Friday, January 12, 2007

Get better terms for your car loan

Dear Mr Tan,

Income only charges 1% on the prepayment amount for early redemption of car loan, whereas all other banks and car financing schemes in the market use the rule 78 to calculate the interest rebate plus 20% surchrage.

I think that the other financiers are rather unreasonable. At one stage there were some efforts to change this by CASE. Would you care to comment on this?



Dear W

We try to be competitive and fair in our loans, including the prepayment fee.


Dear Mr Tan

Although the car loan from Income is competitive, most car distributors package the car prices in such a way that the selling price is lower if the customer take up a loan with one of their so called in-house finance provided by the banks.

The consumer may end up paying a higher car price by not takin the in-house finance. I saw the following announcement in your website.


14 May 2004
NTUC Income offers a better deal on car loans


NTUC Income recognises that the Rule of 78 puts the borrower of a car loan at a disadvantage when he redeems his loan earlier. We support the proposal by the Consumer Association of Singapore to change the system.

If the borrower wishes to redeem a car loan from us earlier, we compute the interest on the loan based on the daily balance. The borrower pays the exact amount of interest calculated at the effective rate, and is not penalised for early redemption of the loan.

Under the Rule of 78, the interest is not spread out evenly over the loan period. A person pays more interest at the start of the loan. About three-quarters of the interest are charged during the first half of the loan period. As a result, the outstanding amount reduces more slowly.

Chief Executive Officer Tan Kin Lian says: "Our computation of interest based on daily balance is fairer than the Rule of 78. We also adopt a flexible approach and allow the borrower to make bigger or accelerated repayment of the loan, if he has additional funds. This allows him to reduce his interest burden."
Here is an example of a motorist who takes a car loan for $70,000 repayable over eight years at 2.35 percent interest.

The total amount of interest is $13,160. If the borrower redeems the loan after three years, the balance payable under the rule of 78 can be as much as $47,837.
If the loan was taken from NTUC Income, it would have been computed on daily balance. The balance payable after 3 years is $46,463. The motorist saves $1,374.

Buy term insurance?

Hi Mr Tan,

I like to check with you on the life insurance for my wife. She is 30 yrs old and in good health. We had a one-year son.

She had a breast scan and ultrascan on her uterus last year. The examinations discovered benign lumps on her breasts and fibroid on her uterus.

I had wanted to buy life insurance from Company X but they slapped a increase in the premium and exclusion of her reproductive organs. Due to this exclusion, I did not sign up for the insurance.

Recently, I had an agent from Company Y who said that he is willing to try for me to buy term insurance without the exclusion. However, the premium is about $50-$60 per month for $100,000.

Is the premiums too high as I compared the premium with one of the blogs on your website below?

What kind of plan do you recommend? I am open to any plans as long as she is adequately covered.


Dear H

Let me ask my colleague to take a look and see if we can offer better terms for your wife.

Winter in Dubai

I visited Dubai for two days earlier this week. It is winter in Dubai. The temperature is about 15 deg Celcius.

Many people think that the desert is hot the whole year round. This is a misconception.

A desert is a dry place. It can be cold. Imagine the Gobi Desert in China. I think that it can be very cold there.

Dubai is hot in summer, for three months - June, July and August. It can be very hot.

But it has winter as well.

How to calculate the return on an annuity

Dear Mr Tan,

I am keen in this 'guaranteed income' product, but i was puzzled how they workout the yield as posted on income site, say 5 yrs term giving 3.46%?

Illustration: An investment of $100,000 provides an annual income of $22,125. The interest rate is shown as 3.46%.

My calculation is:

annual payout is 22,125-20,000 = 2,125 p.a
yield = 2,125/100,000 is only 2.152% p.a.



Dear EK

To calculate the interest rate for this type of payment, you have to work out the reducing balance in each year, and find the right rate of interest that produces the correct result, is reduces to nil at the end of 5 years. We use a financial calculator to work out the sums.

If you calculate year by year and use the interest rate of 2.152%, you will find that there is insufficient money to make the final payment of $22,125.

You can use an Excel spreadsheet to work out the sums, using the interest rate of 2.152% and 3.46%.

Tan Kin Lian

Magnanimous claim settlement

A policyholder was insured under the Dependent Protection Scheme. He suffered from persistent cough for 3months and eventually died of cancer. While seeking treatment, he overlooked to pay the premium for his insurance. At the time of death, the premium was outstanding for 4 months.

His wife made an appeal for the benefit under the Dependent Protection Scheme to be paid, in spite of the insurance cover being lapsed for non-payment of premium. The claims committee of NTUC Income considered the appeal. A decision was taken to pay the benefit in full, less the outstanding premium. The insured sum was $46,000.

The wife was very grateful for this compassionate and magnanimous decision. She sent the gratitude of the family to the members of the claim committee.

Tuesday, January 09, 2007

Please publicise your products more actively

Dear Mr Tan,

I read your blog about your investment plans. I was quite surprised that, for a typical saving plan, the plan from NTUC Income can give $20,000 to $30,000 more, compared to similar plans offered by other companies.

I wished that you had made this known earlier. It is too late for me, as I have already bought a more costly plan from my friend who worked for another insurance company. Why don't NTUC be more active in your marketing?



Dear K

I hope that you can help to tell your friends and family members. Ask them to come to NTUC Income.

They should act now, rather than wait. When an insurance agent (from another company sells to them), your friend is likely to be persuaded by the agent (who is very well trained and persuasive). Then, your friend will be stuck with a costly plan as well.

Here are the FAQs. Read them:


55% return from Prime Fund

Hi Mr Tan,

I bought policies from NTUC since I have started working. The most satisfying return I have seen so far is from my Prime Fund. I have started with $10K since 2001 and it is worth $15.5K now!

The rise in value is due to current good stock market performance. Should I sell it while the stock market is still hot or should I hold it as view it as a long term investment?



Dear VW

Both options (to sell or hold) are suitable.

In my case, I decided to hold my existing investments (as I bought them at a low price). For new investments, I decided to put in the Money Market Fund and wait for the market to correct (before I invest into the Combined Fund).

I am sorry that I cannot be more specific in my advice to you.

Wish you all the best for 2007.

Tan Kin Lian

Monday, January 08, 2007

Invest in Vietnam?

Dear Mr Tan,

I find that the stock market is too high now for investment where the risk is high and the return is limited.

I am now considering the investment in some funds related to Vietnam, where I see it as a potential glowing market. Do you think this is a right move?



Dear EL

I am not familiar with Vietnam. So, I cannot advise you.

Generally, if you wish to invest in a fund, you should look at the fund manager, their knowledge of the market, size of the fund, charges.

Tan Kin Lian

My blog after 1 April 2007

Many people ask me to continue writing my blog after 1 April 2007.

I will try my best. It depends on whether I have access to the issues facing ordinary people, and my ability to find the right answers.

Tell your friends

Do me a favour.

Tell your friends to ready my blog.

They can post questions to me at my website,

Disabilty income insurance

Hi Mr Tan

I have been offered a disability income plan. It provides a monthly income in the event of disability due to illness or accident. The income will be payable in the event of continuous Disability of the Life Assured exceeding the Deferred Period. This plan does not have any cash value or maturity value.

The premiums are not guaranteed and may be adjusted based on future experience or due to changes in occupation or country of residence. Premium is S$50 per month for monthly benefit of S$2,000 at a policy term of 25 years.

I find it quite expensive. What do you think?



Dear L

You are paying a rate of 2.5% for the benefit. This means that the insurer expects up to 2.5% of policyholders to make a claim. The rate of claim, at a young age, is very low.

You should also consider the duration of the deferred period (for which the benefit is not payable) and the maximum length that the benefit is payable.

I am not experienced in this product, but I think that a rate of 1% or maybe 1.5% is attractive, but 2.5% seems to be quite high.

Tan Kin Lian

A safe investment for CPF savings

Hi Mr Tan,

I am looking into investing my CPF money. I am 30 and have been working for 4 yrs. I currently have about $40,000 in my CPF OA.

I am considering between the Growth and Flexi-Link Plans from NTUC Income. I am thinking of putting $25,000 into the Growth Plan first (since there is a current promotion for 1% bonus sum assured) and the rest later into the Flexi-Link Plan (growth fund) when the market cools down a bit.

What are your thoughts?



Dear G

Your approach is good. Many people take the same approach.

The Growth plan can earn slightly more than 4% p.a.

Sunday, January 07, 2007

Troublesome to handle many tokens

Last week, Today published my letter suggesting that the banks should appoint a third party to issue the tokens for internet banking. Each customer only need to have 1 personal token which can be used to transact with any financial institution in Singapore.

Here is the experience of a customer. She had a bank account with DBS Bank and HSBC Bank. The two banks sent two separate tokens to her.

She had to carry the two tokens with her, as she does her internet banking at the office. She misplaced one token, and had to pay $20 for a replacement.

She is worried now, in case other financial institutions sent more tokens to her for their internet access.

She likes my idea of having one personal token to be used for all internet access.

Dread disease policy with premium payable for 25 years

A policyholder bought a life insurance policy from company X (not NTUC Income) to cover $30,000 payable on death and critical illness (30 dread disease).

Company X has advertised that they were able to maintain their bonus over the past years (in spite of bonus cuts made by other companies).

Here are the brief facts:

1) Premium is $64.10 per month, payable for 25 years
2) Sum Assured is $30,000 payable on death, permanent disability and 30 critical illness
3) Protection Value at end of 25 years: Guaranteed $30,000, non-Guaranteed $14,827, Total $44,827
4) Cash Value at end of 25 years: Guaranteed $13,620, non-Guaranteed $6,718 Total $20338

The total premiums paid over 25 years is $19,225. The total cash value (not guaranteed) of $20,338 represents a return of 0.45% p.a. for the 25 years.

It is a poor return. This assumes that the non-guaranteed benefit is paid out as projected by company X.

I believe that a similar plan from NTUC Income should provide a better return, maybe 2% p.a. Our payment should be more than $20,338, even after allowing for the life insurance cover given for 25 years.

I have asked my colleague to calcuate our projected payout. I will post it later.

Blog Archive