A MLM scheme
Hi Mr Tan,
I came across a few website that claims that a person can earn thousands of dollars in a few month by just working from home. Somehow I managed to find a website that is Singapore based that claimed to do that. The website shows a lot of success stories, comments by Singaporeans and also proof of payment etc. Out of curiosity, I went to try out the offer. The website offer a few packages ranging from Free account to SGD$250 a year. I signed up for the SGD$100 2 years package as it seems to be the popular package for starters.
Basically how this thing works is that when you sign up under a specific person, the person will earn commission. The higher the package the referral signed up with, the higher commission they will earn. After which, the person start sending email on tips to get more people sign up i.e. through advertising, words of mouth etc. I tried online advertising and somehow manage to get quite a number of users sign up under me. Most of them sign up the free package (which I suppose will take a lot of years to earn and also I won't earn any commission for that) and also somehow I got 3 person who sign up paid package under me.
During that period of time, users under this program need to reach SGD$100 in order to cash out. Once, I reach SGD$100+, I requested for cash out as I'm afraid that this might not last long. It took quite long for the cash out to process but they did pay me. Although my package still left with 1 more + year. I have stop participate in this program though my account still active. The reason is because I just wanted to know more about how this things work and also I have already got back my money (though I earn a few dollars). Most importantly, I'm afraid that this program might cause some people like students who are not working and fork out their savings. They might lose their money if they cannot find people to sign up under them or they may even pester their friend to sign up under them resulting in lose friendship (see the link below on Push MLM and lose a friend). Moreover, I don't think this kind of program will last long and the person who earn the most is the creator of this program.
I am just wondering what kind of scheme is this called and is this legal? I do have friends who are in MLM who sell health products that also requires to fork out money for products and additional money for training. When they approach me to attend a talk, I will try to avoid. Friendship starts to become drift apart because of this. I frequent read newspaper also found out there are advertisement on "Earn millions dollar a month/year" by attending their seminar to learn more. I never attend such seminar before so I wonder is this similar to one of the above-mentioned story?
It would be glad if you could share your views on the above-mentioned story, Ponzi Scheme, MLM, newspaper ads and related stuff.
Best Regards
Ray
Links
The package that I signed up under (she is the one I keep contact with and I believe she has a lot of people sign up under her)
Push MLM and lose a friend
Friday, March 12, 2010
Land banking - more investors caught
An investor called me. She invested a large sum of money in a land banking project with the promise of 12.5% interest on maturity at the end of 6 months. On maturity, the company did not honor the promise to pay back the investment. They asked her to extend the investment by another 6 months.
She visited a section in Hardware zone and was horrified to learn that many other investors was caught in a similar situation. She refused to extend the investment but the company has not paid back her money, in spite of her repeated requests.
The investor said that she was deceived because the land banking company had a Singapore Quality class awarded by Spring Singapore. She thought that this classification indicate that the company can be trusted to honor its promise.
The land banking company is conducting more road shows and investment talks, and more investors would be caught in this type of investment.
Many investors had already complained to the Commercial Affairs Departments of similar investments during the past year. Apparently, the CAD had not acted on these complaints. During this time, more people are being caught in similar dubious investments. It seems that a few million dollars of investments are being collected each month.
I am really at a loss on how to help these investors who were deceived by these investments. I hope that the newspapers will write a story about it. It should be a crime for the company to take deposits with the promise to return the money with interest, when they do not have a banking licence. How can the Authority stand by and allow such operations to continue?
Tan Kin Lian
She visited a section in Hardware zone and was horrified to learn that many other investors was caught in a similar situation. She refused to extend the investment but the company has not paid back her money, in spite of her repeated requests.
The investor said that she was deceived because the land banking company had a Singapore Quality class awarded by Spring Singapore. She thought that this classification indicate that the company can be trusted to honor its promise.
The land banking company is conducting more road shows and investment talks, and more investors would be caught in this type of investment.
Many investors had already complained to the Commercial Affairs Departments of similar investments during the past year. Apparently, the CAD had not acted on these complaints. During this time, more people are being caught in similar dubious investments. It seems that a few million dollars of investments are being collected each month.
I am really at a loss on how to help these investors who were deceived by these investments. I hope that the newspapers will write a story about it. It should be a crime for the company to take deposits with the promise to return the money with interest, when they do not have a banking licence. How can the Authority stand by and allow such operations to continue?
Tan Kin Lian
Investing in companies
Jack Bogle was the founder of the Vanguard Investment Group - one of the two largest fund managers in America. Vanguard also pioneered the concept of the indexed funds - funds which are invested to mirror the stock market index, such as the S&P index and carry very low expense ratios.
He explained the difference between investing in stocks and investing in companies. The stock investor takes a short term view and trades on the price of the stocks. The investor in companies takes a long term view and looks at the profits earned and dividends distributed by the companies, and is not bothered with the daily price movement of the stocks.
It is difficult for an investor to pick the right companies to invest in. Jack Bogle advise them to invest in the indexed fund, which is invested in a large number of companies that represent the economy. For example, the S&P Index contains the top 500 companies in America that has operations around the world.
The Vanguard S&P funds have an expense ratio of about 0.3%. This is very low compared to an expense ratio of 2%t o 3% charged by many actively managed funds, including the unit trusts available in Singapore.
It may be difficult to find a fund that charges as low as Vanguard. But it is acceptable to invest in a fund with an expense ratio of 0.5% (such as the STI ETF). Here is the accumulated amount from investing $500 a month over 30 years:
Net yield of 5.5% (i.e. 6% - 0.5%), total of $459,517
Net yield of 3.5% (i.e 6% - 2.5%), total of $320,577
You give away 29% of your accumulated savings of $459,517 to get a reduced amount of $320,577 when you invest in a fund that has an expense ratio of 2% higher.
When you invest in companies, you should not bother about any the temporary y fluctuation in the share prices. Although the dividend may be cut during an economic recession, it will be restored when the economy recovers. You only need to make sure that your investments are well diversified, i.e. the fund is invested in many companies, so that any failure of a single company will have a small impact on the fund.
Tan Kin Lian
He explained the difference between investing in stocks and investing in companies. The stock investor takes a short term view and trades on the price of the stocks. The investor in companies takes a long term view and looks at the profits earned and dividends distributed by the companies, and is not bothered with the daily price movement of the stocks.
It is difficult for an investor to pick the right companies to invest in. Jack Bogle advise them to invest in the indexed fund, which is invested in a large number of companies that represent the economy. For example, the S&P Index contains the top 500 companies in America that has operations around the world.
The Vanguard S&P funds have an expense ratio of about 0.3%. This is very low compared to an expense ratio of 2%t o 3% charged by many actively managed funds, including the unit trusts available in Singapore.
It may be difficult to find a fund that charges as low as Vanguard. But it is acceptable to invest in a fund with an expense ratio of 0.5% (such as the STI ETF). Here is the accumulated amount from investing $500 a month over 30 years:
Net yield of 5.5% (i.e. 6% - 0.5%), total of $459,517
Net yield of 3.5% (i.e 6% - 2.5%), total of $320,577
You give away 29% of your accumulated savings of $459,517 to get a reduced amount of $320,577 when you invest in a fund that has an expense ratio of 2% higher.
When you invest in companies, you should not bother about any the temporary y fluctuation in the share prices. Although the dividend may be cut during an economic recession, it will be restored when the economy recovers. You only need to make sure that your investments are well diversified, i.e. the fund is invested in many companies, so that any failure of a single company will have a small impact on the fund.
Tan Kin Lian
A tale of two neighboring countries
My friend lived in Canada and the United States. Although these two countries are similar in many aspects, they are quite different in their economic philosophy.
The Canadians pay higher taxes but are able to enjoy many social services provided free or highly subsidized by the state, such as health care, education and security. The Americans pay lower taxes but have to pay more for their private health care and also to take care of their security.
Although America claims to have lower taxes, they are not collecting sufficient tax to pay for their medicare, social security and unemployment benefits. This has resulted in their large budget. deficit.
Americans dislike the word "socialist". In Canada, socialism is considered to be desirable. He finds the Canadian system to be better for the people.
Tan Kin Lian
The Canadians pay higher taxes but are able to enjoy many social services provided free or highly subsidized by the state, such as health care, education and security. The Americans pay lower taxes but have to pay more for their private health care and also to take care of their security.
Although America claims to have lower taxes, they are not collecting sufficient tax to pay for their medicare, social security and unemployment benefits. This has resulted in their large budget. deficit.
Americans dislike the word "socialist". In Canada, socialism is considered to be desirable. He finds the Canadian system to be better for the people.
Tan Kin Lian
Interest charge on installment payment
I saw the following advertisements in the newspaper:
Acer netbook, cash price $599, weekly installment of $5.47 over 48 months
Toshiba notebook, cash price $939, weekly installment of $8.58 over 48 months
In both cases, the installment payment plan charges an interest rate of 0.7% per week, or 36% per annum. By paying cash, the consumer will save on interest rate of 36%. The total amount payable over 4 years represent an additional 90% of the cash price.
If the consumer pays in cash, he would be able to get two netbooks or notebooks for the same amount payable.
Note: you can calculate the interest rate in this type of transaction by using the Excel function called Rate.
Tan Kin Lian
Acer netbook, cash price $599, weekly installment of $5.47 over 48 months
Toshiba notebook, cash price $939, weekly installment of $8.58 over 48 months
In both cases, the installment payment plan charges an interest rate of 0.7% per week, or 36% per annum. By paying cash, the consumer will save on interest rate of 36%. The total amount payable over 4 years represent an additional 90% of the cash price.
If the consumer pays in cash, he would be able to get two netbooks or notebooks for the same amount payable.
Note: you can calculate the interest rate in this type of transaction by using the Excel function called Rate.
Tan Kin Lian
Thursday, March 11, 2010
Singapore Savings Account Rates
Dear Mr. Tan,
I read your post,asking for readers to post bank interest rate.
Below is a website updated now and then about interest rate at different bank:
http://singapore-savings-account-rates.blogspot.com/
Yours sincerely,
Wei En
I read your post,asking for readers to post bank interest rate.
Below is a website updated now and then about interest rate at different bank:
http://singapore-savings-account-rates.blogspot.com/
Yours sincerely,
Wei En
Financial crisis in Ireland and USA
This article shows the key causes of the financial crisis in Ireland and USA. Read it, I get the feeling that the same factors apply to Singapore.
Decreasing Term Assurance
It is difficult to buy Decreasing Term Assurance in Singapore, as many life insurance companies are not keen to offer this product. I hope that this situation will change and some companies may sieze this market opportunity.
Let me explain the concept of Decreasing Term Assurance. Suppose you earn $4,000 a month and you need to set aside $2,000 for the upkeep of the family. You should choose a Term of 25 years, so that your youngest child will be independent at the end of that period. You will need a sum assured of $2,000 X 12 X 25 = $600,000. As each year passes, you need a lower cover, as the period of dependency reduces by one year. Your sum assured can reduce by $24,000 a year.
I assume that you have bought insurance to cover the mortgage of your home, so the home will be fully paid in the event of premature death. The $2,000 a month is adequate to cover the needs of the family.
If you buy insurance for $600,000 at age 30 for 25 years, and you wish to sum assured to remain level, you have to pay an annual premium (estimated) of $1,000. If you buy a Decreasing Term, the annual premium will reduce to $400 (or therabouts). By passing less on the premium, you can have more savings in a low cost fund for your future retirement.
Tan Kin Lian
Let me explain the concept of Decreasing Term Assurance. Suppose you earn $4,000 a month and you need to set aside $2,000 for the upkeep of the family. You should choose a Term of 25 years, so that your youngest child will be independent at the end of that period. You will need a sum assured of $2,000 X 12 X 25 = $600,000. As each year passes, you need a lower cover, as the period of dependency reduces by one year. Your sum assured can reduce by $24,000 a year.
I assume that you have bought insurance to cover the mortgage of your home, so the home will be fully paid in the event of premature death. The $2,000 a month is adequate to cover the needs of the family.
If you buy insurance for $600,000 at age 30 for 25 years, and you wish to sum assured to remain level, you have to pay an annual premium (estimated) of $1,000. If you buy a Decreasing Term, the annual premium will reduce to $400 (or therabouts). By passing less on the premium, you can have more savings in a low cost fund for your future retirement.
Tan Kin Lian
Benefit Illustration of new plans
Dear all,
Below are the benefit illustration and policy summary for the 4 newer products since 2008 for ntuc income. They are all based on 30 yr-old male customer. Do note that all figures are projected and "hope for the best", unless stated unequivocally as Guaranteed.
1. Vivolife $100K sum assured & pay for 20yrs
2. Revosave $50K sum assured & pay for 25yrs
3. Sail $50K single premium & tenor of 30yrs
4. Vivolink regular ILP $500/mth
Consultant
Below are the benefit illustration and policy summary for the 4 newer products since 2008 for ntuc income. They are all based on 30 yr-old male customer. Do note that all figures are projected and "hope for the best", unless stated unequivocally as Guaranteed.
1. Vivolife $100K sum assured & pay for 20yrs
2. Revosave $50K sum assured & pay for 25yrs
3. Sail $50K single premium & tenor of 30yrs
4. Vivolink regular ILP $500/mth
Consultant
Disability income insurance
A reader sent to me a brochure about a disability income insurance called PaySecure. It shows an example for a person aged 30 insuring for $3,000 a month payable on disability (excluding the first 90 day) until age 55. The monthly premium is about 1% of the insured sum, i.e. about $30. The premium rate is not guaranteed and may be adjusted based on future experience.
The features of this plan looks quite satisfactory, but it is better for the consumer to get a benefit illustration of this plan specific to your age and personal circumstances. You can send the benefit illustration to me.
The consumer should also ask the insurance company to provide the loss ratio (i.e. the ratio of claims paid to the premiums received). If the loss ratio is 60% to 70%, the insurance is fairly priced. This method is explained in my book, Practical Guide on Financial Planning. If the insurance company refuses to provide this information, you should not buy the product as you may be unfairly charged.
The features of this plan looks quite satisfactory, but it is better for the consumer to get a benefit illustration of this plan specific to your age and personal circumstances. You can send the benefit illustration to me.
The consumer should also ask the insurance company to provide the loss ratio (i.e. the ratio of claims paid to the premiums received). If the loss ratio is 60% to 70%, the insurance is fairly priced. This method is explained in my book, Practical Guide on Financial Planning. If the insurance company refuses to provide this information, you should not buy the product as you may be unfairly charged.
Interest rate on bank deposits
Can you share information on the interest rate that you earn on savings account, save-as-you-earn account and fixed deposit of the banks. Show the following:
1. type of account
2. duration (for fixed deposit)
3. bank
4. amount invested
5. interest rate
6. any special condition, e.g. special terms for preferred customer
1. type of account
2. duration (for fixed deposit)
3. bank
4. amount invested
5. interest rate
6. any special condition, e.g. special terms for preferred customer
Wednesday, March 10, 2010
Yield on life insurance policies
A consumer sent me the benefit illustration for three plans. I have calculated the yield to be as follows:
If you are investing for 10 years or longer, you should aim to get at least 4% per annum.
Tan Kin Lian
Plan | Term | Yield p.a. | Reduction in yield |
Growth - single premuim | 5 yrs | 2.94% | |
Growth Link (AIM) - single premium | 30 yrs | 3.52% | 1.73% |
Revosave - monthly premium | 15 yrs | 2.82% | 2.43% |
The return on the growth plan is fairly satisfactory. The return for the other two plans are not attractive, considering the duration of investment. The are based on a projected yield of 5.25%. If the actual yield is lower, the yield on the policy will be lower than illustrated.
If you are investing for 10 years or longer, you should aim to get at least 4% per annum.
Tan Kin Lian
Shuttle service to Liang Court
I drove to Novotel Hotel in Liang Court to attend a conference. I paid a total of $9.50 in ERP charges at 2 gantry points along the CTE and 1 gantry point to enter CBD.
I was quite surprised that the parking fee for 3 hours at Liang Court was quite modest at $1 per hour. I also learned that Liang Court provides a shuttle service to Clarke Quay station. If I knew about the shuttle service, I would have avoided driving.
I was quite surprised that the parking fee for 3 hours at Liang Court was quite modest at $1 per hour. I also learned that Liang Court provides a shuttle service to Clarke Quay station. If I knew about the shuttle service, I would have avoided driving.
Improve productivity in Singapore`
Here are my views on how to improve productivity in Singapore.
Share your views on how to improve productivity in Singapore.
Share your views on how to improve productivity in Singapore.
Benefit Illustration - distribution cost and effect of deduction
A consumer ask my advice on a new product that is being sold to her. It is a life insurance policy with the benefit paid in installments over a period of years (similar to a life annuity). She sent a 15 page benefit illustration on this product to me. She was confused with the explanation by the financial consultant.
I find it difficult to understand the product based on the benefit illustration. There are a lot of information, including items that are not related to the product itself. The additional information gives opportunity to the financial consultant to mislead the consumer when she explains the product.
The distribution cost was $14,000 and there is a statement "please note that the distribution cost is not an additional cost to you, it has already been allowed for in calculating the premium". I find this statement to be misleading - it is a cost paid by the consumer and is a lot of money for financial advice that is confusing and detrimental for the consumer.
I found the "effect of deduction" after 30 years to be horrendous. Based on projected investment yield of 5.25%, the accumulated premium amounts to $840,000, effect of deduction is shown as $611,000 (73%) and the amount payable to the consumer is $231,000 (23%).
What kind of financial product takes away 73% of the accumulated savings from you and leave you with only 27%? I do not know if these figures have been calculated correctly, but they appear in the benefit illustration.
I have advised that the "effect of deduction" should not exceed 20% for most types of long term products. I complained when the ratio is 40%. Now I have seen a ratio of 73% for this product. It is tantamount to daylight robbery and cheating of unwary consumers.
Perhaps the Monetary Authority of Singapore should contact me so I can ask the consumer to send the benefit illustration for their study. This type of product should not be allowed to be sold to consumers, as they are clearly unfair. Perhaps the benefit illustration should be changed, so that it contains information that is clearly understood by the consumer, without giving opportunity for the financial consultant to mislead the consumer through verbal explanation.
Tan Kin Lian
I find it difficult to understand the product based on the benefit illustration. There are a lot of information, including items that are not related to the product itself. The additional information gives opportunity to the financial consultant to mislead the consumer when she explains the product.
The distribution cost was $14,000 and there is a statement "please note that the distribution cost is not an additional cost to you, it has already been allowed for in calculating the premium". I find this statement to be misleading - it is a cost paid by the consumer and is a lot of money for financial advice that is confusing and detrimental for the consumer.
I found the "effect of deduction" after 30 years to be horrendous. Based on projected investment yield of 5.25%, the accumulated premium amounts to $840,000, effect of deduction is shown as $611,000 (73%) and the amount payable to the consumer is $231,000 (23%).
What kind of financial product takes away 73% of the accumulated savings from you and leave you with only 27%? I do not know if these figures have been calculated correctly, but they appear in the benefit illustration.
I have advised that the "effect of deduction" should not exceed 20% for most types of long term products. I complained when the ratio is 40%. Now I have seen a ratio of 73% for this product. It is tantamount to daylight robbery and cheating of unwary consumers.
Perhaps the Monetary Authority of Singapore should contact me so I can ask the consumer to send the benefit illustration for their study. This type of product should not be allowed to be sold to consumers, as they are clearly unfair. Perhaps the benefit illustration should be changed, so that it contains information that is clearly understood by the consumer, without giving opportunity for the financial consultant to mislead the consumer through verbal explanation.
Tan Kin Lian
Tuesday, March 09, 2010
Personal budget
I need some real life examples from Singaporeans who are able to save at least 15% of their earnings, in addition to contributing to CPF: Please send your details to kinlian@gmail.com
Single
1. Your monthly income
2. Contribution to parents
3. Essential personal expenses - e.g. travel, food, clothes
4. Repayment of loans - type and amount
5. Monthly savings
6. Balance available for holidays and other discretionary items
Family
Single
1. Your monthly income
2. Contribution to parents
3. Essential personal expenses - e.g. travel, food, clothes
4. Repayment of loans - type and amount
5. Monthly savings
6. Balance available for holidays and other discretionary items
Family
1. Your monthly income incluidng spouse
2. Number of children
3. Essential personal expenses - e.g. travel, food, clothes, mobilephone
4. Repayment of loans - type and amount, e.g. house, car
5. Household expenses
6. Car or transport expenses
7. Expenses of children
8. Monthly savings
9. Balance available for holidays and other discretionary items
Cost of owning a car
I need your assistance to give some real life examples of the cost of owning a car. Please send your case study to me at kinlian@gmail.com.
1. Cost of buying your car - new/ used?
2. Initial payment
3. Loan taken, repayment period, interest, monthly payment
4. Cost of petrol per month
5. Cost of insurance (yearly)
6. Cost of parking, ERP per month (on average)
7. Cost of repairs
1. Cost of buying your car - new/ used?
2. Initial payment
3. Loan taken, repayment period, interest, monthly payment
4. Cost of petrol per month
5. Cost of insurance (yearly)
6. Cost of parking, ERP per month (on average)
7. Cost of repairs
Advertising and impact on policy bonus
When a business spends a lot of money to advertise its products or improve its corporate image, the money comes from the shareholders. They hope to attract more customers and earn the profit to cover the advertising cost.
The situation is different when it comes to large advertising by life insurance companies. The marketing expenses comes from the existing policyholders. The large amount that is spent will have a big impact on the bonuses that the policyholders can expect to receive on their savings. The more that is spent, the lower is the bonus.
In recent years, many life insurance companies have reduced their bonus rates significantly, but they continue to spend a lot of money on their advertisements. If the insurance company is truly looking after the interest of its policyholders, they should be increasing the bonus rates, rather than spending money on advertisements and marketing that do not benefit the existing policyholders.
If you find that you insurance company has big advertisements, you should ask this question. Are they spending my money? Is this affecting my policy bonus? Can I continue to trust this insurance company to look after my interest?
I have decided to terminate most of my life insurance policies, as I do not like the large sums that are being spent on advertising, marketing and image building (at the expense of existing policyholders) and the lower rates of bonuses that are now being given to the policyholders.
Tan Kin Lian
The situation is different when it comes to large advertising by life insurance companies. The marketing expenses comes from the existing policyholders. The large amount that is spent will have a big impact on the bonuses that the policyholders can expect to receive on their savings. The more that is spent, the lower is the bonus.
In recent years, many life insurance companies have reduced their bonus rates significantly, but they continue to spend a lot of money on their advertisements. If the insurance company is truly looking after the interest of its policyholders, they should be increasing the bonus rates, rather than spending money on advertisements and marketing that do not benefit the existing policyholders.
If you find that you insurance company has big advertisements, you should ask this question. Are they spending my money? Is this affecting my policy bonus? Can I continue to trust this insurance company to look after my interest?
I have decided to terminate most of my life insurance policies, as I do not like the large sums that are being spent on advertising, marketing and image building (at the expense of existing policyholders) and the lower rates of bonuses that are now being given to the policyholders.
Tan Kin Lian
Monday, March 08, 2010
Difficulty in submitting Income Tax statements
I just submitted my income tax statement to IRAS through e-filing. Like in previous years, I had a difficult time. The technology used is good for IRAS but is troublesome for the tax payer.
Here are my difficulties:
a) I received consultancy income from two sources and I do not know if the client is auto-filing my income. To find out, I had to search through a long PDF document. Rather than search this document, I prefer to enter the amount myself. But the form does not allow me to state the name of the client. If they enter the amount separately through auto-filing, I would have to pay tax twice on the same source.
b) There are a few places where I missed a entire section because IRAS hide the details under a button, e.g. rental income and relief. I was reminded by the IRAS prompt, but why hide them in the first place?
c) After entering the details of my tax returns, I click on one button my mistake (as it was not clear) and found, to my horror, that all my entries were deleted. I had to painfully enter all the fields again.
d) I managed to get to the submission form on my second attempt. I found, to my surprise, that the claim for life insurance premium was not shown. I was quite sure that I had entered the figures. I search the form twice and managed to find a button called "Amend". After several clicks and doing my best to avoid any mistake, I managed to get to the life insurance form. I found that my earlier entry was recorded - but why did IRAS mislead me with a blank amount in the final submission form?
IRAS should realise the stress and trouble their technology is giving to the tax payer. As we submit the form only once a year, we should not be expected to learn the technical features of e-filing. IRAS seems to forget that the taxpayer has other responsibilities, such as keeping records of all items of income and payments, and it is unfair for IRAS to add the hassle of e-filing on the tax payer.
Tan Kin Lian
Here are my difficulties:
a) I received consultancy income from two sources and I do not know if the client is auto-filing my income. To find out, I had to search through a long PDF document. Rather than search this document, I prefer to enter the amount myself. But the form does not allow me to state the name of the client. If they enter the amount separately through auto-filing, I would have to pay tax twice on the same source.
b) There are a few places where I missed a entire section because IRAS hide the details under a button, e.g. rental income and relief. I was reminded by the IRAS prompt, but why hide them in the first place?
c) After entering the details of my tax returns, I click on one button my mistake (as it was not clear) and found, to my horror, that all my entries were deleted. I had to painfully enter all the fields again.
d) I managed to get to the submission form on my second attempt. I found, to my surprise, that the claim for life insurance premium was not shown. I was quite sure that I had entered the figures. I search the form twice and managed to find a button called "Amend". After several clicks and doing my best to avoid any mistake, I managed to get to the life insurance form. I found that my earlier entry was recorded - but why did IRAS mislead me with a blank amount in the final submission form?
IRAS should realise the stress and trouble their technology is giving to the tax payer. As we submit the form only once a year, we should not be expected to learn the technical features of e-filing. IRAS seems to forget that the taxpayer has other responsibilities, such as keeping records of all items of income and payments, and it is unfair for IRAS to add the hassle of e-filing on the tax payer.
Tan Kin Lian
Mortgage Protector from Aviva
Dear Mr Tan
I would appreciate if you can review the above insurance plan for me. (Attached are two benefit illustrations for the Morgage Protector plans from Aviva).
REPLY
I compared the monthly premium with the benchmark premium (for decreasing term insurance) shown in my book, Practical Guide on Practical Insurance. I find the premium rate charged for Aviva for the Mortgage Protector policy to be reasonable.
However, if I were in your shoes, I would probably buy the Mortgage Protector only, without the Critical Illness Accelerator, as the additional premium of 80% does not seem to be worth paying.
You can buy my book here.
I would appreciate if you can review the above insurance plan for me. (Attached are two benefit illustrations for the Morgage Protector plans from Aviva).
REPLY
I compared the monthly premium with the benchmark premium (for decreasing term insurance) shown in my book, Practical Guide on Practical Insurance. I find the premium rate charged for Aviva for the Mortgage Protector policy to be reasonable.
However, if I were in your shoes, I would probably buy the Mortgage Protector only, without the Critical Illness Accelerator, as the additional premium of 80% does not seem to be worth paying.
You can buy my book here.
Appreciation to Minister Mah Bow Tan
William Tay
'National Development Minister Mah Bow Tan's remarkable story about his childhood years is a lesson for the younger generation. Despite his humble beginnings, he was able to uplift himself to become a government minister. This is testimony to our system of meritocracy which has enabled talented young people from humble backgrounds to rise up and serve the nation.'
'National Development Minister Mah Bow Tan's remarkable story about his childhood years is a lesson for the younger generation. Despite his humble beginnings, he was able to uplift himself to become a government minister. This is testimony to our system of meritocracy which has enabled talented young people from humble backgrounds to rise up and serve the nation.'
Low Lee Siang
I AM a 58-year-old Singaporean who shed tears on reading last Saturday's article, 'Mah's own upgrading story', in which National Development Minister Mah Bow Tan recounted his difficult childhood years growing up in various housing types. Today, I live in an HDB maisonette. Thank you, Singapore.
Replacing a whole life policy
When an insurance agent approaches you to tell you that a new policy is better and advise you to give up an existing policy to convert into the new policy, the insurance agent is 99% likely to be cheating you. Do not believe the agent.
Ask the agent to give you a benefit illustration and send it to me at kinlian@gmail.com. I will point out on where the agent has been misleading you, and how much you would lose in your savings by taking this type of advice. It can cost you a few thousand dollars.
One common practice is to replace a whole life policy by a policy with premium paid for 20 years or shorter. The customer does not know that he has to incur a hefty upfront cost a second time. The premium for the shorter period is much higher than a whole life policy. Further more, the existing whole life policy has an option to covert into a paid up policy at any time, i.e. the policyholder retain the flexibility to stop the policy at any time (but the agent does not explain this option to you).
If you are buying a new policy, you can decide on whether to buy pay a lower premium for a lifetime, or a higher premium for a shorter period. (Frankly, both options are not good for consumers, due to the high upfront cost). But, you should NEVER stop an existing whole policy policy to move into a new policy, as you will be incurring a large cost for the second time.
Tan Kin Lian
Ask the agent to give you a benefit illustration and send it to me at kinlian@gmail.com. I will point out on where the agent has been misleading you, and how much you would lose in your savings by taking this type of advice. It can cost you a few thousand dollars.
One common practice is to replace a whole life policy by a policy with premium paid for 20 years or shorter. The customer does not know that he has to incur a hefty upfront cost a second time. The premium for the shorter period is much higher than a whole life policy. Further more, the existing whole life policy has an option to covert into a paid up policy at any time, i.e. the policyholder retain the flexibility to stop the policy at any time (but the agent does not explain this option to you).
If you are buying a new policy, you can decide on whether to buy pay a lower premium for a lifetime, or a higher premium for a shorter period. (Frankly, both options are not good for consumers, due to the high upfront cost). But, you should NEVER stop an existing whole policy policy to move into a new policy, as you will be incurring a large cost for the second time.
Tan Kin Lian
Regulating business practice of banks
The US Congress debated the charges and practices of banks relating to credit cards and mortgages. The lofty chamber decided that the banks were acting in a predatory manner (i.e. cheating on the consumers) and decided to pass regulations to forbid some of these practices and to ensure fair treatment of consumers. In the land of free market, the legislators decided that they have to go into the nitty gritty of bank practices, instead of letting the free market sort out these problems.
Lesson - free markets ideas can go too far and result in unfair, predatory practices.
Lesson - free markets ideas can go too far and result in unfair, predatory practices.
Excessive bank charges
2 March 2010
Editor
Forum Page
Straits Times
I refer to the letter from Vincent Chan entitled “Why impose hefty credit car surcharge?” (ST 2 March 2010).
I wish to quote two other examples of hefty charges by banks in Singapore:
a. Recently, I made a payment of USD 1,810 to a factory in China. The bank charge amounted to 53 USD was deducted from the payment. The factory in China, which had earlier agreed to bear the bank charge, complained that the charge was too high.
b. I received a letter from my bank stating that the administration fee for a late payment on credit card is $50. This is in addition to the interest rate of 2% per month that they charge on the rollover balance.
In both cases, the bank charges are exorbitant relative to the marginal cost of the service that is being provided.
As the banks are already making big profit from the huge interest spread, why are they allowed to make more profit from these exorbitant charges?
After a customer has opened an account, it is difficult for the customer to change to another bank. In any case, nearly all banks seem to be operating a cartel in levying hefty charges to boost their profits.
I wonder if the Monetary Authority of Singapore considers it to be their duty to regulate the banks to treat customers fairly, including the levying of reasonable charges for essential banking services?
Tan Kin Lian
Bank charges - excessive is the word
I WISH to add to Mr Tan Kin Lian's lament about excessive fee charges by banks in his letter last Thursday, 'Banks do it too'.
My company's bank statement says:
- Balance brought forward (overdrawn) $3.61
- Service charge $15
- Overdrawn interest charge $10
Now how many per cent interest is that?
Michael Lim
Editor
Forum Page
Straits Times
I refer to the letter from Vincent Chan entitled “Why impose hefty credit car surcharge?” (ST 2 March 2010).
I wish to quote two other examples of hefty charges by banks in Singapore:
a. Recently, I made a payment of USD 1,810 to a factory in China. The bank charge amounted to 53 USD was deducted from the payment. The factory in China, which had earlier agreed to bear the bank charge, complained that the charge was too high.
b. I received a letter from my bank stating that the administration fee for a late payment on credit card is $50. This is in addition to the interest rate of 2% per month that they charge on the rollover balance.
In both cases, the bank charges are exorbitant relative to the marginal cost of the service that is being provided.
As the banks are already making big profit from the huge interest spread, why are they allowed to make more profit from these exorbitant charges?
After a customer has opened an account, it is difficult for the customer to change to another bank. In any case, nearly all banks seem to be operating a cartel in levying hefty charges to boost their profits.
I wonder if the Monetary Authority of Singapore considers it to be their duty to regulate the banks to treat customers fairly, including the levying of reasonable charges for essential banking services?
Tan Kin Lian
Bank charges - excessive is the word
I WISH to add to Mr Tan Kin Lian's lament about excessive fee charges by banks in his letter last Thursday, 'Banks do it too'.
My company's bank statement says:
- Balance brought forward (overdrawn) $3.61
- Service charge $15
- Overdrawn interest charge $10
Now how many per cent interest is that?
Michael Lim
Prime Minister of China
I have high respect for Wen Jiabao, Prime Minister of China. He is humble and in touch with the ordinary people. He governs a country which is 300 times of Singapore, draws a salary of one-tenth of any Singapore minister and is willing to tackle the challenges of income inequality and asset inflation in China. He does not say that these matters can be left to the market to sort out. He sets a good example and is a role model for public service.
Tan Kin Lian
Tan Kin Lian
Sunday, March 07, 2010
Petition - Employ Singaporeans First
Dear Friends,
Do support my petition to "Employ Singaporeans First" -
Due to the recent high influx of foreigners, many of our own people are been sidelined by employers. Many new graduates are also jobless now as they have to compete with thousands of foreigners for jobs.
Our people are also not protected by any minimum wage policy here and their salaries have being pressed down by cheaper foreigner imports. Employers are kings now as they have a host of choices now whenever they advertise for positions. Many who apply for jobs are foreigners.
This petition urges all employers in Singapore to consider employing Singaporeans FIRST despite the slightly higher cost and their older age. If not, we will see ourselves being over-run by foreigners in time to come.
If you support this cause, do sign on the peition so that we can rally together and bring hope to those who are jobless and struggling. Do also spread this cause to your friends for active participation! We need to send the right message out to our government!
Singapore for Singaporeans!
Gilbert Goh
Possible security fraud - Toyota and Countrywide
The US firm Kirby McInerney is investigating possible securities fraud cases against Toyota (TM) involving the decline in its common stock price following recalls related to brake problems, and Countrywide (CFC) involving the sale of certain mortgage backed securities (MBS) issued by it.
If you purchased a large amount of stock in Toyota or MBS issued by Countrywide, then you may wish to contact the firm to find out more. You may email a partner at the firm Daniel Hume, who I have met, at dhume@kmllp.com.
Tan Kin Lian
If you purchased a large amount of stock in Toyota or MBS issued by Countrywide, then you may wish to contact the firm to find out more. You may email a partner at the firm Daniel Hume, who I have met, at dhume@kmllp.com.
Tan Kin Lian
Dementia (also called senility)
Dementia is a word for a group of symptoms caused by disorders that affect the brain. It is not a specific disease.
People with dementia may not be able to think well enough to do normal activities, such as getting dressed or eating. They may lose their ability to solve problems or control their emotions. Their personalities may change. They may become agitated or see things that are not there.
Memory loss is a common symptom of dementia. However, memory loss by itself does not mean you have dementia. People with dementia have serious problems with two or more brain functions, such as memory and language.
Many different diseases can cause dementia, including Alzheimer's disease and stroke. Drugs are available to treat some of these diseases. While these drugs cannot cure dementia or repair brain damage, they may improve symptoms or slow down the disease.
Many people say that the best way to prevent dementia is to exercise your mind regularly, with games such as Sudoku or other puzzles. I have written puzzle books, which contain tips on how to solve these puzzles. After you learn the technique, you can go through the puzzles as a form of daily exercise.
You can view free copies of these puzzles here. For our seniors, you should invest time and a few dollar to keep dementia away.
Challenging Sudoku
I have published 2 volumes of my book containing challenging Sudoku puzzles. They are published for the Sudoku experts and have similar level of difficulty as the puzzles published in Weekend Today and in The Sunday Times. I enjoy working on these weekend puzzles - as a test of my mental agility.
I also work on the puzzles in my Sudoku books. If I am alert or lucky, I can complete a puzzle within 5 minutes. Sometimes, I take 10 minutes, if I get stuck. I write down the time taken to solve each puzzle in the book. I am also able to check the solution at the back of the book, although this is usually not necessary.
You can order Challenging Sudoku here. You can develop your own skill in solving difficult puzzles through practice. You can also buy this book as a gift to a friend or a relative who is hooked on Sudoku. The pocket book version (suitable to play in the train, bus and plane) is called Logic9.
I also work on the puzzles in my Sudoku books. If I am alert or lucky, I can complete a puzzle within 5 minutes. Sometimes, I take 10 minutes, if I get stuck. I write down the time taken to solve each puzzle in the book. I am also able to check the solution at the back of the book, although this is usually not necessary.
You can order Challenging Sudoku here. You can develop your own skill in solving difficult puzzles through practice. You can also buy this book as a gift to a friend or a relative who is hooked on Sudoku. The pocket book version (suitable to play in the train, bus and plane) is called Logic9.
Affordable housing
What is "affordable housing"? The minister for national development said in Parliament that new HDB flats are still affordable and has produced studies to prove his point. Critics have brought up arguments from the other side to show that HDB flats are expensive for the working people. I shall be writing to give my views of this point within the next few days.
In the meantime, I invite you to share your comments.
In the meantime, I invite you to share your comments.
Productivity and related issues
Singapore is now embarking on a strategic thrust to improve productivity and reduce reliance on low cost foreign workers. A few people has asked, "What is productivity? How do we measure it?"
In its simplest form, productivity means to do a given quantity of work in less time, or to do more work in a given time. in both cases while maintaining the same quality of work.
We need to go to the next level and define, "If workers are more productive, should they earn more for their time and how much of the gain should go to the worker?". To answer this question, we have to recognize that the productivity comes from all factors of production - labor, capital, entrepreneurship and property. If the labor content is say 50%, then it is fair that 50% of the productivity gain should go to the workers.
We have to address another social question. If the productivity increases 100% and one worker can do the work previously done by two workers, who will provide the work for the displaced worker? The classic answer is "leave it to the free market". The displaced worker can find other suitable jobs in the market.
But this classic answer has proved to be false. During the past decade, the global economy was able to provide a lot of good paying jobs in the financial services sector, especially in creating "innovative" products. These innovative products are used to create bubbles in real estate, stock market, foreign exchange market and in other forms of financial speculation. The bubbles have deflated during the past two years, causing massive loss of jobs. While new bubbles can be created in other markets, history has shown that they will eventually lead to disaster. In the meantime, many countries will find it difficult to create new jobs in the real economy. This is why many economists hold the view that the recession in America will take a long time to recover.
Here is my perspective. Each person needs only a certain amount of goods and services. The global demand will be limited by the population size and the time available to enjoy the goods that have been produced. If people are working too hard, they do not have the time to enjoy the products, while unemployed people do not have the income to spend on these products. This is why the disparity of income in the past two decades have brought disaster to the global economy.
The answer to higher productivity is straight forward. With improved productivity, we should reduce the hours of work for each working person so that the total demand and necessary work is shared fairly by all available workers.This could mean a 35 or 30 hour week. The incomes do not need to be equal, but the disparity should not be so wide.
Tan Kin Lian
In its simplest form, productivity means to do a given quantity of work in less time, or to do more work in a given time. in both cases while maintaining the same quality of work.
We need to go to the next level and define, "If workers are more productive, should they earn more for their time and how much of the gain should go to the worker?". To answer this question, we have to recognize that the productivity comes from all factors of production - labor, capital, entrepreneurship and property. If the labor content is say 50%, then it is fair that 50% of the productivity gain should go to the workers.
We have to address another social question. If the productivity increases 100% and one worker can do the work previously done by two workers, who will provide the work for the displaced worker? The classic answer is "leave it to the free market". The displaced worker can find other suitable jobs in the market.
But this classic answer has proved to be false. During the past decade, the global economy was able to provide a lot of good paying jobs in the financial services sector, especially in creating "innovative" products. These innovative products are used to create bubbles in real estate, stock market, foreign exchange market and in other forms of financial speculation. The bubbles have deflated during the past two years, causing massive loss of jobs. While new bubbles can be created in other markets, history has shown that they will eventually lead to disaster. In the meantime, many countries will find it difficult to create new jobs in the real economy. This is why many economists hold the view that the recession in America will take a long time to recover.
Here is my perspective. Each person needs only a certain amount of goods and services. The global demand will be limited by the population size and the time available to enjoy the goods that have been produced. If people are working too hard, they do not have the time to enjoy the products, while unemployed people do not have the income to spend on these products. This is why the disparity of income in the past two decades have brought disaster to the global economy.
The answer to higher productivity is straight forward. With improved productivity, we should reduce the hours of work for each working person so that the total demand and necessary work is shared fairly by all available workers.This could mean a 35 or 30 hour week. The incomes do not need to be equal, but the disparity should not be so wide.
Tan Kin Lian
Buying a life annuity for a parent
Dear Mr Tan,
My father is going 58 and has only $30,000 in his retirement account. I was thinking of helping him to purchase either the NTUC Income Classic Annuity or the Growth Plan.
Since both plans require a SRS account, I thought of buying a Growth Plan for my Dad using his retirement account to earn a get a greater return, by registering with one of the SRS operators and subsequently use this SRS account of $29K to buy Growth Plan.
Can I do that? I am not sure because I understand that there is a so called minimum sum required in RA and RA cannot be used to buy anything except annuity.
REPLY
The money in the CPF Special Account (or Retirement Account) now earns interest at 4% plus a bonus. The return from the Growth plan is likely to be 3% or less. The agent who made this recommendation is probably giving bad advice, either intentionally or by mistake.
Please ask the agent to give you a benefit illustration for the Growth plan and send it to me at kinlian@gmail.com.
It is better for you to help your father by topping up his CPF Special Account. You will enjoy tax savings on the contribution and allow him to earn a higher rate of return of 4%. When he reach age 62, it is better for your father to buy the CPF Life, instead of a life annuity from an insurance company.
You can read a chapter on life annuity and CPF Life from my book, Practical Guide on Financial Planning, which can be ordered here:
My father is going 58 and has only $30,000 in his retirement account. I was thinking of helping him to purchase either the NTUC Income Classic Annuity or the Growth Plan.
Since both plans require a SRS account, I thought of buying a Growth Plan for my Dad using his retirement account to earn a get a greater return, by registering with one of the SRS operators and subsequently use this SRS account of $29K to buy Growth Plan.
Can I do that? I am not sure because I understand that there is a so called minimum sum required in RA and RA cannot be used to buy anything except annuity.
REPLY
The money in the CPF Special Account (or Retirement Account) now earns interest at 4% plus a bonus. The return from the Growth plan is likely to be 3% or less. The agent who made this recommendation is probably giving bad advice, either intentionally or by mistake.
Please ask the agent to give you a benefit illustration for the Growth plan and send it to me at kinlian@gmail.com.
It is better for you to help your father by topping up his CPF Special Account. You will enjoy tax savings on the contribution and allow him to earn a higher rate of return of 4%. When he reach age 62, it is better for your father to buy the CPF Life, instead of a life annuity from an insurance company.
You can read a chapter on life annuity and CPF Life from my book, Practical Guide on Financial Planning, which can be ordered here:
Robert Kennedy on GDP
Robert Kennedy was assassinated in 1968 while running for nomination as the US President. Someone sent to me the following quotation (which I am not able to verify) from him about GNP:
QUOTE
... Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
UNQUOTE
In our drive to increase the GDP of Singapore, we may be making the same mistake mentioned by Robert Kennedy, that we are degrading the quality of life for the people.
Tan Kin Lian
QUOTE
... Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
UNQUOTE
In our drive to increase the GDP of Singapore, we may be making the same mistake mentioned by Robert Kennedy, that we are degrading the quality of life for the people.
Tan Kin Lian
Saturday, March 06, 2010
Contact person for Kirby McInerney
Dear Mr. Tan,
Of late, I have received calls from a few investors (who have read your blog about me) that they have been approached by an unknown person saying that he also represents Kirby McInerney interests and that he could also help to facilitate.
For all intent and purpose, perhaps you could inform all investors in your blog to direct their queries and address their concerns only to me. They should not be talking to anyone else in Singapore who may mislead them. Thank you
Teo Guan Hock
email: tguanhoc@singnet.com.sg
Earthquakes are now quite frequent
I saw these news reports in Channel News Asia:
a. Taiwan quake causes millions of dollars in damage. A powerful earthquake that rocked southern Taiwan caused millions of dollars in damage to infrastructure and business operations, officials and companies said Friday.
b. Strong earthquake strikes off Indonesia. A 6.5-magnitude quake struck late Friday off the coast of Sumatra in Indonesia, seismologists said, but no tsunami alert was issued and there were no reports of damage or injuries.
We seem to have many earthquakes in recent years - starting form the earthquake that caused the Asian Tsunami in 2005 followed the big earthquakes in Sichuan, Haiti and Chile.
Any comments?
a. Taiwan quake causes millions of dollars in damage. A powerful earthquake that rocked southern Taiwan caused millions of dollars in damage to infrastructure and business operations, officials and companies said Friday.
b. Strong earthquake strikes off Indonesia. A 6.5-magnitude quake struck late Friday off the coast of Sumatra in Indonesia, seismologists said, but no tsunami alert was issued and there were no reports of damage or injuries.
We seem to have many earthquakes in recent years - starting form the earthquake that caused the Asian Tsunami in 2005 followed the big earthquakes in Sichuan, Haiti and Chile.
Any comments?
More grads join jobless queues
Read this article by Seah Cheang Nee published in The Star, Malaysia.
Investment tips for retirees
I write this article to help retirees, who are not savvy in investing, to decide on how to invest their savings to get a monthly income for a lifetime and leave behind some balance for their children and grand children. Should they buy a life annuity? If not, how should they invest their money?
Calculate the total amount of your assets, excluding the flat or house that you now live in. Estimate the monthly income that you need to live comfortably. If your total assets is more than 300 times of your monthly income, you are quite comfortable. For example, if you need $1,000 a month, you need more than $300,000 in savings (i.e. personal savings and CPF).
Another way to look at this matter is to take your total assets and divide by 300 to get the monthly income. Will this be sufficient to meet your living expenses?
If you have more than this ratio of assets that can be invested, you can manage your own investments. The best choice is to invest in a low cost investment fund, such as the STI exchange traded fund that is available from the Singapore Exchange (SGX). This fund is invested in the top 30 shares listed in SGX. It is well diversified and has a low expense ratio of less than 0.5% per annum. It will earn a market rate of return, which is likely to average more than 5% over the long term, net of expenses.
If you invest all of your savings in the ETF, you can sell 1,000 shares to realize money to spend at regular intervals. If you need $1,500 a month, the sale of 1,000 shares will provide about $2,800 which can last nearly two months.
If your ratio of assets to monthly income is less than 300 times, you may have to consider investing in a life annuity. The best annuity is provided by CPF Life. It provides an investment yield of about 4% and has low expense ratio. It operates on a mutual basis and shares the actual experience of the fund fairly among all the annuitants, i.e. it is not taken away as profits for shareholders.
Some people are uncertain about the choice of the four options. Look at the amount that you will get under each option and choose the option that suits your need. Do not try to calculate which option gives you the best value, as you really do not know how long your future lifespan is.
If your health is poor, relative to your age, you should avoid CPF Life and keep your money under the Retirement Account to be withdrawn monthly. If you are in fairly good health for your age, you can choose any of the option under CPF Life and leave the worry about future life expectancy and investments to CPF, instead of trying to manage the money yourself.
If you have to buy a life annuity from an insurance company, you have to consider the following - how much of the annuity payout is guaranteed and how much is variable? What is the amount taken away by the insurance company to pay its expenses, distribution cost and profit for shareholders? If the answers to these questions are vague, or if the amount that is taken away is more than 0.2% per annum of your invested sum, the annuity is likely to give poor value.
There is a chapter on selecting a life annuity in my book, Practical Guide on Financial Planning. It is available in the major bookstores and can be ordered online here.
Tan Kin Lian
Calculate the total amount of your assets, excluding the flat or house that you now live in. Estimate the monthly income that you need to live comfortably. If your total assets is more than 300 times of your monthly income, you are quite comfortable. For example, if you need $1,000 a month, you need more than $300,000 in savings (i.e. personal savings and CPF).
Another way to look at this matter is to take your total assets and divide by 300 to get the monthly income. Will this be sufficient to meet your living expenses?
If you have more than this ratio of assets that can be invested, you can manage your own investments. The best choice is to invest in a low cost investment fund, such as the STI exchange traded fund that is available from the Singapore Exchange (SGX). This fund is invested in the top 30 shares listed in SGX. It is well diversified and has a low expense ratio of less than 0.5% per annum. It will earn a market rate of return, which is likely to average more than 5% over the long term, net of expenses.
If you invest all of your savings in the ETF, you can sell 1,000 shares to realize money to spend at regular intervals. If you need $1,500 a month, the sale of 1,000 shares will provide about $2,800 which can last nearly two months.
If your ratio of assets to monthly income is less than 300 times, you may have to consider investing in a life annuity. The best annuity is provided by CPF Life. It provides an investment yield of about 4% and has low expense ratio. It operates on a mutual basis and shares the actual experience of the fund fairly among all the annuitants, i.e. it is not taken away as profits for shareholders.
Some people are uncertain about the choice of the four options. Look at the amount that you will get under each option and choose the option that suits your need. Do not try to calculate which option gives you the best value, as you really do not know how long your future lifespan is.
If your health is poor, relative to your age, you should avoid CPF Life and keep your money under the Retirement Account to be withdrawn monthly. If you are in fairly good health for your age, you can choose any of the option under CPF Life and leave the worry about future life expectancy and investments to CPF, instead of trying to manage the money yourself.
If you have to buy a life annuity from an insurance company, you have to consider the following - how much of the annuity payout is guaranteed and how much is variable? What is the amount taken away by the insurance company to pay its expenses, distribution cost and profit for shareholders? If the answers to these questions are vague, or if the amount that is taken away is more than 0.2% per annum of your invested sum, the annuity is likely to give poor value.
There is a chapter on selecting a life annuity in my book, Practical Guide on Financial Planning. It is available in the major bookstores and can be ordered online here.
Tan Kin Lian
Friday, March 05, 2010
China must reverse inequalities
By Michael Bristow
BBC News, BeijingChinese Premier Wen Jiabao has said China must reverse its widening income gap between rich and poor.
He said benefits of a growing economy - expected to expand by 8% this year - should be distributed more fairly.
In a major speech at the start of China's annual parliamentary session, the premier also said the economy needed restructuring.
He wants Chinese firms to improve their ability to innovate, producing high-tech and high-quality products.
The premier's comments came in a wide-ranging speech delivered in Beijing's Great Hall of the People, where the largely ceremonial parliamentary session is being held.
In the keynote speech, Mr Wen reviewed the government's work over the past 12 months and set out its policy goals for the coming year.
Registration reform
The speech touched on many issues, but on a number of occasions the premier spoke about the need to make China a fairer society.
"We will not only make the 'pie' of social wealth bigger by developing the economy, but also distribute it well," Mr Wen told about 3,000 delegates, returning to a theme that he has often spoken about during his premiership.
"[We will] resolutely reverse the widening income gap," he added later, in a speech that lasted more than two hours.
As part of that project, the premier said China would reform the household registration system that classifies people as either city or rural dwellers.
This controversial system means many migrant workers - farmers who travel to towns and cities to find better-paid work - are unable to get proper services.
"[We will] gradually ensure that they receive the same treatment as urban residents in areas such as pay, children's education, healthcare, housing and social security," he said.
But Mr Wen did not outline what policies would be introduced to achieve that aim, and when they would come into force.
And, importantly, he said reforms would only be carried out in towns and smaller cities, suggesting the system would remain in place in big urban centres such as Beijing and Shanghai.
Mr Wen also addressed what he called a "complex situation" facing the economy, which he said should expand by 8% this year.
Fuelled by innovation
Last year China was desperate to keep the economy growing following a global downturn that left many Chinese people without jobs.
But now, having weathered the worst of that crisis, Premier Wen said China needed to concentrate on restructuring the economy.
"This is a crucial year for…accelerating the transformation of the pattern of economic development," he said.
He wants future growth to be fuelled by innovation.
China should also expand consumer demand by getting people to spend on such things as tourism, fitness and other services.
Delegates to the Chinese parliament are selected, not elected, but in his speech Premier Wen indicated that he does listen to those outside the government.
Many people across China are currently concerned about rising house prices that mean many cannot afford a home.Mr Wen said China would do something about it.
In the keynote speech, Mr Wen reviewed the government's work over the past 12 months and set out its policy goals for the coming year.
Registration reform
The speech touched on many issues, but on a number of occasions the premier spoke about the need to make China a fairer society.
"We will not only make the 'pie' of social wealth bigger by developing the economy, but also distribute it well," Mr Wen told about 3,000 delegates, returning to a theme that he has often spoken about during his premiership.
"[We will] resolutely reverse the widening income gap," he added later, in a speech that lasted more than two hours.
As part of that project, the premier said China would reform the household registration system that classifies people as either city or rural dwellers.
This controversial system means many migrant workers - farmers who travel to towns and cities to find better-paid work - are unable to get proper services.
"[We will] gradually ensure that they receive the same treatment as urban residents in areas such as pay, children's education, healthcare, housing and social security," he said.
But Mr Wen did not outline what policies would be introduced to achieve that aim, and when they would come into force.
And, importantly, he said reforms would only be carried out in towns and smaller cities, suggesting the system would remain in place in big urban centres such as Beijing and Shanghai.
Mr Wen also addressed what he called a "complex situation" facing the economy, which he said should expand by 8% this year.
Fuelled by innovation
Last year China was desperate to keep the economy growing following a global downturn that left many Chinese people without jobs.
But now, having weathered the worst of that crisis, Premier Wen said China needed to concentrate on restructuring the economy.
"This is a crucial year for…accelerating the transformation of the pattern of economic development," he said.
He wants future growth to be fuelled by innovation.
China should also expand consumer demand by getting people to spend on such things as tourism, fitness and other services.
Delegates to the Chinese parliament are selected, not elected, but in his speech Premier Wen indicated that he does listen to those outside the government.
Many people across China are currently concerned about rising house prices that mean many cannot afford a home.Mr Wen said China would do something about it.
eGovernment adds to stress and cost
As a director of a small company, I am required to submit application forms for Ministry of Manpower, Inland Revenue and other agencies. They expect me to log into their website using my Sing Pass, and to enter the details in the application form.
In the real world, the paper forms are completed by an office staff and submitted to a director for signature. In the e-Government, they expect the director to complete the form by entering all the details, just like an office staff. This is a big waste of time for the director and is likely to lead to many mistakes.
The e-Government environment should follow the real world and allow a staff to complete the details in the form and then submit it electronically to a director to "e-sign" the form, which can be done by entering the Sing Pass ID and password.
I have given this suggestion to the Infocomm Development Authority (IDA) but was told that these specific applications are under the control of the agency and is outside of the influence of IDA. This is typical of the "turf" mentality of Singapore organisations.
I know that for some applications, it is possible for the director to authorise a staff to submit the forms on behalf of the director. However, this is not practical in many situations and is tentamount to giving the check book and check signing authority to the staff!
The private sector has to work under stress and waste a lot of valuable time complying with the requirements of government agencies. With this type of waste, it is no wonder that the cost of doing business is so high and life is so stressful in Singapore!
Tan Kin Lian
In the real world, the paper forms are completed by an office staff and submitted to a director for signature. In the e-Government, they expect the director to complete the form by entering all the details, just like an office staff. This is a big waste of time for the director and is likely to lead to many mistakes.
The e-Government environment should follow the real world and allow a staff to complete the details in the form and then submit it electronically to a director to "e-sign" the form, which can be done by entering the Sing Pass ID and password.
I have given this suggestion to the Infocomm Development Authority (IDA) but was told that these specific applications are under the control of the agency and is outside of the influence of IDA. This is typical of the "turf" mentality of Singapore organisations.
I know that for some applications, it is possible for the director to authorise a staff to submit the forms on behalf of the director. However, this is not practical in many situations and is tentamount to giving the check book and check signing authority to the staff!
The private sector has to work under stress and waste a lot of valuable time complying with the requirements of government agencies. With this type of waste, it is no wonder that the cost of doing business is so high and life is so stressful in Singapore!
Tan Kin Lian
Books by Tan Kin Lian
My books on financial planning and intelligence quiz are sold at the following bookstores:
1. Harris
2. MPH
3. Kinokuniya
4. Times bookstores
5. Popular
Wasteful security measures
To visit an office in Suntec City, I had to register with the security counter to get an access card and to fill in my particulars. On leaving the building, I had to return the access card. Both activity took me an additional 20 minutes, including time waiting in the long queue. I had to carry two bags containing materials for my talk, so the security measures and waiting time is a big hassle. Nobody bother to look at the contents of my bag - to see if I was carrying a bomb.
Security is important, but are we overdoing it? Is there more effective ways to have security instead of asking visitors to spend a lot of time unnecessarily? All these hassles add to wasted time and higher cost of doing business. If there is a terrorist visiting any large office in Singapore, it is easy to bypass the security measures as the security guards are too busy doing paperwork and recording particulars of genuine visitors.
To be effective, it is better to employ more security guards (i.e. create more employment) to watch the strategic locations, such as lift lobbies or lift cars, and to watch people moving around the office. Security is watching people and not doing paperwork.
You can multiply the wasted time in all of the big office buildings in Singapore to get an idea of the scale of wastefulness. Anyway, Singapore is a wasteful society. We spend a lot of time and money on things that are look good but are not effective.
To be productive, we should be adopting practical measures that reduce our cost and achieve our goals. We have to cut down wastefulness.
Tan Kin Lian
Security is important, but are we overdoing it? Is there more effective ways to have security instead of asking visitors to spend a lot of time unnecessarily? All these hassles add to wasted time and higher cost of doing business. If there is a terrorist visiting any large office in Singapore, it is easy to bypass the security measures as the security guards are too busy doing paperwork and recording particulars of genuine visitors.
To be effective, it is better to employ more security guards (i.e. create more employment) to watch the strategic locations, such as lift lobbies or lift cars, and to watch people moving around the office. Security is watching people and not doing paperwork.
You can multiply the wasted time in all of the big office buildings in Singapore to get an idea of the scale of wastefulness. Anyway, Singapore is a wasteful society. We spend a lot of time and money on things that are look good but are not effective.
To be productive, we should be adopting practical measures that reduce our cost and achieve our goals. We have to cut down wastefulness.
Tan Kin Lian
High cost of driving
I went to Suntec City to deliver a talk. I had to drive there, as I had to carry the materials needed for the talk. I left home at 7.45 a.m. hoping to avoid the ERP charges at Central Expressway. I did not realise that the ERP charges start from 7.30 a.m. I paid a total of $6 for the ERP charges along the expressway and to enter the Central Business District. Parking at Suntec city for slightly longer than 4 hours cost $11. This reminded me of the high cost of driving in Singapore.
Promoting Singapore as a Financial Center
Dear Mr. Tan
From 2005, the MAS has been aggressive in promoting Singapore as a financial centre. Singapore gave tax incentives of all sorts to attract financial institutions to relocate their biz to Singapore.
Many banks relocate their FX, fixed income, structured products biz to Singapore. Also, Singapore has attracted many hedge funds to set up offices here. While the effort did boost Singapore's GDP, it might have also led to the following:
i. inflated real estate prices in commercial offices, residental
ii. more structured products being structured and sold here to unsuspecting retail customers.
HCM
From 2005, the MAS has been aggressive in promoting Singapore as a financial centre. Singapore gave tax incentives of all sorts to attract financial institutions to relocate their biz to Singapore.
Many banks relocate their FX, fixed income, structured products biz to Singapore. Also, Singapore has attracted many hedge funds to set up offices here. While the effort did boost Singapore's GDP, it might have also led to the following:
i. inflated real estate prices in commercial offices, residental
ii. more structured products being structured and sold here to unsuspecting retail customers.
HCM
Unemployment in Singapore
Hi Mr Tan,
I am a keen reader of your blog and I remember previously you were keeping track of employment and retrenchment statistics.
Just want to highlight that MOM recently updated their stats, and also included a new one: Re-Employment i.e. what percentage of retrenched workers were able to find another job within 6 months.
The numbers are not as nice as reported in the news:
1. For 2009, the overall unemployment rate is 3% while the unemployment rate for residents (incl. PRs) is 4.3%. This is higher than in 2001 and just slightly lower than for year 2002. If just looking just at citizens, the unemployment rate may be 5% or higher.
2. The total workers retrenched in 2009 is 19,500. This is similar to year 2002. If combined with 2008, the total number retrenched is 33,420. This is higher than in 1998.
3. Looking at the Re-Employment stats, the percentage of retrenched workers in 2009 who found another job within 6 months is only about 50% or less. This is worse than during the last long recession from 2001 to 2003.
Below is URL for MOM's main statistics page:
ttp://www.mom.gov.sg/publish/momportal/en/communities/others/mrsd/statistics.html
Ex-Con
I am a keen reader of your blog and I remember previously you were keeping track of employment and retrenchment statistics.
Just want to highlight that MOM recently updated their stats, and also included a new one: Re-Employment i.e. what percentage of retrenched workers were able to find another job within 6 months.
The numbers are not as nice as reported in the news:
1. For 2009, the overall unemployment rate is 3% while the unemployment rate for residents (incl. PRs) is 4.3%. This is higher than in 2001 and just slightly lower than for year 2002. If just looking just at citizens, the unemployment rate may be 5% or higher.
2. The total workers retrenched in 2009 is 19,500. This is similar to year 2002. If combined with 2008, the total number retrenched is 33,420. This is higher than in 1998.
3. Looking at the Re-Employment stats, the percentage of retrenched workers in 2009 who found another job within 6 months is only about 50% or less. This is worse than during the last long recession from 2001 to 2003.
Below is URL for MOM's main statistics page:
ttp://www.mom.gov.sg/publish/momportal/en/communities/others/mrsd/statistics.html
Ex-Con
Thursday, March 04, 2010
Shape Quiz for a class
I gave the Shape Quiz Minipak to a business associate for his daughter. He likes it so much (or maybe his daughter likes it) that he decided to buy 40 paks to give to all of her classmates in a primary school. Order here.
Free Gift - Shape Quiz Minipak ($2)
This is valid from 2 March 2010 until further notice. When you buy the Intelligence Quiz Vol 3 ($7.90) or the Practical Guide on Financial Planning ($12) from Internet Shop, you will get the Shape Quiz Mini-pak (usual price: $2) free.
Order here.
Order here.
New Asia Republic
I introduce you to a new website, New Asia Republic. Visit it. There is a link on the right panel. I have written an article on taxation here.
Wednesday, March 03, 2010
Puzzleman
REVISED LINK:
Here are some interesting puzzles for you and your family. Download the PDF and print it out. You can do the puzzles in your free time. You can also pass them to your family members and friends. They can test their problem solving skills.
Many people were surprised that it was possible to make 100 shapes from the 4 plastic pieces. Many of the shapes are challenging and could not be done easily. When they learned the solution, there were surprised that it was simple and ingenuous. They also learn to have a flexible mind and see "out of the box". The Shape Quiz book is available at $6 and the mini-pak at $2. Each comes with 4 plastic pieces in a zip lock bag.
Click here
Here are some interesting puzzles for you and your family. Download the PDF and print it out. You can do the puzzles in your free time. You can also pass them to your family members and friends. They can test their problem solving skills.
Many people were surprised that it was possible to make 100 shapes from the 4 plastic pieces. Many of the shapes are challenging and could not be done easily. When they learned the solution, there were surprised that it was simple and ingenuous. They also learn to have a flexible mind and see "out of the box". The Shape Quiz book is available at $6 and the mini-pak at $2. Each comes with 4 plastic pieces in a zip lock bag.
Click here
Increasing productivity in Singapore
There is now a strategic thrust to improve productivity in Singapore, to become less dependent on low cost foreign workers. Some people are sceptical. They say that this slogan is nice to say, but difficult to achieve. In some respect, they are right. The productivity campaign was first launched in Singapore three decades ago. Why has it not made much progress during this time?
I want to give a honest view, although some people may not like to hear it. We have a culture in Singapore of saying nice things, but not addressing the root of the problem. This is why we were not able to improve the birth rate, in spite of top level priority and massive effort expended for more than two decades. Improving productivity is another challenge that has not been overcome.
What is the root of the problem? We tend to take a theoretically approach towards solving our problems. We can say nice things and adopt strategies crafted by consultants, who do not really know the problem. Their solutions come from the text books, but are not practical. Some people say that this is the price to pay for letting scholars run the country.
We need to look at the root of the problem, before we can understand and find lasting solution. To improve productivity, we have to overcome the risk adverse mindset of Singaporeans.
Many people feel safe in keeping the status quo and are quite good in identifying reasons to keep the status quo. They will not make a change, unless the decision is made by someone at the top. Singaporeans are generally good at identify problems, including imaginary problems, rather than implementing change and improvements .
Singapore is also a wasteful society. We spend a lot of money on technology and management consultants, instead of implementing simple and practical improvements. Many people do not want to take the responsibility, so they pass the buck to the consultants, who take the big fees and also do not find any solution.
Can this mindset be changed? Yes, it can. The best way is to require a change to be done and to give a small budget for the change. You will be surprised how resourceful people can be, if they have limited budget and the responsible to solve the problem. i.e. no excuse accepted.
Tan Kin Lian
I want to give a honest view, although some people may not like to hear it. We have a culture in Singapore of saying nice things, but not addressing the root of the problem. This is why we were not able to improve the birth rate, in spite of top level priority and massive effort expended for more than two decades. Improving productivity is another challenge that has not been overcome.
What is the root of the problem? We tend to take a theoretically approach towards solving our problems. We can say nice things and adopt strategies crafted by consultants, who do not really know the problem. Their solutions come from the text books, but are not practical. Some people say that this is the price to pay for letting scholars run the country.
We need to look at the root of the problem, before we can understand and find lasting solution. To improve productivity, we have to overcome the risk adverse mindset of Singaporeans.
Many people feel safe in keeping the status quo and are quite good in identifying reasons to keep the status quo. They will not make a change, unless the decision is made by someone at the top. Singaporeans are generally good at identify problems, including imaginary problems, rather than implementing change and improvements .
Singapore is also a wasteful society. We spend a lot of money on technology and management consultants, instead of implementing simple and practical improvements. Many people do not want to take the responsibility, so they pass the buck to the consultants, who take the big fees and also do not find any solution.
Can this mindset be changed? Yes, it can. The best way is to require a change to be done and to give a small budget for the change. You will be surprised how resourceful people can be, if they have limited budget and the responsible to solve the problem. i.e. no excuse accepted.
Tan Kin Lian
Financial planning - reaching out to young people
Hi Mr. Tan,
I have your book "Practical Guide on Financial Planning". I find the stories and experiences of other people to be most beneficial. Because of my past experience e.g. Minibond, insurance, capital gurranteed products, I am able to appreciate your opinions and suggestions.
If I were an undergrad or secondary student, I would not be interested to read. This is a problem as financial education should not be learned from trial and error of a new worker. It should be taught in schools before they start drawing their first cheque.
Banks and FIs will continue to attract, promote, market products based on margin, profit or commission. The new workers continue to be bombard with the theme "credit is good for you" while "live within your means" is ignored by most people.
REPLY
I find that many undergraduates are also interested in financial planning. When I talk to them, they also find my views to be useful. They realised the importance of knowing what are good products to buy and bad products to avoid. I intend to hold many talks for young people so that they can benefit from my suggestions as well.
I have your book "Practical Guide on Financial Planning". I find the stories and experiences of other people to be most beneficial. Because of my past experience e.g. Minibond, insurance, capital gurranteed products, I am able to appreciate your opinions and suggestions.
If I were an undergrad or secondary student, I would not be interested to read. This is a problem as financial education should not be learned from trial and error of a new worker. It should be taught in schools before they start drawing their first cheque.
Banks and FIs will continue to attract, promote, market products based on margin, profit or commission. The new workers continue to be bombard with the theme "credit is good for you" while "live within your means" is ignored by most people.
REPLY
I find that many undergraduates are also interested in financial planning. When I talk to them, they also find my views to be useful. They realised the importance of knowing what are good products to buy and bad products to avoid. I intend to hold many talks for young people so that they can benefit from my suggestions as well.
AIA and Prudential
Dear Mr. Tan
Does the purchase of AIA by Prudential result in less choice for consumers?
REPLY
Most insurance companies offer different products which are difficult for consumers to compare. Nearly all of them have charges and give a poor return to consumers. The reduction in yield is about 3% in most cases. This could reduce the payout on maturity by more than 40%. If your premium can accumulate to $500,000 over the next 30 years, the insurance policy pays you only $300,000 - with 40% being taken away.
Consumers have a choice to invest in a low cost investment fund, such as the STI ETF available on the SGX. It offers diversification and an attractive return over the long term (by averaging out the good and bad years of the market). They can buy term insurance, decreasing term insurance or personal accident insurance to cover the risk of premature death.
This is explained in my book, Practical Guide on Financial Planning ($12). It is available in most bookstores or can be purchased from my Internet Shop. It comes with a free Shape Quiz minipack (worth $2).
Does the purchase of AIA by Prudential result in less choice for consumers?
REPLY
Most insurance companies offer different products which are difficult for consumers to compare. Nearly all of them have charges and give a poor return to consumers. The reduction in yield is about 3% in most cases. This could reduce the payout on maturity by more than 40%. If your premium can accumulate to $500,000 over the next 30 years, the insurance policy pays you only $300,000 - with 40% being taken away.
Consumers have a choice to invest in a low cost investment fund, such as the STI ETF available on the SGX. It offers diversification and an attractive return over the long term (by averaging out the good and bad years of the market). They can buy term insurance, decreasing term insurance or personal accident insurance to cover the risk of premature death.
This is explained in my book, Practical Guide on Financial Planning ($12). It is available in most bookstores or can be purchased from my Internet Shop. It comes with a free Shape Quiz minipack (worth $2).
Work near your home
There are many advantages of working near your home. You reduce the travelling cost, which can be quite expensive. You reduce the travelling time and have more time to spend with your family and neighbors and have a community life.
We have to changes our recruitment practices to make this possible. We should make it easier for people to search for a job near their homes. Advertisements for jobs should state their location of their workplaces. HR managers should give preference to people who live near the place of work. It is an advantage to the business as well, as these workers are likely to stay longer with the employer.
For most jobs, it should be possible to find a suitable candidate who lives near the place of work. We only need to improve our ability to search for these workers, or for the workers to search for these jobs.
Businesses should also be encouraged to set up their workplaces near the residential estates. This will allow them to tap into a pool of suitable workers in that estate.
Reducing commuting and traffic congestion will also promote a green environment.
Tan Kin Lian
We have to changes our recruitment practices to make this possible. We should make it easier for people to search for a job near their homes. Advertisements for jobs should state their location of their workplaces. HR managers should give preference to people who live near the place of work. It is an advantage to the business as well, as these workers are likely to stay longer with the employer.
For most jobs, it should be possible to find a suitable candidate who lives near the place of work. We only need to improve our ability to search for these workers, or for the workers to search for these jobs.
Businesses should also be encouraged to set up their workplaces near the residential estates. This will allow them to tap into a pool of suitable workers in that estate.
Reducing commuting and traffic congestion will also promote a green environment.
Tan Kin Lian
Home ownership
There is a general belief that owners will take care of their home better than tenants. This was the reasons given to promote home ownership.
This may be true to some extent. But, it should not be exaggerated. The care that is given to the home and environment depends not so much on ownership, but on the behavior of the person. A higher income person is likely to take care of the home better than a person struggling to make a living at a low income.
Most people in Switzerland rent, rather than own their homes. I believe that they do take care of the property as well as home owners. This is just a belief, as I do not have the chance to verify it.
The poor people who lives in slums in some countries cannot afford to take care of their own living, so they are not likely to take care of their homes either.
I believe that it is better to treat home owners and renters equally, rather than to promote home ownership on a wrong belief that it leads to a better society. If more people rent their homes, they will be able to move closer to their place of work and reduce the travelling time and expense. This will reduce traffic congestion and improve quality of life.
Some people will argue that it is not possible for everyone to live near their place of work. I agree. We only need to have (say) 30% to live near their place of work to reduce traffic congestion by 30% - which is a lot.
The next step is to abolish the stamp duty and legal fees for selling a home. This will reduce a financial obstacle and encourage some home owners to move closer to their place of work.
Tan Kin Lian
This may be true to some extent. But, it should not be exaggerated. The care that is given to the home and environment depends not so much on ownership, but on the behavior of the person. A higher income person is likely to take care of the home better than a person struggling to make a living at a low income.
Most people in Switzerland rent, rather than own their homes. I believe that they do take care of the property as well as home owners. This is just a belief, as I do not have the chance to verify it.
The poor people who lives in slums in some countries cannot afford to take care of their own living, so they are not likely to take care of their homes either.
I believe that it is better to treat home owners and renters equally, rather than to promote home ownership on a wrong belief that it leads to a better society. If more people rent their homes, they will be able to move closer to their place of work and reduce the travelling time and expense. This will reduce traffic congestion and improve quality of life.
Some people will argue that it is not possible for everyone to live near their place of work. I agree. We only need to have (say) 30% to live near their place of work to reduce traffic congestion by 30% - which is a lot.
The next step is to abolish the stamp duty and legal fees for selling a home. This will reduce a financial obstacle and encourage some home owners to move closer to their place of work.
Tan Kin Lian
Integrity and honesty
Integrity is being honest. Some companies claim to serve customers, but they will find ways to make profits by overcharging customers or give them a poor deal.
It is acceptable for a company to make profit, but it has to be done in an honest and fair way. In the past, the standard of ethics and integrity was quite high. A trusted company would not destroy its reputation by telling lies or deceiving its customers.
In recent years, the standard of ethics had dropped significantly in the quest for profits or other commercial goals. This is what "being different" is now like.
Tan Kin Lian
It is acceptable for a company to make profit, but it has to be done in an honest and fair way. In the past, the standard of ethics and integrity was quite high. A trusted company would not destroy its reputation by telling lies or deceiving its customers.
In recent years, the standard of ethics had dropped significantly in the quest for profits or other commercial goals. This is what "being different" is now like.
Tan Kin Lian
Tuesday, March 02, 2010
Hassle to write many cheques
I bought a commercial property to be used as my office. The property is under development. I have to write two cheuqes for each progress payment. one cheque for the developer and another cheque for GST.
To make matters worse, the lawyer for the developer wanted the cheques to be made out in full, to "The Hongkong and Shanghai Banking Corporation account no XXX-YYYY-YYY for ABC Company Ltd". There is no space in the cheque to write this long name and the amount in words. It is so easy to make a mistake.
If I make a mistake, which is quite likely to happen, you can be sure that the bank will return the cheque and ask for a new cheque to be written. This will take time and hassle and give the bank, lawyers and the developers the opportuntity to charge a hefty interest on late payment and other charges for the mistake.
Why should our bankers and lawyers make life so difficult for consumers? Are they trying to find the excuse to levy more charges?
Why should the GST be written in a separate cheque? This is one more reason why I strongly dislike GST, as it is creating a lot of unnecessary work and burden.
Tan Kin Lian
To make matters worse, the lawyer for the developer wanted the cheques to be made out in full, to "The Hongkong and Shanghai Banking Corporation account no XXX-YYYY-YYY for ABC Company Ltd". There is no space in the cheque to write this long name and the amount in words. It is so easy to make a mistake.
If I make a mistake, which is quite likely to happen, you can be sure that the bank will return the cheque and ask for a new cheque to be written. This will take time and hassle and give the bank, lawyers and the developers the opportuntity to charge a hefty interest on late payment and other charges for the mistake.
Why should our bankers and lawyers make life so difficult for consumers? Are they trying to find the excuse to levy more charges?
Why should the GST be written in a separate cheque? This is one more reason why I strongly dislike GST, as it is creating a lot of unnecessary work and burden.
Tan Kin Lian
Bonus on participating policyholders
During the past two years, many insurance companies had cut their bonus due to the global financial crisis. Although the investment markets had largely recoverd, these companies had still not restored their bonus. This has badly affected the policyholders whose policies had matured recently. They received payouts that are far less than what was originally projected, and less than what had actually been earned on their premiums.
I hope that the regulator (MAS) will look into this matter and ensure that policyholders of matured policies receive a fair payout, that reflect the investment return that has been earned on their premiums over the past years. The payout should not be reduced by the surplus that is retained in the insurance fund to fund the marketing expenses of the insurance companies, made at the expense of the maturing policyholders.
Tan Kin Lian
I hope that the regulator (MAS) will look into this matter and ensure that policyholders of matured policies receive a fair payout, that reflect the investment return that has been earned on their premiums over the past years. The payout should not be reduced by the surplus that is retained in the insurance fund to fund the marketing expenses of the insurance companies, made at the expense of the maturing policyholders.
Tan Kin Lian
Prudential buys over AIA
Someone asked for my views about the impact to consumers, after Prudential buys over AIA. The policyholders should not be affected by the change of ownership. Their money is kept in a separate insurance fund. It does not matter who the owner is.
However, the change of management may affect the philosophy in the distribution of bonus. The new management may be more generous or less generous in distributing bonus to policyholders out of the surplus in the insurance fund, compared to the previous owners.
Tan Kin Lian
However, the change of management may affect the philosophy in the distribution of bonus. The new management may be more generous or less generous in distributing bonus to policyholders out of the surplus in the insurance fund, compared to the previous owners.
Tan Kin Lian
Hefty bank charges
Vincent Chan wrote to the Straits Times to complain about a hefty charge of $12 to pay for a budget air ticket of $50, using his credit card. I paid a bank charge of $75 to transfer $2,500 to a factory in China. My bank told me that if I pay late on my credit card, there is a fee of $50 in addition to the interest of 2% per month on the rollover.
It seems that the banks have gone overboard in levying exorbitant charges for essential banking services. The authority (MAS) sits on the side and allow them to charge what they like. The banks are able to make billions of dollars of profits from the interest spread and hefty charges. Are bank customers being fleeced?
Tan Kin Lian
It seems that the banks have gone overboard in levying exorbitant charges for essential banking services. The authority (MAS) sits on the side and allow them to charge what they like. The banks are able to make billions of dollars of profits from the interest spread and hefty charges. Are bank customers being fleeced?
Tan Kin Lian
Monday, March 01, 2010
Different functions of Government
REX has written about the macro and micro functions of politicians. They have to see the big picture and make macro policies. They have to attend to the nitty gritty of listening to their constituents. It is difficult to find people who have both skills.
In the USA, the elected members of Congress listen to their constituents and debate policies in Congress. Their primary role is to represent the people.
The heads of the different departments in Government (i.e. like our ministers) are appointed by the President, usually with the approval of Congress. They can be selected from anywhere in the country, i.e. from the business sector, academia, the people sector or from elected politicians. If they are appointed from elected politicians, they have to resign their elected seat to be in the Executive Branch of Government. Their seat is taken over by another person who can discharge the role of representing the people.
In UK, the ministers rely on the senior civil servants to administer the policies decided by the Government. They do not manage the administration. They remain largely policy making.
Singapore has a unique system where the Ministers play all three roles. They are over-stretched and do not have sufficient time and attention to discharge these roles properly. This is my humble view.
I prefer the system in USA followed by UK .
Tan Kin Lian
In the USA, the elected members of Congress listen to their constituents and debate policies in Congress. Their primary role is to represent the people.
The heads of the different departments in Government (i.e. like our ministers) are appointed by the President, usually with the approval of Congress. They can be selected from anywhere in the country, i.e. from the business sector, academia, the people sector or from elected politicians. If they are appointed from elected politicians, they have to resign their elected seat to be in the Executive Branch of Government. Their seat is taken over by another person who can discharge the role of representing the people.
In UK, the ministers rely on the senior civil servants to administer the policies decided by the Government. They do not manage the administration. They remain largely policy making.
Singapore has a unique system where the Ministers play all three roles. They are over-stretched and do not have sufficient time and attention to discharge these roles properly. This is my humble view.
I prefer the system in USA followed by UK .
Tan Kin Lian
Missing the boat
Some people are worried that they have missed the boat and that property prices will continue to go higher.
They should not worry. Inflated prices will come down. Look at what has happened in Japan, USA and Europe. They went through their property bubbles and prices have dropped. It will remain low for one or two decades.
Singapore is not exempt from these forces. If prices are inflated and at unsustainable level, they will surely fall. In the meantime, be calm. Rent a flat or house. Wait for the prices to fall.
Tan Kin Lian
They should not worry. Inflated prices will come down. Look at what has happened in Japan, USA and Europe. They went through their property bubbles and prices have dropped. It will remain low for one or two decades.
Singapore is not exempt from these forces. If prices are inflated and at unsustainable level, they will surely fall. In the meantime, be calm. Rent a flat or house. Wait for the prices to fall.
Tan Kin Lian
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