Saturday, January 02, 2016

International Trade Agreements

Are international trade agreements, such as the Trans Pacific Partnership (TPP) and the Asean Economic Commuity (AEC) good for Singapore?

There is little discussion about these agreements in our local community. One reason is the lack of information given to the public about these agreements and their impacts on Singapore. The government prefers to treat the terms of these agreements as "confidential" or not for public discussion.

Here are what the ordinary people think about the TPP.

It is not encouraging.

Friday, January 01, 2016

London Eye vs Singapore Flyer

I went to the website to get details about London Eye and the Singapore Flyer. I wanted to find out why London Eye is doing well, and the Singapore Flyer is struggling.

Here is a comparison

London Eye - GBP 20 = SGD 40
30 minute rotation.
Entry to 4D movie

Singapore Flyer - SGD 33
30 minute rotation
Multimedia showcase.

The Singapore Flyer is 20% cheaper than London Eye. I know know if there is a difference between the 4D movie and the multimedia showcase.

There is a big difference in the presentation of the two websites. I was able to find the prices of the London Eye immediately, and to know what I get for the ticket price.

The Singapore Flyer website is confusing. I read the whole of the home page and could not find out the ticket price. I get so much detail, but little information. I had to search and read a lot of irrelevant information before finding what I want.

I wonder if this had an impact on the public buying of the tickets? Most people search the website for information. They will be discouraged by the website of the Singapore Flyer.

Parliament has still not convened

The general election was held on 11 Sept 2015. More than three months have already passed, and Parliament has not yet convened. How deplorable!
Someone told me that some MPs complained about the delay in convening Parliament. They miss the chance to sleep in the sessions. Hahaha.

Win a free e-book and save $6

Give your vote on 5 issues and win a free copy of the ebook "Financial Planning for Young People". This book sells for $6 but you can get it free.

Thursday, December 31, 2015

Low payout ratio

Dear Mr. Tan

Can you explain how to read the claim ratio and the profit ratio of critical illness insurance shown on this page?

For the top company PRU, the claim ratio is 18.3% and the profit ratio is 27.1%, giving a total of 45.4%. What happened to the remaining 55.6%?

The remaining 55.6% goes towards commission, expenses and increase in reserves.

The claim ratio is very low. For every $100 in premium, the policyholder gets back only $18 in claims. This payout ratio is worse that 4D or Toto!.

Wednesday, December 30, 2015

Soursop Tea Leaf and prostate cancer

Prostate cancer, (Mr Lim, 75)

Mr Lim went for his regular urinal test and the doctor did a Postrate Speicfic Antigen (PSA) on him. The result on 6 Oct shows 9.370. Normal range below 4. Doctor suspected he may have Postrate Cancer and scheduled a biopsy test of the postrate in Dec 2015. In the meantime, Mr Lim continued his same medication which he has been taking for past 1 to 2 years.

Having read about the soursop leaf tea, Mr. Lim started to drink the team every morning 30 minutes before breakfast.

On 29 Dec when he did his PSA test again the reading was 5.930. As this caused no alarm, the doctor scheduled him for next checkup 6 months time. The doctor was not able to give reason for reduction in the reading, but the patient knew what helped him.

Tuesday, December 29, 2015

ElderShield supplement

Dear Mr. Tan
I receive a call from an agent recommending that I should top up my Eldershield as $400 is not enough. Should I buy the top up policy?
Get the agent to send you a benefit illustration. You can send it to me. I will carry out an analysis.
The claim ratio for this class of business is very low, as shown here:
This means that very few people are making claim for disability. The insurance company are making a very big profit margin. One large company make a profit of more than 90% on the premium that they received!

How to get a more detailed analysis

A consumer (or perhaps an insurance agent pretending to be a consumer) commented on my article about Aviva MyCare policy. He said that I should carry out a more detailed analysis to back up my recommendation to "take your own risk".
My recommendation is based on the statistics that shows the insurance company had a profit ratio over 90%. This is horrible. The other companies have a profit ratio more than 30%, which is also too high. The insurance companies are making a high profit margin on Eldershield and the supplements.
If the consumer wants a more detailed analysis, he has to contact me at my consulting portal and provide data that is relevant to his own case.

Monday, December 28, 2015

Service for property owners, agents and tenants

Office desk space available for rental
Free listing available for agents or owners

How to replace the Goods and Services Tax

I dislike the Goods and Services Tax (GST). It increases the cost of living and hits the low income people hardest. It adds to the cost of doing business, by imposing a burden on traders to collect the tax on every transaction and to account the collection to the government.

The government needs revenue to meet its operating expenses and to provide welfare and public service to the people. The GST represents an important source of revenue for the government. If it is discontinued, we will need a suitable replacement.

The government can increase the income tax rate to replace the loss of revenue from stopping GST. This was the situation prior to the introduction of GST. However, this could bring the income tax rates to a level that is higher than other countries.

Another way is for the government to introduce payroll tax to replace GST. A payroll tax of 3.5% is sufficient to replace GST of 7% on the assumption that most people spend 50% of their income on expenses  that now attract GST.

For self employed people such as hawkers, taxi drivers and small contractors, the government can introduce a licence fee of $50 to $250 a month, depending on trade. This would be equivalent to the payroll tax collected from an average employee.

The alternative of payroll tax/ licence fee can be set at a level that is adequate to replace the revenue from GST. It has an advantage over GST. It is a cost of doing business, similar to the salary and CPF contributions.

While it will increase the consumer price by the increase in cost to the business, it avoids the multiplying effect imposed by GST, i.e when GST is increased by x%, the consumer prices usually increase by more than x%.

This will free the traders from the added cost of administering the GST.

I believe that countries will be better off by replacing the broad based GST with the payroll tax/ licence fee. They can still introduce a selective sales tax on certain types of expenses, such as hotel bills, restaurant bills, lawyer billings, stamp duties.

Sunday, December 27, 2015

Short sighted thinking in the government

Dear Mr. Tan

You said that the PPP model is more costly for the country. Why does the government opt for this model?

We have a government that is "very smart".They want to get the Sports Hub for free. Why not get the private sector to fund the cost and take all the risk?

Unfortunately, the decision makers probably did not realize that this kind of model is quite costly, troublesome and difficult to manage. It adds to the total cost to the country.

I suspect that this kind of "short sighted thinking" happens in many other aspects of our government administration.

For example, the government agencies want to reduce their operating cost, e.g. to cut down on staff and to get the public and businesses to "do it yourself" by using the online websites. But they do not take into account the cost to the public of using these complicated online process. For example, the government agency save 5 minutes of their staff's time, but as a result, the public has to spend 1 hour.

The cumulative effect of this short sighted thinking in the government over the past decades has increased the cost of doing business in Singapore, apart from high property rental. We are now inefficient and costly.

Period of premium payment

Some insurance buyers are not able to distinguish between the duration of the insurance policy and the period of premium payment. Usually, they are the same, but some plans are designed to be different.

A insurance buyer may be misled into thinking that he or she is investing in a life insurance policy for 5 years when the premiums are locked up for a much longer period.

Read this article to understand the difference.

What's wrong with the Public Private Partnership model?

Mr. Tan
The PPP (public private partnership) model sounds like a good idea. The government (i.e. taxpayers) do not bear any risk. All the risk are borne by the private sector. Eventually, the government gets the asset, i.e. the Sports Hub, for free. Is there any negative aspect of it, from the taxpayer's point of view?

The private sector does not enter into the PPP as a charity or public service. They do it for profit. They expect to earn a higher profit that will cover their risk.

The PPP model is also more costly. Decision making is complicated, as the different partners have to agree to any major change.

The model is also inflexible. The terms of the PPP have to be set out in detail in advance. It is difficult to modify the terms to meet changing market conditions. The re-negotiation will be time consuming and costly.

The PPP model is more costly. It can work in a virtual monopoly, e.g. utilities and toll roads.

When there is no monopoly, the higher operating cost is likely to price the PPP out of the market. That is why many of the international sports events find the rental rates of the Sports Hub to be too expensive and have opted for other venues.

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