Consumer consultancy

Tan Kin Lian will provide consultancy to consumers on the following scope of work, at a modest fee.
http://tankinlian.com/admin/file.aspx?id=740&IID=746

New HDB flats

In my financial planning talk, my advice is to spend not more than 5 years of the family income on their home. Many participants said that for a family income of $60,000, my 5 year benchmark is $300,000 and it is not possible to buy any HDB flat at this price.

I checked the HDB website and found that it is possible to buy a new 4 room HDB flat way below this price, if the government glrant is counted. Without the grant, it is still possible to buy with this budget.

http://www.hdb.gov.sg/fi10/fi10296p.nsf/PressReleases/176CF92493B9089848257A4C0019D9BA

Deceptive practices in property launches

Many new condos are still being sold at new property launches, and the prices are way above their actual price. The buyers were told that they are getting a discount and bought thinking that they got a good deal. The discount is false, as the prices have been marked up way above the actual market price for similar properties. 

The practice adopted by the marketing agents are also questionable, possibly illegal. The buyers are asked to give a blank check and to sign open ended powers of attorney to the marketing agent, in return for a deceptive "discount".

While the prices at new launches continue to show higher prices compared to previous launches, the buyers are not really able to sell their new properties to make a profit - the resale market show a big discount to the new launch prices.

This distortion is extremely bad, and is being tolerated in Singapore under the "free market" approach adopted by the government. The government should address this bad practice, in addition to the cooling measures.

Move to a flat rate tax

Most people still think that a progressive income tax system is fairer to society. Those who earn more should pay more tax. 

Many countries are moving closer to a flat rate tax system, where the majority of tax are paid at a flat rate of the earnings, rather than at a higher rate on the top bands of income. This move is a subtle one, and many people may not have noticed it.

When countries introduce GST or VAT, they are actually moving to a flat rate system. Most people spend 80% of the current earnings and they have to pay the same rate of GST or VAT on their spendings.

Singapore is mostly on this model. As a further example, look at the way that dividends on shares are taxed. In the past, the shareholders at the lower income brackets were allowed to claim back a part of the tax paid by companies, if their personal tax level is lower than the corporate rate. This has stopped for several years now, under the concept of a flat rate tax.

A flat rate tax is acceptable, even for the lower income, if the wages are set high enough so that the net income, after tax, is sufficient to meet the cost of living. This is the approach used in several countries; which I subscribe. Most of them have a high minimum wage.

The situation in Singapore is quite bad. We have a troublesome system of collect tax in "bits and pieces" through the GST system, and then to give permanent GST vouchers to the lower income. Our system is administratively wasteful and unfair (as some lower income people do not get the GST).

Some people will disagree with me, after they have given thought to the idea. There will be a large number of people who will disagree with me without much thinking; they just want to appear to be "smart"; want to justify the status quo for some "political purpose" or may have not given much analysis to the matter.

Health care in South Korea

South Korea has a better health care system
http://www.todayonline.com/Voices/EDC130118-0000038/A-prescription-for-healthcare-system

Here are some good features of a health care system:

a) The state should make basic health care available at affordable rates, through economy of scale and subsidy and provide adequate resources to meet the demand
b) Those who can afford private care can go outside of the state system and pay on their own or through insurance
c) Each person only needs to have one insurance plan to cover their health care needs, instead of the complicated and fragmented system that is adopted in Singapore.

Here is an excellent description of the health care system in Korea. It is much better than the fragmented system in Singapore
http://askakorean.blogspot.sg/2010/01/healthcare-system-in-korea.html

Put your spare cash into CPF

f you have adequate savings and cash in the bank, it is a good idea for you to put the savings into the CPF special account or the retirement account and earn interest at 4% per annum. 

You will be allowed to withdraw the savings monthly, from age 65, through CPF Life. The money is payable for as long as you live. If you are born before 1958, you are allowed to withdraw your money in monthly installments, instead of buying CPF Life. Both options are good.

Some people are worried that CPF does not have money to pay them back. This is not true. CPF has more than sufficient money to pay back all their members.

There is also the belief that the CPF money is invested by GIC and Temasek and they make loses on their investments. This is also not true. These fund managers make a good return on their assets.

If you have spare cash, it is better to put into CPF to earn 4%. You can top up the special account and retirement account to the full amount that is allowed for yourself, spouse, parents and siblings. Check with CPF on how this can be done.

Unnecessary terms and conditions

http://www.straitstimes.com/premium/forum-letters/story/so-much-hassle-just-get-new-currency-notes-20130118

31 January 2013

Editor, Forum Page

Straits Times

DBS Bank sent an e-mail to me, as their customer, to offer 

new currency notes for the festive season. This was

a nice gesture of the bank, but their process left a bad taste in my mouth.

I was asked to sign and fax a request form to the bank. It required me to read

and agree to one whole page of "terms and conditions" for the service.

I asked the relationship manager why it was necessary to impose

this kind of requirement for a simple transaction. I had thought that 

DBS Bank could be trusted to carry out a simple transaction, 

without the need to give this burden to the customer. 

Even if a mistake should arise, it would expect the bank to treat

its customer fairly to resolve the issue, without the need to hide under a pre-agreed

agreement.

Many elderly people, who are not financial savvy or literate, have were misled

into making unsuitable investments by signing forms that they do not understand. One

should be wary about signing documents without reading or understanding them.

After the fax was received, a received a call from the bank's staff to verify my 

identity. The verification procedure was, as usual, quite tiresome. 

My signature was already on the form and I had earlier signed another form to indemnity

the bank for the use of fax signature. Why was this further step necessary?

Furthermore, the bank had required me to show my identity card when I collect my new 

currency notes at the pre-selected branch. Why was the phone-call  verification
necessary then? Where has common sense disappeared to?

I would have expected the Monetary Authority of Singapore to ensure that simple

banking practices are carried out fairly, without the need for millions of customers

to have to bear the burden of reading and understanding the terms and conditions .

Tan Kin Lian

Discriminatory questions in application forms

I am shocked at the type of questions asked in the application form for public service jobs, relating to the past offences committed by the applicant. Questions were asked about past and pending convictions. 

The government is setting a bad example in penalizing a person for life, if he or she had been previously convicted, and had served a sentence. How can an ex-convict rehabilitate? Does thegovernment expect everybody to be angels? Can a person who made a mistake before, be allowed to turn over a new leaf?

I am aware that there are certain high or sensitive level position that need people of good character and that ex-convicts should be barred. But, this requirement should not be imposed for the front line jobs, where the risk is virtually non-existent.

I urge the government to set a good example, and remove these discriminatory questions from their standard application form for most entry level jobs. They can reserve these questions for promotions to sensitive positions.

CONTRIBUTED BY A READER OF MY FACEBOOK
If you apply for any government job they ask you that, as well as whether you have ever suffered from any mental illness, or have any disabilities:
*1. Have you suffered, or are suffering from any medical condition, illness, disease, mental illness, substance dependence1 or physical impairment?
Yes No 

*2. a) Do you have a criminal record in Singapore?2
Yes No 
b) Have you been convicted in a court of law in any other country (excluding parking offences or criminal records disclosed above)?
Yes No 

*3. Have you been charged with any offence in a court of law in Singapore or in any other country for which the outcome is pending (excluding parking offences)?
Yes No 

*4. Are you aware of being under any current police investigations in Singapore or in any other country following allegations made against you?
Yes No 

*5. Have you been or are you under any financial embarrassment i.e. (a) an undischarged bankrupt, (b) a judgement debtor, (c) have unsecured debts and liabilities of more than 3 months of last-drawn pay, (d) have signed a promissory note or an acknowledgement of indebtedness?
Yes No 

*6. Do you have intention to apply for foreign citizenship/foreign permanent residence within the next one year?
Yes No 

*7. If you are currently working in the Singapore Public Service, which Ministry/Statutory Board are you working in?

*8. If you have been in the employment of the Singapore Public Service before, which Ministry/Statutory Board were you last with before you left the Public Service?

*9. Please indicate the reason for leaving the Singapore Public Service.

Other grounds:

*10. Have you broken any bond, left an employer without serving your period of moral obligatory service or are currently serving any bond or moral obligatory service (e.g. bonds associated with scholarships or obligatory service related to training awards or no-pay leave, etc)?
Yes No 

*11. If your answer was "Yes" to any of the questions above, please give details :

Withdrawal from CPF retirement account

I asked CPF about how to make withdrawal from my CPF retirement account. I am allowed to keep my money in the retirement account for as long as I want. I can start my monthly withdrawals at any time (after age 62 in my case), based on my choice. 
http://tankinlian.com/admin/file.aspx?id=739&IID=745

Topping up CPF Retirement Account

I wish to share my experience of topping up the CPF retirement account to the full amount for myself and my wife. This is suitable for people who has extra cash and wish to earn a higher interest rate under the CPF scheme.
http://tankinlian.com/admin/file.aspx?id=738&IID=744

Dangerous to invest in Government Bonds

It is dangerous in invest in Government bonds as a spike in interest rate will cause the value of the bonds to drop sharply.
http://www.cnbc.com/id/100386296

Unethical salesman

Dear Mr Tan,

I wrote this article to Voices but was not published. Perhaps, you can post it up in your blog.

Quote:

In recent times, when one often come across many advertisements about sales offers,  it is imperative that one has to be more discerning about claims made by some irresponsible salesman.

I am speaking from my personal experience at IMM Gain City. On 24 Dec 2012, I went there to place an order for system 3 non-inverter air-con. After getting some quotes, I then decided to place an order for Brand A.

However, I was persuaded to purchase Brand B instead. This  salesman told me that" he has so far received no complaints from customers ". Despite my comments that I have had the positive experiences of using Brand A before and that it is a trusted brand for many years, he told me that Brand A has become very unreliable in recent times. 

To entice me to buy Brand B, he at first offered me a discounted price of $2K. After speaking to my cousin over the phone, he then further offered me a price of $1980. The installation date was to be on 31 Dec 2012. 

On 26 Dec 2012, I called him to check on some negative feedback I have received from other users about Brand B remote system being problematic. He told me specifically that there is no such problem. However, he subsequently called me up several times asking me to purchase further extended warranty at additional cost. I did not take up the offer.

On 31 Dec 2012, the date of installation, I instructed my cousin (who was at the premise) to check with the installers about the quality and reliability of this Brand B model. She was told this is not a reliable brand. This reinstate my suspicion that this salesman has not been truthful and has, in fact mis-represented about the quality of both brands.

I am deeply disappointed with his lack of professionalism , responsibility and sincerity . He does not have the interest of the customers at heart as he has not accepted my earlier order for a Brand A and instead try to influence my decision with some unjustified claims which are even contradicted by the Gain City technicians who , I believe are more first-hand experienced in such products.

For many unsuspecting victims who are misled, like myself, there is indeed little recourse for customers and one can only suffer in silence .

Ben Phang

Mortgage payments

A family should take a loan not more than 200 times of the monthly payment that they can afford. If the monthly payment (including CPF) is $2,500, the maximum loan is $500,000. This allows for interest rate to increase to 3.5% and for the loan to be repaid over 25 years.
http://tankinlian.com/admin/file.aspx?id=736&IID=742

Review of banking practices

I have suggested to MAS to review the banking practices shown in this paper. Can I have your views?

http://tankinlian.com/admin/file.aspx?id=735&IID=741

Recommendations of FAIR Review Panel

Here are the recommendations of the FAIR Review Panel. The key benefit to consumers are:

a) Website to buy standard products directly
b) Reduced commission on sale by agents (about 50% reduction)

http://www.todayonline.com/Business/EDC130117-0000041/No-commission-ban-for-financial-advisers--Panel

This is the full report
http://tankinlian.com/admin/file.aspx?id=737&IID=743

Contempt of court

Someone asked me if his criticism of the work of the CPIB for a case now being heard in court could be unlawful. I searched for the definition of "contempt of court" and found this explanation:

Contempt of court is a court order which in the context of a court trial or hearing, declares a person or organization to have disobeyed or been disrespectful of the court's authority. Often referred to simply as "contempt," such as a person "held in contempt," it is the judge's strongest power to impose sanctions for acts which disrupt the court's normal process.

A finding of contempt of court may result from a failure to obey a lawful order of a court, showing disrespect for the judge, disruption of the proceedings through poor behaviour, or publication of material deemed likely to jeopardize a fair trial.

To prove contempt, the prosecutor or complainant must prove the four elements of contempt:

- Existence of a lawful order
- The potential contemnor's knowledge of the order
- The potential contemnor's ability to comply
- The potential contemnor's failure to comply

Conclusion: for the act to be unlawful, the court must give an order that the criticism of the CPIB is deemed to be "publication of material deemed likely to jeopardize a fair trial" and, after the order has been given, the party continue to ignore it.

Do you agree with my interpretation?

Payroll tax to replace GST

I wrote an earlier article on why tax is necessary to collect revenue to pay for public services that are enjoyed by all residents.

Ideally, everybody who enjoys the public service should contribute to the taxation. However, there are people who earn below the poverty line that cannot afford to pay the tax.

By giving a minimum wage above the poverty line, it should be possible for everyone to be able to pay tax to contribute to the public service.

The best form of tax is a payroll tax. This is a tax that is calculated at a certain percentage of the wages and other income.

In Singapore, most people at the lower income level spend nearly all of their income. They pay GST at 7 percent. GST can be replaced by a payroll tax of 7 percent. If this is collected on wages, there is no need to collect GST on every item that is purchased.

Strictly speaking, the payroll tax should be paid by the employer. To avoid increasing the business cost, the employee should be allowed to deduct the payroll tax from the employee's salary, as it is to replace GST. However, for employees earning below a certain level, the cost should be absorbed by the employer.

As most employees do not spend of of their income, it is possible for employers to collect a lower rate of payroll tax (say 5%) instead of 7%.

Collecting payroll tax is simpler and neater than collecting GST. It will also avoid the add-on effect of GST, i.e. the GST collected at the earlier levels are added to increase the final product cost, i.e. the compounding effect. Currently, the administrative cost of collecting GST is also added to the final product cost; this cost can be avoided if the payroll tax is implemented.

Singapore is used to paying CPF contribution on salaries. This infrastructure makes it easy to collect payroll tax.  The remaining issue is to collect the payroll tax on self-employed people, professionals and business people. It should be possible to levy the same payroll tax on their earnings.

Ever since GST was introduced, I have been against it for two reasons; it is regressive (i.e. the lower income bears a bigger burden) and it is wasteful (i.e. a lot of administrative work has to be done to collect the tax).

If we have to accept that the tax should be collected at 7% on all spending, it is better to adopt the payroll tax approach.

Advice on financial matters

16 students from SIM university replied to this live poll. 62% said that the best advice on financial education is "self education". They do not wish to rely on their parents or a financial adviser.

Will Singapore properties be sheltered from the global storm?

If interest rate goes up globally, and have a bad effect on the stock and property market, what is the likely impact on properties in Singapore?

a) They will still maintain their prices as land is limited and there will be continue to be strong demand from foreigners

b) They will fall in the same manner as in other countries.

Share your views.

Bad experience with Standard Chartered Bank

I met a persistent marketeer and finally decided to apply for two credit cards of Standard & Chartered Bank, that I do not really need.

I decided not to use the card until I had fixed by GIRO arrangement.  I did not want to pay late and incur a penalty ($50?) as well as 2% interest charge. I know that banks make a lot of profit on these high charges.

Six months had passed. During this time, my first GIRO application disappeared mysteriously. I had to send another set. The bank told me it take 4 to 6 weeks for the GIRO to be approved.

Why so long? I thought that our banks had spent tens of million dollars on IT systems that allow electronic transactions to be made instantaneously?

I had a nasty feeling that they do not really welcome GIRO payments and to miss the chance of imposing their charges.

Nobody bothered to tell me that the GIRO payment had been approved. I had to call their hotline to find out.

After so much trouble, I lost interest to use their credit cards. I have put a reminder to cancel the credit cards when the 3 year free use period expires.