Saturday, May 20, 2006

Adjustible Annuity

NTUC Income now offers the participating annuity. It offers a guaranteed payout which is increased each year by a variable bonus. The bonus is usually about 2.5% per annum, but is not guaranteed. In most years, it should vary from 1% to 4%.

A male at 62 investing in this annuity will get a return of 6.3% plus bonus. If he invest $100,000, the payout is $524 per month. This will increase with the yearly bonus.

Assuming the bonus is 2.5% per year, the annuity will increase to $671 after 10 years and $859 after 20 years.

Some policyholders have asked us to provide a higher payout in the earlier years. One option is for us to offer an adjustible annuity. It will pay $660 a month, of which $524 is guaranteed and $136 is adjustible.

If the average return on our investments is 5% per annum, the annuity will remain the same. If the average return is higher than 5%, we will adjust the annuity upwards. If it is lower than 5%, it will be adjusted downwards, but will not be less than the guaranteed floor of $524.

We will make gradual adjustment, by looking at the average return over a few years.

We have not yet decided to offer the adjustible annuity at this time. If there is sufficient interest, we may offer it in the future.

Poor performance of two bond funds


I have invested in your 2 bond funds. I want an explanation for the under-performance of these funds. I have attended your talk. You said if fund manager consistently do not perform you are going to remove them. Why have you NOT kept your word?

Now it has been 3 years of underperformance - you are still going to keep them? Or are you going to do the right thing for policyholders who have entrusted our money to you? Customers expect swift and robust action to correct this problem!


NTUC Income operates two bond funds - the Global Bond fund and the Singapore Bond fund.

The annualised return for the past 3 years is:

Global Bond - 3.4% p.a. (benchmark: 3.3% p.a.)
Singapore Bond - 1.2% p.a. (benchmark: 1.8% p.a.)

The return on Singapore bonds has been rather low, due mainly to the low interest rate in Singapore.

The return on the bond funds are affected by the recent increase in interest rate. This is a temporary situation. If the investment is kept for a longer period of 5 to 10 years, the average return will be about 3.5% p.a.

Investment in bonds have low risk, but the return is also low.

If the actual performance is within 1% of the benchmark (in the case of bonds), we consider the performance to be acceptable. We have to accept a small degree of fluctuation.

My advice: If you are investing for 10 years or longer, you should choose the global equity or the combined fund. Risk is to your advantage.

Friday, May 19, 2006

Bank customer has bad experience


When I visited a bank A to put my money in a fixed deposit, I was treated to personalised service at a sit down counter. If I decide to withdraw, I have to line up at the regular counter.

The bank has a roving officer who checks periodically on everyone in the queue regarding their transaction. The hard sell is strong.

When she came to me in the withdrawl queue, she tried to interest me in structured products instead, citing that they gave better returns than fixed deposit. This is a trap for the uninformed.


During the the last six months, I went to my bank B on two occasions to renew a deposit and to enquire about a shield plan.

On both occasions, the bank officer has online access to my particulars. When I gave them my NRIC, they know what products I have with the bank.

The bank officer saw that I have a particular unit trust with the bank. The officer tried to get me to sell that unit trust (stating that it is not doing well) and get me to buy a different unit trust.

They recommended recommended different products on two occasions.

I was quite confused at that time. I bought the unit trust 5 yrs ago, and it was losing money all these years. Now that it is finally on the uptend, they were asking me to sell. Luckily I decided to not act rashly.


I now realise that their real interest was probably in the commission they would make by selling a new product to me. Straight away, they make 5% and I lose another 5%. Nobody was interested in what was best for me.

It is like preying on my fear - that I should get out of a money losing decision made earlier. If I run now with at least my capital intact. But I realise that this is getting from the frying pan into the fire. I recover my capital and straight away give away 5% to someone else again !

It is a world of predators out there! I shall never trust anything sold by banks again. My interest is the last thing on their minds!

Feedback about the Business Center

I received two feedback about the business center.


Having just started working full-time after graduating, I have been shopping around looking at various financial plans and insurance policies. Most agents I meet are terrifyingly aggressive and pushy, with their emphasis seemingly being on “Sell! Sell! Sell!” while I sit there, bewildered and intimidated by lists of figures and percentages.

It is reassuring and encouraging to know where NTUC Income’s heart lies and the ethics you work by. I’m definitely looking forward to a consultation with your financial planners!”



The new business centre caters to consumers like me, someone who is not comfortable to speaking with an agent but still wants the consultation and advise necessary to
make informed decisions on financial products.

There are far too many financial products floating about in the market. Consumers are often confused and frightened off and as a result not take any steps to help themselves. With the business centre, consumers are encouraged to take the
initiative to seek advise without being solicited and without the pressure of having to make any purchases.

Your business centre is a fine example of the cooperative's ethos and philosophy of putting the consumers' needs, concerns, trust and care above all else."


Thursday, May 18, 2006

Why prior approval is useful

I wish to share an experience involving someone I know. It illustrates the importance of getting prior approval for expensive medical treatment.

Mr Koh went to see a specialist for a medical condition. The specialist carried out some complicated tests. He told Mr Koh that his condition is serious and needed to be treated immediately.

Mr Koh signed the consent letter and was operated. He was discharged a few days later. He received a bill for more than $30,000. Mr Koh was not insured.

Mr Koh consulted his personal doctor. The doctor told him, "Mr Koh, you are already 80 years old. This type of medical condition is not serious. The operation is not necessary for a person of your age. Why did you agree to be operated?"

Mr Koh paid the bill. He decided not to pursue the matter.

Lesson: If Mr Koh is insured and has to consult his insurance company, he will be able to get a second opinion. In fact, the specialist will not dare to recommend an unnecessary operation, as he might be questioned.

20 insurance advisers left NTUC Income

The Straits Times reported that 20 insurance advisers left NTUC Income to join other insurance companies, due to unhappiness with our insurance business center.

This is true. But it does not give the complete picture.

Each year, an average of 40 insurance agents from other companies join NTUC Income. They find it easier to sell our products, which give better value to their customers. Although they earn a lower rate of commission, they are able to earn more through a higher volume of sales.

Some join as supervisors or salaried consultants on fixed salaries.

NTUC Income aims to provide a new channel for people to buy insurance. We want to educate consumers and allow them to buy insurance from our business centers.

We will continue to have insurance advisers, who sell insurance to customers through the traditional way, by visiting their home or workplace. They continue to offer good value products to our customers.

There will be two channels to serve the two different groups of customers.

Get good leaders in government

At each general election, there is the risk that some of our experienced ministers may not get elected into Parliament. People worry that this may disrupt the smooth running of our country.

Is there a different way to "find" capable people to run the country?

The American system provides an interesting alternative.

The citizens elect their representatives into Congress, which is the equaivalent of our Parliament. Each district elect their own representative. They do not have a "group consitutency" system.

The citizens also elect their President and Vice President to run the country. The President cannot run the country on his own. He nominates capable people to be secretaries of the various departments. These secretaries perform roles that are similar to our ministers.

For example, their secretary of state is like our foreign affairs minister. The secretary of the treasury is like our finance minister.

The nominees have to be approved by Congress, which are the elected representatives of the people.

I think that Singapore can adopt this aspect of the American system. We do not need all ministers to be members of parliament at the same time. If necessary, we can appoint a minister from outside of Parliament, if they get the approval of a select committee of the Parliament.

Wednesday, May 17, 2006

Insurance Business Center

NTUC Income now provides a new channel to service our customers.

At our new business centres, our salaried insurance consultants are on hand to assist you.

You get suitable advice on insurance and financial planning, without feeling obliged to buy the product. You enjoy a lower premium and a better return on the insurance and investment products from NTUC Income.

You can also get a modest incentive by buying through our business center.

Our business centers are conveniently located at Bras Basah Road and Tampines Point.

Call 6877-3366 for an appointment.

More people now read my blog

My site meter said that 350 people visit my blog last Friday and 400 visit yesterday. Wow.

Previously, I received an average of 150 visitors daily.

If you like my blog, tell your friends to visit it.

Auto-renewal of fixed deposit at poor interest rate

Dear Mr Tan,

My $50,000 FD was auto-renewed 1 month ago at 1.7%, although the same bank is offering about 3% for other customers.

Probably, after this similar incident was highlighted in your blog, the bank finally tele-invited me to renew my FD at a higher rate of 3%. But I think it is still not fair that the 3% will be effective only from the date when I made a personal request at the bank to renew it.

I trust the banks to auto renew my deposit at the best rates and yet got a lousy deal in return for my trust.


Tuesday, May 16, 2006

Positive feedback on Insurance Business Center

Dear Mr Tan,

Having salaried insurance consultants who are not commission based at NTUC Income's Insurance Business Centre is a fantastic concept. It shows that NTUC Income understands the needs of their customers.

My expereince dealing directly with either financial consultants from banks or insurance agents has left me with a somewhat negative impression as many push products and services which may not be entirely suited for me. At the back of my mind I always question the sincereity of the agents as hitting sales targets and earning a commission will still be their priority.

I look forward to going to NTUC Income's Insurance Business Centre for a financial evaluation soon!


Sunday, May 14, 2006

Bank customer is unhappy with renewal of fixed deposit


I wish to bring up a disgusting issue regarding the behaviour of my bank.

My fixed deposit of $50,000 with bank X matured recently. The bank auto renewed it at 1.88%.

When I found out, I was so angry that I decided to withdraw the money. This bank has been offering 3% for a new deposit. And yet, the quietly renewed my deposit at a lower rate.

I am angry on behalf of all the people out there, especially those the retirees who are not so well educated. They trust the banks to auto renew their deposit at the best rates. They get a lousy deal in return for their trust.

If they threaten to take out their money and go to another bank, they will get a higher interest rate.

Our banks seems to be playing games, trying their best to OUTWIT and take advantage of the poor, uninformed consumer with their fancy tricks.

I'd say this is blatant cheating by institutions that are supposed to be high on trust and credibility.

Make the right choice. Earn $146,000 more!

Many people are approached by their friend, who is an insurance agent, to buy a life insurance policy. They obliged. They have to pay a big premium for many years.

If they buy the wrong product, they will get a poor return. The difference can be a lot of money.

If you invest $300 a month over 30 years, the difference (between earning 2% and 6% per annum) can be as much as $146,000. Yes, you can earn $146,0000 more when you buy the right product!

Even if you buy the right product to earn 6% per annum, the difference (between buying from company A and company B) can be as much as $60,000. It depends on the charges that are taken from your investment.

Wow. That is a lot of money.

Take my advice. Attend our educational seminar. Spend 2 hours only and learn how to make the right choice. It can be worth $146,000 more to you!

You can also get advice from our salaried consultant at our Insurance Business Center.

Call 6877 3366.

Better to invest in ILP or unit trust?


1. According to Dr Money, he has grouped unit trust seperately from insurance (ie ILP). Please explain the difference.

Reply: An ILP is offered by an insurnce company. It combines insurance with investment. An insurance adviser sells the product.

A unit trust is operated by a fund manager and distributed by a bank or a financial adviser. Apart from the charge by the unit trust operator, the financial adviser usually add another layer of charge.

2. Does that mean that unit trust usually charges a higher sales fee as compared to an ILP. What about the returns? Which one tends to give higher returns?

Reply: Different unit trusts and ILPs have different charges. It is very difficult to generalise. Many of them (except for NTUC Income) aim to make much profit, so they give less to the investors.

3. If I were to invest in an ILP, say the ideal plan, is the insurance component compulsory? Can I opt for 100% into investment alone?

Reply: If you buy our ideal plan, it is not compulsory to pay for insurance. You can opt for 100% investment. You can buy insurance separately, if you wish. We offer low cost term insurance.


I suggest that you attend my education talk. You can register for the "financial tips for the young"

You can also see a salaried consultant by visiting our business center.

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