Saturday, September 08, 2012

Price of HDB flats

A HDB maisonette in Bishan sold was sold for nearly $1 million.

This should be a personal matter between the buyer, who can afford to pay the price, and the seller, who  pockets a hefty capital gain. It should not bother the rest of the people, IF our government has adopted the correct economic policy.

The flaw is in our government policy to link the price of new HDB flats to the resale market. This bad policy can be changed. And, if it is changed, things will be so much better.

Let us see what should be a better policy. If the Government prices new HDB flats based on the mean income of the citizens, and a new 4 room flat cost say $250,000, it should more than meet the cost of construction and land (based on its holding cost). The public would be able to afford these flats and would be happy if the sellers can fetch a high price!

I call on the Government to adopt a new approach to price new HDB flats.

Health care cost in Hong Kong

The health care cost in Hong Kong for the elderly is affordable, unlike Singapore. Read this article.

Three decades ago, the cost in Singapore was also affordable, and that was before the Government decided to restructure the hospitals. We have the choice to go back to the old system. If you agree, share your views here. We will find a way to tell the Government.

But, the Government is worried about the high cost of health care and the demand for health care from elderly people. Perhaps, they should be brave to tell people,  “When you are above 80, and it is time to die, no amount of medical care can cure you. It doesn’t matter if you are in Ward B2 or in a private hospital. Say your last goodbyes and leave your children with a fortune, instead of wiping out their savings.”  Quote from Jeremy Ko's blog.

Who needs financial help

Acting Minister Chan said that "society must agree on who should receive social help." But he did not state who is "society". In democratic countries, the issues are debated in Parliament and in the media. But, unfortunately, these debates are not actively done in Singapore. We need to change our democratic processes.


Please take part in these surveys

Changes in Government Policies

Make HDB flats more afforable

E-government services

The headline in Today's paper seems misleading. The actual ranking of Singapore in the use of the internet, in economic, social and political impact, is surprising low.

Although the Government scores reasonably well in providing information to the public through the internet, the actual process of submitting information to the government agencies is the exact opposite. It is difficult, painful and time wasting to submit returns to various agencies. The websites are too complicated to navigate. I have given my feedback to the government agencies on countless occasions.

Just as an example. Recently, I paid a fine of $120 to submit a return late to ACRA through the internet. I learned that ACRA collected $17.1 million in penalites in 2001 from late submissions. This means that 145,000 people submitted late!

If our e-government services is easy, efficient and No.1, why do 145,000 people find it difficult to comply with the requirements to file their returns?

The Missing Singaporeans

Some employers said that they are willing to employ Singaporeans, but they cannot find them, even at higher salaries. There seems to be a shortage of Singaporeans for the economy.

I want to share the key factors for the missing Singaporeans.

The shortage of Singaporeans is a fact. Look at our declining birth rates for the last 25 years and you will agree that numerically, the supply of Singaporeans for the economy has diminished. The Government's attempts to reverse the birth rate through its "three or more, if you can afford it" has failed miserably, and the birthrate had continued to decline relentlessly.

The other factors are that many Singaporeans are spending too much time in National Service (here, I refer to the males) and going to universities.

Recently, I asked a Poly student what he thought about "National Service". He said, "wasting time". He explained that he is already 19 years and will complete National Service by 22 and will only start work at 26, after completing university. His classmate said that she will go to an university outside of Singapore, as she would not be able to qualify for a local university. She would only start work at 23.

Forty five years ago, I started work at 18 after completing Secondary Four. More than 80% of my cohort started work around that time - as only 20% went to college and university. We were trained in our jobs at the workplace and fitted well. We did not need to have any degree in "business management" or "marketing" to do the clerical, executive, sales or service work that were needed by business. We learned on the job, and the learning was more relevant!

Today, far too many people are spending their time in universities, either in Singapore or overseas, learning knowledge that they will not apply in their future work. For example, we have many qualified engineers  making more money as insurance and property agents or financial traders. If we want them to do these vocational jobs, why do they have to spend four years in university?

 Our local people have to compete with foreigners who hold university degrees. Many of these foreign degrees are given out quite liberally, with the result that the holders do not match the degrees. Many Singaporeans pursuing overseas degrees in low grade universities be in a similar situation. Why spend so much time and money on these useless qualifications? At least, the foreigners spend a fraction of the cost spend by Singaporeans on getting these papers.

One key factor for this "paper chase" is the refusal by the Government to implement a minimum wage in Singapore. There is also a culture of blind adherence to salary grades based on paper qualifications. Many people pursue a degree, even a useless one, in the hope that they can qualify for the higher salary band. It is sad to see human resource managers over-rely on paper qualifications, rather than judgment on work performance, in fixing salaries.

We have to re-think our approach towards paper qualifications and spend our time and money more wisely to produce people that can fit the real needs of business and industry.

Tan Kin Lian

Friday, September 07, 2012

Be prudent in buying a home

Not published
6 August 2012 

Editor, Voices
Today Paper

I agree with the Minister for National Development Mr Khaw Boon Wan
that Singaporeans should be prudent and avoid buying an expensive property 
on a long term mortgage loan, such as the 
50 year loan that is introduced recently by a local bank.

I urge the Minister to review the practice of pricing HDB flats and  
the financing terms offered by the Housing and Development Board and their
partner banks.

Many Singaporeans are paying for their HDB flats on loans that stretch to 
30 years and require the income of both spouses to service the loans. 

Can these working people be sure that both of them can maintain their current jobs 
and earning capacity over a long period?

The mortgage payments may appear to be affordable under the 
low interest rate of 2.6% per annum. The current low interest 
environment cannot continue forever. The mortgage payment will increase by a 
hefty 26% when the interest rate is increased to (say) 4.5%, which is more 
compatible with the prevailing inflation rate.

Recently, the Canadian government took the step to limit mortgage loans to 
25 years to combat the bubble in property prices. I suggest that HDB should 
follow this prudent example, and keep the prices of HDB prices at an 
affordable level, representing not more than four years of the average combined 
family income. 

Tan Kin Lian

Yields on Signapore Government Securities - SGX

Here are the yields on Singapore Government Securities based on the prices quoted on Singapore Exchange (SGX).

The liquidity is low and the yield is low. The yield on a bond with more than 29 years remaining tenure is only 2.282%.

Thursday, September 06, 2012

Cyber crime

I suggest that those who are concerned with hacking, impersonation and other types of cyber crimes point out that these are criminal activities and the perpetrators can be sent to jail.$1,18-billion-loss-to-individuals-in-Spore

The best way to prevent crime is to make clear that is is a criminal activity and for law enforcers to be prepared to take action.

Unpopular but prudent measures

Read this article and participate in this survey

Singaporeans should be smarter to avoid falling into labels such as "unpopular but prudent measures". This was a question asked to DPM Tharman at the dialogue in Nanyang Technological University.

A measure is unpopular when it is rejected by many people. But, what makes it prudent? Is it prudent to collect taxes that the people cannot afford to bear, such as GST? Is it prudent to allow too many immigrants that strain the infrastructure and compete with locals for jobs? Is it prudent to allow public housing prices to rise beyond the reach of the ordinary people?

The outcome of these "unpopular but prudent policies" is a wide income gap, an extremely low birth rate and a stressful life.

So, what is prudent and what is not prudent?

What should alternative policies be labelled as "populist"? What can't it be described as "popular"? Remember, "popular" means that it is what many sensible people consider to be suitable for society. What is wrong about letting the common people decide their future?

Here is the definition of "populist" as taken from Wikipedia:

Populist may refer to "a supporter of Populism, a political philosophy urging social and political system change that favors "the people" over "the elites", or favors the common people over the rich and wealthy business owners." ....
So, it seemed to be quite respectable and honorable to be "populist" which is the opposite of "elitist".

I would have preferred DPM Tharman to answer this question along the following lines ... "We should not give labels to certain policies as being prudent and other as being imprudent. Let us have an open mind and see which policies are suitable for our society. We can trust the ordinary Singaporeans to make a collective judgement on what is necessary and right ...."

I agree many of the other answers given by DPM Tharman at the dialogue. He does have an open mind. But he should be careful about being locked into outmoded concepts of "prudent" and "imprudent".

US economy during the past 4 years

This article, and the useful charts, showed the progress of the US economy during the four years of the Obama Administration.

Wednesday, September 05, 2012

Yield on Singapore Government Securities

The yield on Singapore Government Securities based on new issues in 2012 are quite low, below the rate of inflation. The term to maturity maturity vary from 1 to 30 years.

Dividend yields on blue chip shares

Which blue chip shares give the highest dividend yield? Find out here.

Honesty and truth matters

Listen to Michelle Obama - a great speaker!

New Lumia

Microsoft and Nokia are pinning their hopes on the new Lumia. Wish them the best of success!,-Nokia-pin-hopes-on-new-Lumia-as-mobile-war-escalates

My guess is that the Microsoft Surface tablet will be a bigger winner!

One Term More

With best wishes to President Obama on his re-election.

The Obama team describe this video as a "political parody".

parody is an imitative work created to mock, comment on or trivialise an original work, its subject, author, style, or some other target, by means of humorous, satiric or ironic imitation. 

Diversification outside of Singapore

What is a good way to diversify investments beyond Singapore. You will be surprised to learn that the STI exchange traded fund (ETF) offer this opportunity. Read about it in the FISCA website, (Information).

Not published.
September 2012

Editor, Forum Page
Straits Times

I agree with the views expressed by Lisa Latip ("Proper childhood? Mum faces challenge, ST 1 Sep).

Although I belong to one generation before her, I also wanted my three children to enjoy their childhood. But, 
they had to struggle with demands of the school system and also need to attend 
enrichment and tuition classes.

The root of the problem is the high standard of the school syllabus set by the Ministry of Education. Twenty years ago, I saw a Maths problem in a Primary 4 textbook that I recalled learning in Secondary 1 during my time. I do not know if the standard had since been increased further!

The high standard did not seem to produce a better quality of people that leave our schools. We need people
who are educated, broad minded, confident in solving problems and are guided by moral, ethical and 
social values. Our highly stressed education system did not seem to produce this kind of people, 
even among those that did well in the system.

We should also ask if we want to continue with a competitive education system to produce
scholars at a young age. 

The alternative is a system that produces educated people who are confident of their
place in society. The top leaders should be identified after they had worked for many years in 

I hope that the Minister for Education, who is now heading the National Conversation, can change the 
education system go give back the childhood to our children.

Tan Kin Lian

Tuesday, September 04, 2012

Survey on Affordable Housing

Take part in this survey

Inconsiderate bureaucrats

Our inconsiderate bureaucrats continue to impose an unfair burden on the small employers. My issue is time is with the SAF.

My staff went for in-camp training. He submitted a claim for NS makeup pay. I received an e-mail from SAF asking me to verify his claim. I click the link and had to enter my SingPass. This was not recognized. I was then asked to call the SAF hotline 1800 3676767.

This is supposed to be a hotline. It is an infuriating line. I went to an automated voice response system asking me all kinds of questions that I do not know how to answer. I tried to guess the button to push and there are more buttons to come. I finally got lost, after wasting much time.

I replied to the e-mail and once again was asked to call the SAF hotline. I tried again and after refusing to press a button 3 times, they asked me to press 0 to talk to a human being.

I pressed 0 and got a message that all the customer service officers are busy.

Why does the SAF need to waste so much of my time? How inconsiderate can they be?

Useful role for financial advisers

There are 15,000 financial advisers (or insurance agents) in Singapore. They make a living by selling life insurance policies and earn a commission on the sales.

It is all right to earn commission on products that benefit the consumers. Unfortunately, many of the products currently marketed as "investment products" give a poor return for their long term savings of the consumers.

The solution is for insurance companies to design "investment products" that give good value to consumers. The insurance agents can earn a  commission by selling these products, and the customer still benefits.

In my view, the "investment type" products should give insurance protection and offer a long term yield of 4% per annum. This yield is possible by investing in the right long term assets and keeping expenses, including commission, at a modest level. This yield will give a modest real return above the long term rate of inflation (2% to 3%). It is possible to create a product that meets this criteria, and offer it for financial advisers to sell to the consumers. This will be a win-win solution.

The financial advisers can also offer advice on financial planning, budgeting, debt management and early withdrawal of CPF, for an appropriate fee, say $50 to $100 an hour. This type of advice is suitable for the individuals and help them in a positive way.

For debt-management or early CPF withdrawal, the fee can be fixed at $200 with a 70% subsidy to be provided from government funding. The consumer pays $60 and the financial adviser earns $200, with $140 funded by the government.

It will help financial advisers to move to a new platform of giving fee-based advice, and can help them to make a living appropriate to the time that they have spent to acquire the financial advisory knowledge.

Dangers of the Three Tier Agency System

Life insurance is sold in Singapore, in most cases, through a three tier agency system.  I want to share my concern about the three tier agency system, and what is the real problem that many people may not realize. I did not realize it myself until recently.

Under the three tier system, you have an agency manager who supervises unit manager who recruits the agents. 

The agents earn a commission on selling the life insurance policies. The unit managers earn an overriding commission, say 30% of what the agent earns, and the agency manager earns an overriding commission, say 15% of all the commissions earned by all the agents in the agency. 

On the surface, this type of systems looks quite acceptable. After all, there is the cost of recruitment, supervision and training - and they have to be met by the insurance company. The payment of over-riding commission, which is tied to actual sales, looks like an efficient system.

Now, here is the danger!

Many of the agents are young people, most probably graduates or even undergraduates from polytechnics or universities.They are trained to pass the examinations and then on the "positive features" of the products that are being sold. 

Some are even told lies about the products, e.g. that the investment linked products can earn a yield of 9% and is better than other types of investments. They are also told that this yield is possible because the insurance company is able to manage the funds to earn this type of return. The net yield, after using a more realistic projection and allowing for the high deductions, is probably 3% or less. 

These new agents, being naive, goes to tell their friends how wonderful these products are! In some cases, the agents knowingly tell a lie to clinch the sale, but it is also quite likely that most the agents believed what they were told and honestly sold the products in the belief!

It may take the agents a year or two to realize that they were making the wrong statements. They then drop out of the business. This accounts for the high attrition rate. 

The agency managers and unit managers take over the business abandoned by the agents and continue to recruit the next batch of agents. 

This type of business model has been operating for decades. I did not realize earlier that it could be the umbrella for the massive mis-selling, using innocent young people to tell the lies to get customers to buy the life insurance policies.

Remember, it is difficult for the experienced agency manager to tell lies directly to his or her own clients. It is easier to train a young recruit to tell the lies. If this is found out, it is easy to wash off the blame by saying that the new agent has mis-understood the terms of the contract. 

This type of mis-selling is now easier with the sale through the bank channels. The bank staff are told by the insurance agency manager on what to "sell" to the customer. I have come across many cases of consumers who were given  incorrect information.

I wish to clarify that the above statement does not apply to all agents. It may be possible that most agents and agency managers practice the trade ethically, and it may apply only to a small number. But, we do not really know how big is this proportion of mis-selling, and what portion is deliberate mis-selling. 

I honestly do not know why it is necessary, in the year 2012, to continue this mode of selling life insurance  through three tiers and for life insurance companies to continue paying high commissions on these policies sold to unwary consumers. 

The road to citizenship

Here is a good article to explain two different approaches to citizenship.

Two approaches in financial planning

Hi Mr Tan
Let me refer you to a blog posting I came across. The writer attended 2 talks, one of them its held by you.
I think its apparent which talk gave better value. You might want to put this on your website. 
Note: I am not related to the writer, I just think its a good endorsement of your work.

Will or nomination?

Dear Mr. Tan,

I have a will that distributes half of my estate to my wife and the other half to my parents. I have an insurance policy that nominates my wife to receive 100% of the proceeds.

When I die, how will the proceeds of my insurance policy be paid?


My understanding is that the nomination is more specific and it takes precedence over the will. However, i will post your question in my blog and see if a legal expert can comment on it.

Monday, September 03, 2012

Make it easy for business to make electronic payments

28 August 2012

Editor, Voices
New Paper

In spite of the availability of electronic banking, many businesses
are still making payment using checks. I read a report that
91 million checks were cleared in Singapore in 2000. This number 
is likely to be higher today.

Why are so many checks being used, when there are
more efficient ways to make payments, e.g. through
electronic banking.

It probably cost businesses a few dollars to process each check, considering
the manual work that has to be done by accounting staff in the paying and receiving 
companies and their respective banks. 

I have tried to make electronic payments for my business transactions and
found the process to be difficult and error prone. After the disappointments, I have decided
to go back to writing checks.

Can the Monetary Authority of Singapore and the Association of Banks in Singapore
look at how to make it easier for business entities to make electronic payments and to
promote its usage?

Tan Kin Lian
Tan Kin Lian & Associates Pte Ltd

Affordable housing - top priority

This findings of these three surveys carried out in Facebook ( are quite interesting and should get the attention of our government leaders.

The first survey asked the readers to choose the top priority on a change in government policy from a list of 6 choices. The top choice, which was reduce HDB prices by 30% under a restricted resale policy, attracted 24 out of 55 votes (i.e. 44%). The next higher votes went to the choices to reduce immigration by 80% (14 votes) and to abolish GST (6 votes).  Clearly, the high cost of housing was a top concern.

The second survey asked if there is a concern that the new category of HDB flats could damage the price of existing HDB flats bought at market-linked prices. 19 people participated in this survey. 17 (89%) said that they like the new category of flats and only 2 expressed the concern about the impact on the prices of existing flats.

It is likely that most of the voters were young people that wanted to have more affordable prices. But, the survey is also read by older people who have a chance to vote if they had a concern. Perhaps most of them had only one flat to live in, and it did not matter if the HDB prices does not continue to increase. Maybe, they were thinking of their children.

The third survey asked the readers to choose between the market priced flats, which had the possibility of capital appreciation and the restricted flats sold at a 30% discount. 17 people voted, of which 14 people (82%) chose the restricted flats, which had to be sold back to HDB at its posted prices, which can be adjusted according to inflation and depreciation. This high score for the discounted flats, in spite of its restriction on resale, was quite unexpected.

The findings seemed to be quite conclusive, that there is a strong preference for a new category of restricted flats to be introduced at a more affordable price, say 30% lower than the current price. It is clear that the public prefer to have a lower priced flats and to forego the prospect of further capital gains, apart from the adjustment in line with inflation.

There is a big benefit. If Singaporeans can have access to affordable public housing, and non-citizens cannot, it can also reduce the concern about immigration and the unfair advantage perceived to be held by foreign workers who are willing to accept lower wages as they do not have to pay for the high cost of housing in Singapore (as they usually share a rented room).

I hope that the findings of these three surveys will give the courage to our government leaders to think of this approach, and to carry out a more comprehensive survey among the people. This seem to be the biggest concern and the best topic to be covered under the National Conversation to be chaired by Minister Heng Swee Kiat.

Please participate in this survey. Thank you.

Enbloc Sale at Cactus Garden

This is the famous Hong Sheng Restaurant at Cactus Road. It has been famous for two decades for its seafood kuay teow. It has now moved to another location due to the enbloc sale of Cactus Garden.

The enbloc sales affected six coffee shops and cafes, with more than 20 stalls. These stalls have to relocate to other places and rebuild their business. This will not be easy.

When the site is redeveloped in the future, the rental is expected to double. This will increase the price of food served in the new outlets. Many of the customers are workers in nearby factories, who will not be able to afford the higher prices. This is the sad part of re-development and is a cause of the rising cost of living.

Sunday, September 02, 2012

Financial Planning Advice

There is a risk in using the advice of a financial planner, who may be collecting fees to look after his own retirement, rather than look after the interest of the client.

Blue Chips 7 May 2012

This table shows the dividend yield and other financial indicators for blue chips as at 7 May 2012

REITS 7 May 2012

This chart shows the yields and other financial indicators for REITS as at 7 May 2012

Anonymity in the Social Media

Lucky Tan argues for the need for anonymity in the social media

I take a middle ground. Each person should be registered, but is allowed to use a pen nam
e. By being registered with a real identity, he has to act honestly and responsibly. He cannot defame, insult or tell lies. He can be traced.

Andrew Loh writes with his personal name. Mr. Brown uses a pen name, but his identity is known. My identity is known. We know Lucky Tan by his pen name, and he writes responsibly.

I disagree with the threat of defamation action taken against Alex Au and against Richard Wan (which I consider to be "bullying") and against the university lecturer that was bankrupted. But, I also disagree with the extremely bad behavior of many people who writes irresponsibly under the protection of anonymity.

Educating consumers

Two different approaches in educating consumer about financial planning and investments.


On the surface, it would seem that the Wealth Expo would be more value for money, but sadly I was wrong. The two talks were different as heaven and hell, and I will share about TKL’s talk first.
TKL talk was held in a small SMU lecture room with about 20 people. There was no fluff, it went straight to the point regarding the different types of insurance (life, term, car, home, death etc), the ideal types to buy, rationale for doing so and it ended with a simple book promotion. The books were also not very expensive, $8 for a book. After that, there was an open Q&A where we got to pick his brain.
Most importantly, you could tell he was sincere in sharing whatever he knew and honestly felt. For example, he has an almost zen-like approach to cancer and death, which I paraphrase “When you are above 80, and it is time to die, no amount of medical care can cure you. It doesn’t matter if you are in Ward B2 or in a private hospital. Say your last goodbyes and leave your children with a fortune, instead of wiping out their savings.”

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