Saturday, August 04, 2007

Common Sense and your Blue Rose

Some inspirational advice from Dr. Lee Kum Tatt to NUS Chemistry graduates and their parents at the Graduation Ceremony in 2006. Read what Dr. Lee said in his address in his blog.

Friday, August 03, 2007

Level premium for Shield plan

Dear Mr Tan,

I understand that the premium for the Shield plan varies according to the current age. It means that I have to pay a higher premium when I grow older. The increase can be quite steep. Is it possible for me to pay a level premium?


It is true you have to pay a higher premium when you grow older. To get an idea about the likely amount, you can refer to section 15 of this FAQ.

It is not possible for the insurance company to charge a level premium, as the premium rate has to be revised according to the claim experience. It is likely that the cost of treatment will increase in the future, due to new technology and more sophisticated method of treatment.

The premium will increase due to two factors - increase in your age (as older people need more treatment) and escalation of treatment cost.

Although you pay an increasing premium, you can use your CPF Medisave account to level out the cost. You should keep sufficient money in this account to pay for all of your future cost. It allows you to earn interest on the balance in your account.

You also have the choice to downgrade to a less costly plan, when you grow older. This option is available only if you have a plan with a yearly adjustible premium.

Application of Laws of Chemistry to Our Everyday Life

Dr. Lee Kum Tatt has written many articles in his blog on the philosophy of science and how this together with our culture and values affect our lives. He has just written an article on how to use chemistry laws to solve everyday problems. This article is meant for our amusement the contents of which can only have been written by a fanatic chemist. Enjoy yourself.

Dr. Lee Kum Tatt and his blog

I persuaded Dr. Lee Kum Tatt to put his ideas in this blog so that others may benefit from his experience , values and philosophy. Many still asked him why he blogs and for whom? Here are his comments.

Thursday, August 02, 2007

Some tips on investing in structured products

1. What are structured products?

These investments link your returns to stocks or bonds. It reduces both the high and low-end of potential returns. You receive the middle part.

2. What type of structured products are good for consumers?

If you must buy a structured product, your best bet is probably one (i) which pays a minimum return that is more than a money market fund and (ii) doesn't lock up your money for longer than you are comfortable with. (It is hard to find one of these.)

3. What type of structured products are bad for consumers?

Structured products with high costs and uncertain returns are bad for consumers.

Costs: For many structured products, the costs are not disclosed. Some structured deposits trade as unit trusts and these report an expense ratio. The expense ratio contains most of product's costs.

Returns: The products usually state a minimum and maximum return. If the minimum return is higher than the money market rate, it is acceptable as long as it doesn't lock up your money for longer than you wish.

4. What steps should the consumer take, before investing in a structured product?

Check out the (i) costs, (ii) minimum returns and (iii) lock-in period.

Single premium endowment has its attractions


Your FAQs are very informative. is the single endowment plan, Growth, by NTUC a good investment vehicle?

You have advised against any product with lock in. I notice that this Growth has lock in. To get the full return you have to keep it till maturity.

It may be considered a low risk but then its guaranteed component is very low especially in the early years and it is only 1.5% when it is held to maturity.

I think the investor is better off taking about the same risk with well diversified portfolio. Consider these two downsides, ie. long lock in period and low return, I won't recommend anyone investing in this product.

What is your view, Mr. Tan?


Based on the current bonus rates, the Growth policy should give a return of 3% to 4% p.a. at the maturity date.

It is a good plan for a policyholder who does not wish to take investment risk, and is willing to invest for the full term. The upfront cost is low. The return on maturity has been quite fair.

For those who are prepared to take risk, it is better to invest in a well diversified fund.

Earn 4% in your CPF special account

Dear Mr Tan,

If the Growth Policy can return between 3%-4% do you think it is wise to invest your CPF Special Account in this product?

The Special Account gives a guaranteed 4% without the risk and no need to hold to maturity.

I have one NTUC agent persuading me to invest my special account in the Growth POlicy. Trying hard to convince me about the insurance, which is actually a personal insurance stripped of all other benefits. I am amazed by her argument.


It is better to keep your money in the Special Account to earn 4% per annum, rather than invest in the Growth policy, which is likely to pay a lower return. You can get your life insurance by buying a low cost term insurance.

Buy term and invest in a low cost fund


I don't believe in cash value policies. I have only term from NTUC. They are cheap. I have no worry about keeping them. I can throw them away when the time comes without the feeling of loss.

I invest in the combined funds which are giving me good returns. I can move the investment whenever I like. I can use the profit to finance my term policies if I run into a crunch.

It is so flexible having two types of plan seperated. Don't fall for all those limited premium plans with fanciful names like LPPL living policy.

Wednesday, August 01, 2007

Writing a Will

Dear Mr Tan

I like to thank you. Your Blog is always helpful.

I visited the "NTUC Income : Know Your Insurance" website and went through the "Personal Accident" and "Making a Will" sessions.

I contacted the NTUC customer service officer to find me a lawyer to help me in drawing up my Will. She recommended a lawyer who quoted $157.50 for a simple will. This is much cheaper than another law firm that I approached earlier.

Starhub Mobile

I subscribed to Starhub Mobile recently. It had the following advantages:

* free incoming calls
* free IDD calls (018) to several countries, including Malaysia, China, Hongkong, Taiwan and USA

As I have to call these countries frequently, the free IDD call was quite useful to me.

Surgical operation was not helpful

I know of someone who passed away recently. He was over 70 years. He had been on kidney dialysis for many years. He spent two months in a public hospital but they did not operate on him.

Later, he went to a private hospital to carry out an operation. He passed away from some complication arising from the operation. The medical bill was $60,000.

Lesson: Avoid taking an operation at an old age, unless it is clear that the operation is useful and is not risky. Seek a second opinion before carrying out the surgery.

Brief History of Science in Early Singapore

As the founder chairmen of Singapore’s Science Council, Singapore Institute of Standards and Industrial Research, Singapore Standards Council and a member of Singapore Polytechnic’s Board of Governors, Dr. Lee Kum Tatt was one of our early pioneers who was in a good position to coordinate the application of science to Singapore’s development.

Pioneers always face uncertainties and dilemmas. Dr. Lee shares with us his personal feelings of those times. Dr. Lee also shares with us what he considers as some of the important factors that made Singapore what it is today. Read about his accounts on this subject in his blog.

Tuesday, July 31, 2007

How to apportion the investments?

Dear Mr Tan,

Is it a good time to invest in unit trusts, since the share price have shoot so high? If yes, what type of unit trust will you recommend?

How about placing the extra money in fixed return like policy? Example "Growth" policy from NTUC Income with fixed return for 8 years?

I have about $100,000 saving. How should be investment be apportioned?


I suggest that you read this FAQ. Although the points were written three months ago, they are still relevant today.

Invest in bonds now?

Dear Mr. Tan,

At present, I have stocks worth about S$200,000. As stock prices are high, I am considering to sell them and re-invest my money in another type of investment.

I understand that bonds are a good and safe investment. Do you agree? Is there any good bond investment that you can recommend? I want my money to work harder for me, as I am retired now.


I suggest that you read this FAQ. Although the points were written three months ago, they are still largely relevant today. I hope that you find them useful.

Two currencies system

I first visited China in 1987, i.e. 20 years ago.

The law at that time require tourists to use the "foreign exchange certificate", which is different from the "reminbi" used by the local people.

I have a few foreign exchange certificate kept for 20 years. It is like a currency note, but has the following statement ...

BANK OF CHINA. Foreign Exchange Certificate

The yuan expressed in this certificate is equivalent in value to the Reminbi yuan. This certificate can only be used within China at designated places. No request to register its loss will be accepted by the Bank.

All tourists were required to buy and use the foreign exchange certificate. The conversion rate is higher than the local yuan. This is China's way of making tourists pay a higher price (compared to the local people) for the same goods and services.

In subsequent years, China had developed its economy. It ceased the use of the foreign exchange certificate. Tourists now use the same currency (ie Reminbi yuan) as the local people.

Monday, July 30, 2007

Financial Planning for the Young (revised FAQ)

I have updated the FAQ on Financial Planning for the Young. It consolidates several FAQs. It should be clearer and more comprehensive.

Invest in single premium ILP



(Edited) Whole life plans, with or without limited premium paying term, is a gimmick to hoodwink consumers into paying more without much added value. They are sold at the expense of coverage.

Recent survey shows that Singaporeans are grossly under insured. Why? The insurance companies and their agents have been around for so many years and what have they done for the consuming public?

The answer is that insurance agents had never put their clients' interest first. They put thier pocket first. Term insurance don't pay much, wholelife with cash value pays more commission.

No wonder AXA, the world's largest insurer is committed to selling only term plans and ILPs. They strong believe the concept of buy term and invest the rest.


I understand that the ILPs sold by AXA have high charges as well. They charges are as bad as the traditional policies. You can read to find out their charges. Do not buy the ILP from AXA.


Unless advisers are paid a fee for giving advice, they will always be tempted to sell plans that benefit their pockets more.

Unfortunately, there are still not many people who like the idea of paying advisers a fee. They cannot see the benefits that an a professional adviser can give them.

Some DIY their investments plan but many lacks discipline to carry out for long term and lacks the knowledge to review and rebalance along the way.

Maybe someday, CPF board may allow members to use their CPF monies to pay such advisory fee.


(Edited) Single premium ILPs had 5% sales charge which was higher than Income. Now every SP has 3% and that levels the playing field.

Doctor Money's comparison is for regular ILPs.....

Naturally like traditional plans they carry high charges. You pay for flexibility. You can change them to whatever you want at different stage of your life cycle.


Invest in a single premium ILP to reduce the upfront charge. Some insurance companies offer you a plan that allows recurring single premium to be invested. This is the most cost effective plan.

Read this FAQ.

Investing your CPF and cash savings

I have often been asked, "Is it better to leave the minimum sum with the Central Provident Fund to earn 4% per annum, or to buy a life annuity"?

My reply, "Both options are suitable". The return from a participating life annuity from NTUC Income is more than 4% per annum (if the current rate of bonus is included). The life annuity also play a useful role of spreading the longevity risk.

The return of 4% paid by CPF is very attractive, and it does not carry any risk. For most people, keeping the money in CPF is a good choice.

For your cash savings (ie not the CPF minimum sum), it make sense to invest in a life annuity (as the alternative investment options, which have low risk, offer less than 3% per annum).

My suggestion:

1. Keep your minimum sum in CPF to earn 4%
2. Invest $100,000 of your cash savings to buy a life annuity
3. Invest the balance of your cash savings in a large, well diversified fund

Read this FAQ.

Strengths of mature workers



I agree with your views on the strengths of mature workers. Employers need to recognise these strengths and make use of them.

Some older workers have the skills, experience and patience to work in the sectors that require god customer-service orientations. Many are probably more suitable in backend work not involving direct customer service.

I think older workers are looking for reasonably paid jobs that recognise their strengths and allow them to contribute to the work or organisation.


Studies world wide have shown that older workers are reliable, more mature and better at managing relationship related situations, and have much lower absent rates compared to younger workers.

One issue facing older workers is ageism, where employers feel that older workers have little relevant strengths, believing erroneously that older workers cannot learn new skills, have poor attitude, and are expensive because of high medical expenditure, etc.

I hope that .... can work with employers to identify concrete job opportunities, affordable work adaptation practices as well as ageist prejudices that can be addressed. The .... contribution in this instance will be invaluable!

Use older workers for their strengths

28 July 2007

Forum Page
Straits Times

I refer to the letter from Dr Adrian John Kok entitled "Have policy to protect rights of older workers" (Straits Times, 28 July).

Dr Kok suggested that policies should be in place to address discrimination against older workers in the workplace and to recognise the rights of the people who in their prime contributed to the prosperity of their organisations.

The root cause of the problem is the difficulty of older workers in getting meaningful, well paid jobs in a competitive environment brought about by the free market and globalised economy.

I wish to suggest the following approach to address this issue:

* identify the strengths of older workers
* identify the new jobs where their strengths can be put to better use
* encourage businesses to tap the older workers for their strengths
* encourage the older workers to adapt to the changes

The strengths of older workers are their experience, skills in handling people, understanding of the business and willingness to stay in the same job. These strengths are needed in the new economy where a high standard of customer service gives a competitive edge to businesses.

There are jobs that are more suitable for younger people, and other jobs that are more suitable for older people. if we recognise the difference and can create the right environment to use their respective strengths, there will be ample opportunities for both younger and older workers.

Tan Kin Lian

Sunday, July 29, 2007

Budget Roaming with Sunpage

I found a service provider that offers budget roaming.

Save while you roam… with SunPage Budget Roaming

Now you can enjoy Huge Roaming Savings up to 90% with SunPage BUDGET ROAMING, a mobile call diverting service.

All you need is an overseas mobile or fixed line number where you can divert your Singapore mobile number to receive incoming calls.

Blue Ocean Strategy

This is a book written by W Chan Kim and Renee Mauborgne.

Some excerpts.

* There are no permanently excellent companies.
* We need to make a positive difference and to replicate it systematically
* We need to create a blue ocean strategy
* Red ocean is bloody competition
* Blue ocean is uncontested market space that makes competition irrelevant
* It grows demand and breaks away from competition

It quotes the example of Cirque du Soleil. Instead of adopting a red ocean strategy to compete with other circus on the same operating model, e.g. use animals, it adopted a blue ocean strategy and created a new type of experience using highly trained gymnasts. It became very successful, and grew the market without having to face any competition.


Wireless@SG is a wonderful initiative by the Infocomm Development Authority. It aims to provide wireless connection to personal computers from many hotspots around Singapore. This is provided free to users for the first 2 or 3 years.

However, this initiative faced the following problems:

* many hotels and commercial buildings refused to participate in this intiative
* they want to charge a high rate for access to their hotspots
* the login can be quite complicated as different protocols are adopted by different service providers and hotspots.

I hope that IDA will review this project and find a better way to achieve the original goal.

I suggest a premium service be provided as follows:

* users can pay for their usage
* the rate should be a modest rate (and not a high rate)
* a standard login should be provided (regardless of the hotspot)

Another alternative is to sign to the wireless broadband provided by M1.

A good financial plan - case study

Dear Mr Tan,

I bought $40,000 of NTUC Income shares a few years ago. I am happy with the dividends. Should I keep the shares as my retirement portfolio?

I have been buying unit trusts through monthly regular savings plan. Some of these unit trusts (Asia ex Japan equities and Global equities) were bought since 1999. I have not redeemed any of the units. I plan to keep them for my retirement. The unit trusts have appreciated more than 100%.

Should I reap the profits now and continue investing through regular savings plan in a diversified portfolio comprising core and supplementary funds?

I have transferred my excess funds from my CPF Ordinary Account to the Special Account in the CPF to earn 4% interest. My flat is fully paid for 5 years ago.


You have managed your financial affairs very well and have earned a good return on your investments. Congratulations.

Your experience will be useful for other people. It is a good case study. My views are:

* keep your Income shares, as it gives a good dividend (5 to 7% p.a.)
* keep your unit trust investments (if the funds are large and well diversified)
* check that the expense ratio is less than 1.5% p.a (better, if less than 1%)
* you are astute in transfering the excess funds from orinary to special account in CPF to earn a higher intrest rate.

Growth policy: yield of 4.6% p.a.

Mr Tan,

Just to share and seek your view on my following Growth Policy from NTUC Income:

I bought the Growth Policy (10 yr) in 1997 for $3000. It had a guaratneed maturity value of $3,750 and a projected value of $5063.

This policy will mature on 1st Aug 2007. I was told that the finalised amount was $4742.

Should I feel happy that it is more than the guaranteed amount or unhappy that it is less than $300 less than the projected amount?


Wow, you got a return of 4.6% per annum for the past 10 years. That is a great return (although it is slightly lower than the original projection).

Many people invested large sums of money in structured products during this period. They obtained a miserable return of 0.2% per year for 5 years. They would be delighted to get a return of 3% (not even 4.6%).

Yes, you can be happy. And send your thanks to the adviser who sold this product to you.

Avoid Roaming Charges

I spoke to someone in the telco business last night. He told me of this service provided by a third party telco:

* you open an account with the third party telco
* when you are overseas, you can get a local SIM card for your mobilephone
* you send a SMS to the telco to give your new "local" number
* they will divert all calls from your Singapore mobilephone to the "local" number
* you pay local call rate for your incoming calls, plus a small charge to the telco
* they also provide an option for you to update the "local" or diverted number through the internet website

This seems to be a good service, and is quite convenient. He will send me the URL of the service provider.

Shared Values

Loh Chee Keong wrote in his article "In Search of the Singapore Soul" in Today paper (28 July):

Quote: In 1991, a national committee headed by Lee Hsien Loong, presented five shared values after an extensive study. I doubt many even remember that initiative, let alone what those values were. Unquote.

I searched the internet and found these values to be:

* Nation before community and society before self
* Family as the basic unit of society
* Community support and respect for the individual
* Consensus, not conflict
* Racial and religious harmony

Wireless Broadband

M1 provides a wireless broadband service linked to a notebook or PC. They charge $39 for 5G of data retreival a month. The speed is more than 1.8 M bytes per minute. The cost of 1 M of data is about 1 cent. The cost of retriving 1 M of data is about $3 for the mobilephone.

An alternative is to use Wireless@SG for free internet access. The problem is the limited number of hotspots, complicated login (for some hotspots) and the slow speed.

It is worthwhile to pay for the wireless broadband access, if you are doing work outside of office.

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