Practical measures to help PMEs to find jobs

There is a simple solution that the government should introduce to help PMETs to compete for jobs against foreigners on employment pass.

Here are two practical measures.
http://c-onyx.com/page/1866

A quick analysis of Medishield Life

I have done a quick analysis of the increase in coverage and premiums under the newly introduced Medishield Life

The results are shown here:
http://c-onyx.com/page/1865

Tan Kin Lian

Note: if you find any mistake in my figures, please send an email to kinlian@gmail.comNote: if you find any mistake in my figures, please send an email to kinlian@gmail.com

Why consumers should invest in the STI ETF

The best investment plan for long term savings is the Straits Times Index ETF. The reasons are:

a) It is well diversified, reducing risk
b) It earned an average yield of more than 9% over the past 20 years, after deducting expenses.
c) The expenses is only 0.3% per annum.
d) When investing for the long term, you can ignore the dialy market fluctuation.

If you are investing for 30 years, the difference between an investment linked policy that pays a net yield of 3% and the STI ETF (assuming only 6%,) is quite large. The STI ETF can pay 50% more. If you get $200,000 from the policy, you get $300,000 from the STi ETF.

You can take a monthly sum of $100 or more in the STI ETF using the regular investment plan offered by POSB or OCBC. See
http://c-onyx.com/page/42

To understand more about this investment, attend this talk. Spend $30 and 3 hours. and get a lot more for your retirement!

http://c-onyx.com/page/1056 See More

Enroll your children for the financial planning talk before they start work

A man visited my office to buy my life insurance book. His son, who was just about to start work in a contract job, was approached by an insurance agent who recommended to him an investment linked policy with a monthly premium of $300 and other riders to cover death, accident and disability with a total monthly premium of $70. The son had no idea about what the policies were for, so he approached his father for advice (what a sensible young man!). The father approached me.

I analyzed the policies and came to the following conclusion:

a) The investment linked policy had a projected value, at the end of 30 years, of $180,000 (based on the average between the 4% and 8% yield).
b) If the son invested the same money in the STI ETF earning an average yield of 6% (similar to the projection), the projected sum is $280,000, after deducting expenses and setting aside $10 for the cost of insurance.
c) He does not need to spend $70 a month for the additional covers. By spending $30 a month, he will have adequate term insurance under the SAF policy.

The father decided to enroll himself and his wife and son for the Financial Planning talk on 21 July to learn about financial planning for his son.

He was glad that he saw me, as this information could give his son an additional $100,000 in 30 years time.

I wish to send this message to other parents. Your children will also fall into the trap of buying the wrong investment product. Enroll them and get them to attend the financial planning talk.
http://c-onyx.com/page/1056

Note:
Although the investment linked policy use a projected yield of 6%, the actual yield is only 3.2% due to the charges and upfront fee, amounting to 2.8%.
For the STI ETF, the net yield is 5.7% as the annual fee is only 0.3%

How to stop mis-selling of life insurance policies

I make a guess, and this is just a guess, that 30% of the life insurance policies sold each year are sold wrongly and for the wrong reasons.

Examples are:
a) Policies that require a big monthly premium to be paid that is beyond the means of the policyholder, such as a student that is not working

b) Policies sold on the misconception that it is a form of savings that can be withdrawn like a fixed deposit, without the policyholder realizing that one or two years of the premium will be forfeited.

c) Policies sold to a policyholder who thinks that it is a single premium policy, when in fact it is an annual premium policy.

d) Policies sold to replace an existing policy - on the false claim that it offers better value to the policyholder.

In most cases, the agents were aware about the misconception and were in fact, responsible for telling misleading the policyholder.

When the policyholder finds out the truth and lodges a complaint to the insurance company, the officer handling the complaint gets a statement from the agent. The agent will deny any wrong doing, and the officer usually tells the policyholder that the complaint is not substantiated, in other words, the consumer cannot get their money back.

If the officer bothers to use his common sense and look at the facts, he or she will surely recognize the following:

a) How can a student, without any income, afford a large monthly premium?
b) How can a consumer, with modest means afford a large annual premium - when their total savings is just enough to pay one year's premium?
c) Why does the policyholder want to stop an existing policy and take up a new policy, when the policyholder is likely to suffer a financial loss?

Surely, something is amiss?

It is usually too late to act, when the policyholder makes a complaint, and it can come several years after the policy is taken.

The best time to act is at the time that the policy is issued. The insurance company can, as a matter or practice, get an officer to call the policyholder and check that he or she is aware about the actual terms of the contract.

If this call is made, any misunderstanding could be found immediately and the situation could be rectified. If the insurance company has such a practice, most of the misrepresentations and bad sales could be prevented.

Many years ago, I introduced this "call the policyholder" practice in the insurance company that I was in charge. I required the agent's supervisor to call the policyholder for each new policy that was issued, and verify that their understanding of the policy is exactly what it should be. The supervisors did not find any case of serious misrepresentations.

The sales general manager reported that the new sales dropped by 30 percent (if my memory served me correctly). My guess is - the insurance agents stopped the mis-selling as they knew that they would be caught quite soon. And this represented 30% of the new sales.

Any insurance company can stop the mis-selling by introducing a system to "call the policyholder to verify the understanding". But will they want to do it?

Well, the answer is "no". They will only do it when the regulator, i.e. the Monetary Authority of Singapore, require them to.

Tan Kin Lian

Increase CPF monthly payout from age 65

In addressing people who do not have the required CPF minimum sum, the government has to consider this question about how much they can be allowed to withdraw from the minimum sum from age 65:

a) Should the monthly withdrawal be reduced according to the available minimum sum and the payment be continued for 20 years or for life?

b) Should the monthly withdrawal be allowed at the level that is needed for their current needs, say $800 a month, although the minimum sum may run out earlier?

The government has chosen method (a).

I think a better decision is method (b). The retiree needs a minimum sum to survive from month to month. Their immediate needs are greater than their longer term needs.

They have to face a separate problem when their minimum sum is exhausted, but at least they can live adequately for the immediate future.

Tan Kin Lian

CPF interest rate has to be reviewed

One major source of unhappiness is the low rate of interest, i.e. 2.5% and 4%, payable on the CPF savings.

It is a wrong policy to invest the CPF savings in long term government bonds, which gives a low yield. As the savings are being invested for a long term, say more than 40 years, it is more appropriate to invest them in good quality shares which can give a better return compared to than government bonds.

The yield on good quality shares has averaged more than 8% per annum over the past three decades.

While the values of the shares may fluctuate from one year to the next, this fluctuation is immaterial for a long term investor. While some shares may turn bad, they can be compensated by the good performance of other shares. It is the average yield of the portfolio over the long term that matters to the CPF members.

The CPF members do not expect a yield of more than 8% per annum. But 2.5% and 4% is too low. A yield of 6% would be more appropriate and fair to the people, whose savings have been locked up for a long time.

There is a negative point about raising the yield or interest rate on CPF savings. This will also affect the interest rate charged on loans to buy HDB flats and other properties. The impact has to be considered when making a change. This issue may be difficult, even problematic, but it can be overcome.

It is time for the interest rate policy of the CPF to be reviewed. A higher return will ensure that the members will have more adequate savings for their retirement.

Tan Kin Lian

PM should seek an out of court settlement with Roy Ngerng

PM Lee must take heed of the strong support from ordinary people in Singapore towards the legal defense fund of Roy Ngerng. More than $70,000 were raised in just 4 days, surpassing the target needed to pay a good lawyer to defend Roy Ngerng.

If PM Lee continues with the legal action and wins the case in court and, if the court award the damages of $250,000 that he had asked for, what is likely to happen next?

I expect that the people of Singapore will come forward again and contribute the $250,000 in damages in full. And they will do so, with great anger against the person who is collecting this money. Even if it is donated to charity, it will still be the hard earned money of the donors.

And if that happens, it will surely be followed by a resounding defeat of the People's Action Party at the next general election.

What can PM Lee do now? He can remove the demand for aggravated damages and reduce his claim for damages to $10,000 - twice of what Roy Ngerng had earlier offered. And this is likely to be accepted by Roy Ngerng, leading to an amicable close to this case.

And this may turn out to be positive for PM Lee, as he will be sending a strong message that he is willing to listen to the voices of the people.

Tan Kin Lian

Give a better return on CPF savings

One source of unhappiness with the CPF is the low rate of interest paid on the savings, i.e. 2.5% on the ordinary account and 4% on the special account. The interest rates are so much lower than the actual return that is earned on the funds invested by Temasek Holdings and GIC.

This unhappiness is valid. It is wrong for the government to invest the CPF funds in low yielding government bonds, although they give the reason that the funds have to be invested securely.

The savings are invested for 40 years or longer. For long term investments, the correct investments are in good quality shares, and not in bonds. The difference in return can be as much as 4% per annum.

If the long term savings were invested mainly in good quality shares, the average yield over the past three decades would be more than 8% per annum, and not the 2.5% or 4% that were distributed.

While the values of the shares may fluctuate from year to year, the changes are immaterial to the CPF members, whose savings are locked up for a long term. They are not allowed to take out their savings prematurely, so the fluctuations in the asset values do not matter to them.

Even if some of the share investments turn out to be bad, they will be compensated by the appreciation in other shares. It is the long term average that count. And the long term average had been more than 8% per annum.

We do not need to expect a yield of 8% per annum. A yield of 6% would be fair. And if an adequate and fair yield had been given in the past years, the CPF savings would be much higher today, perhaps 50% more!

One important change to the CPF is to make the return more aligned to the actual yield that can be earned on quality quality shares.

Tan Kin Lian

Adopt a constructive approach

Sam Tan said:
Beware Fellow Singaporeans, It is PAP deliberate ploy to constantly provoke and attack WP in parliament to create DRAMA (corner WP to say and do wrong things) so that PAP can take these words/ actions against WP in next GE campaign ACCUSE WP for being an irresponsible/ destructive Opposition like those in other countries.

Hence convince Singaporeans to stick with a one party system so that PAP can control Singaporeans with their iron fists and implement all policies they want without consultation, debate and obstruction from Opposition and Singaporeans.

Remember this, every alternative policy/ suggestion has its pros and cons and PAP will attack the cons of whatever WP suggest and WP will never win the debate with PAP majority in the parliament. https://sg.news.yahoo.com/pm-lee-asks-low-thia-khiang--where-do-you-stand-180324245.html

REPLY
The pugnacious approach of our PAP leaders is not constructive. They set a bad example. 
They should be open minded to get the views of other people and seek a better solution to many of the "elephants in the room", i.e. problems that they have been ignoring or unable to solve for a long time.

Does the CPF Minimum Sum include the amount set aside for Medisave?

Someone asked:

I am curious about CPF Minimum Sum and Medisave Minimum Sum. If I am not mistaken, the Retirement Account compromise of Ordinary Account + MediSave Account + Special account once the person turns 55. So should not it be the minimum sum for CPF wef 1 July 2014 be $155,000 and out of that, $43,500 from the Medisave? Need correct interpretation please

REPLY
The minimum sum for retirement is $155,000 and for Medisave account is $40,500. Together, the total is $195,500.

Read
http://mycpf.cpf.gov.sg/CPF/my-Cpf/reach-55/Reach55-2.htm
and
http://mycpf.cpf.gov.sg/CPF/my-cpf/reach-55/Reach55-4.htm

Can a person earning $3,000 at age 25 meet the minimum sum at 55?

To answer this question, I present two scenarios:
a) Moderate salary increase. 
b) Low salary increase. 

The results can be found here:
http://c-onyx.com/page/1856

Analysis of CPF Life

THE FIRST EVER ANALYSIS OF CPF LIFE !!!

A CPF member reaching age 55 in or after 2014 will have the "minimum sum" portion of the CPF savings transferred to CPF Life. The member is given a choice of two plans, known as the standard and basic plan, which gives a monthly payout from age 65, payable for life, and a bequeath to the family on death. If the member does not exercise a choice, the default choice is the standard plan.

The standard plan has a higher payout than the basic plan, but give a lower bequeath to the family on death of the annuitant.

The PDF below contains an analysis of the payout and bequeath and helps the CPF member to decide on the choice of the plan to opt.

http://c-onyx.com/page/1851

Your CPF savings are safe

 I wish to address the issue on whether the CPF is able to pay off all its members, if it is dissolved today. 

The annual report of the CPF at 31/12/2012 showed total amount owing to CPF members to be $230 billion. This is invested in Singapore Government Securities totaling $229 billion, with a few other billions invested in other assets.

If CPF were to be wound up, will the government be able to pay the $229 billion?

The answer is clearly "yes". The reserves of the government comprises of $198 billion in Temasek Holdings, $305 billion in MAS and "over $100 billion" in GIC. The total is over $600 billion.

If this were to happen, will the government be able to sell the assets to raise $230 billion to pay the CPF members? There is no need to. If the government were to issue bonds of $230 billion, that is backed by the $600 billion of actual assets, it should have not much difficulty.

Another way is for the government to "print $230 billion" of money to pay back the CPF members.

The actual amount that the government needs to pay back the CPF members will be much less than $230 billion. The outstanding loans owed to the HDB (which is a part of the government) should be a large sum. Surely, if the government were to pay back the CPF balances, the members should also pay back the balance of the HDB loan?

If you wish to verify my figures, you can check them here:

The winding up of the CPF is completely hypothetical and inconceivable. I have used this scenario to illustrate that the savings in the CPF is safe, and that the fear that there is no money to pay back the CPF balance is totally unfounded.

However, I do not support the current system where most of the savings are stashed away by an ever increasing minimum sum. This has to be reviewed, and a portion of the savings should be allowed to be withdrawn at age 55, even if the savings is inadequate to meet the minimum sum.

Tan Kin Lian

Easy way to mark tests and examinations

We have developed a software to allow teachers to mark OMR answer sheets easily. It has been used a few times and several practical issues have been identified. These issues have been resolved, and the software is now quite easy to use.

The attached PDF shows an example of the use of this software. If you are interested to try the software, you can contact us using the e-mail shown in the PDF.

If you have encountered difficulty using the OMR equipment provided by your school, you can try this software and see if your issues have been resolved. As this software is convenient to use, you can use it for your regular tests and quizzes during the term, in additional to the final examination at the end of the term.

http://c-onyx.com/pdf/1849

How to determine a fair wage?

What is a fair wage? How is this to be determined? The answer to this question is important, as it sets the foundation for a fair and vibrant society. 

There are three main methods to determine the fair wage, as adopted by most countries:

a) By collective bargaining between the the workers and the employers
b) By government decree
c) By leaving to market forces

All of them do not work well. But it seems that method (a) has a better chance of working well, as shown is some successful countries, such as Germany.

Singapore follows method (c) and the results have been quite poor, leading to a high wage disparity.

In my view, the right answer is a combination of the three methods, and to use the modern tools to achieve it. A wage panel can be formed to determine the recommended wages for the various types of jobs, after considering the inputs of the workers, relative difficulties of the jobs, and adjusting the wages yearly based on supply and demand (i.e. market forces).
Employers are allowed to employ workers within a margin from the recommended wages.

Introduce flexibility in CPF withdrawal

After thinking much about the CPF, minimum sum scheme, and getting the views of other people, my conclusions are:

1. The CPF is generally a good scheme
2. The minimum sum scheme is a good feature, as it requires people to keep some savings for the future
3. The current level of the minimum sum scheme, with 50% to be pledged in property, is reasonable
4. The member at age 55 should be allowed to withdraw up to one-third of their savings and this can take higher priority over the minimum sum. This will reduce the monthly payout at age 55, but it is the choice of the member.

Why do I have to pay to file a return to ACRA?

I submitted my annual return to ACRA. It took me 1/2 hour to make the submission including an occasion where the browser hang and I have to re-enter the website. 

After completing the transaction, ACRA required me to pay $20. I opt to pay by credit card. In the process of making payment, the eNETS hang. So, my transaction cannot be completed.

It is ridiculous. Even making a payment is a hassle. And why must ACRA ask the business user to pay the $20 to make a compulsory submission? Why can't the forego this unnecessary step?

Help-desk has to be more helpful

I called the ACRA helpdesk. And I got reminded on how inconsiderate our government agencies are.

They force me to hear all kinds of "nonsense" and after pressing "0" to talk to an officer, I am asked to wait many cycles for an officer to be available. 

ACRA does not seem to know that people have other matters to attend to. 

This is also the style of most government agencies. They really know how to give trouble to the public and then make them waste a lot of time on their so called "helpdesk".

Simplify websites of government agencies

As a business owner, I have to comply with regulations from many government agencies, i.e. ACRA, IRAS, MOM, CPF, etc.

Many of their websites are designed in a complicated manner, requiring the public to spend a lot of hours to make a simple submission. Their payment systems are a hassle. 

If you need help and have to call their so-called help desk, you also have to spend a lot of time. 

I have given this feedback to the government agencies on many occasions during the past three years. Nobody bother to make any change.

I am sure that this problem is faced by many other people. This increases the operating cost in Singapore and make Singapore an expensive place to do business, and this high cost is passed to the consumers.