Cheating - as defined in the Penal Code of Singapore

Cheating – Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he or she would not do or omit if he or she were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".For example, A cheats if he intentionally deceives Z into a belief that A means to repay any money that Z may lend to him when A does not intend to repay it, and thereby dishonestly induces Z to lend him money.Cheating is punished with imprisonment of up to one year, or a fine, or both.

Cheating is a crime and action has to be taken by the state, i.e. it is not a civil matter. If a person deceives another person and receives money from the victim, the person is committing the crime of "cheating".

If a forex trainer claims that his technique is guaranteed to make money, and the representations are false, the trainer is deceiving the students and can be charged for the crime of "cheating" them of the fees that are being paid.

Effect of Deduction

Hi Mr Tan.
I am signing a policy soon. But I don't understand what the effect of deduction is. It's a AXA policy called INSPIRE FLEXI 2. After reading your blog, I tried to do the calculation but am more puzzled. Attached are the 3 pages of the illustrations. I hope that you can advise me.

REPLY
The Effect of Deduction is the amount taken away from your future savings. You can see that this is a large amount. Why are you investing in a life insurance policy when so much is being taken away?

It is better for you to invest on your own, e.g. in the STI ETF, as advised in my book. You can buy term insurance for your life insurance protection. Please read my books for a better understanding on this matter. www.tankinlian.com/ishop

You can also attend the FISCA talk on 26 Nov 2011 - register here: http://easyapps.sg/assn/Org/Event.aspx?id=5

In the meantime, you should not take up the life insurance policy, especially as you do not understand these important matters.

Ask Mr. Tan

I have received question from readers of my blog on life insurance and financial planning. I usually ask them to read my books which are available from www.tankinlian.com/ishop. Often, the answers can be found in these books. In the future, I will ask them to make a donation of $200 to FISCA, before I look into their question.

Higher business costs

I met the owner of a chain of coffee shops. He told me that his business is being squeezed by higher rentals and shortage of manpower. His employees keep resigning, as they can get better wages elsewhere, after the government clamped down on the work passes. He feels the pressure of squeezed margins.

I said that to look at this matter in a different perspective. The higher rentals and wages apply to all of his competitors, and does not hit him alone. So, the higher costs will have to be translated into higher retail prices for his products. As long as he is more efficient that his competitors - and he is selling this coffee and breakfast at lower prices - he will be able to do well. People will still need breakfast and coffee, so they will continue to patronize his outlets, even after he has adjusted his prices to cope with the higher costs.

Higher prices are bad for the consumers - but this has to be solved at the government level - to moderate the rentals for business outlets. It is good for wages to be adjusted upwards, as the workers need to earn enough to feed their family.

I welcome the move by the government to build more markets at HDB estates - and hope that these outlets will be rented at non-tender prices. If they are at moderate levels, it will help to moderate the rentals in the private sector as well.

Flexible Pensions

The state pension systems adopted in many advanced countries are now in deficit, due to ballooning cost and under-funding. This does not mean that the pension system is inferior to the provident fund system (such as the Central Provident Fund operated in Singapore). The provident fund system also has its pitfalls.

The key weakness of the pension system is its rigidity. It aims to pay the pension in predetermined amounts when asset values and economic conditions can fluctuate significantly. A better solution, which has not been tried, is to have flexible pensions, i.e. the amounts will be changed according to the underlying value of the assets. This type of flexible values are already embodied in mutual fund investments and can be applied to make pension payments flexible and keep the system solvent over the long term.

There are two key advantages in the pension system. First, it provides for pooling of investments over the long term, by professional fund managers. This is much better than allowing the retirees to take out their provident fund savings to invest on their own - as most lay people cannot manage their own investments.

The second benefit is the pooling of longevity risks. Those who die younger draw out less, and allows the pension fund to pay the pensions to those who live longer.

The fear about insolvent pension schemes can be addressed by building in the flexibility to the pension payments.  In good economic times, the pensions can be bigger. In bad times, they can be smaller. The pensioner can cope with fluctuating pension amounts (provided that the adjustments are modest and made every six months). When they receive a smaller payment during an economic downturn, the cost of living will probably be lower - so the smaller pension payments may still be adequate.

It is time for Singapore to convert CPF Life into a flexible pension scheme and to make it attractive for retirees to invest their savings (other than the CPF minimum sum) in a sound pension scheme.

FISCA Financial Planning Workshop - 26 Nov 2011

The next FISCA financial planning workshop is available for registration now at http://easyapps.sg/assn/Org/Event.aspx?id=5
The last workshop was well received. Here are two feedbacks:

Ong:  I think the seminar is very relevant especially for young people who have recently joined the job market. It can really help make good investment decisions and avoid pitfalls that could ruin people's lives. The talks on Financial Planning today were both interesting and enlightening. Mr Tan Kin Lian's delivery is frank and very helpful, especially in understanding financial planning and  insurance policies. Kindly keep me inform of his future talks.

Najmi: Thank you for such an informative session earlier. I thoroughly enjoyed it and learnt a lot from you and Mr Ling today.  

One participant sent an e-mail to all his friends to recommend that they attend the workshop.

Rates of GST

Here are the current rates of GST adopted in various countries:

Australia 10%
Canada 5%
Hong Kong (abandoned)
India (to be introduced in 2012, rate not decided)
New Zealand 15%
Singapore 7%
Germany 19%
Japan 7%
Sweden 25%
UK 20%

I am not able to draw any conclusion on this matter. I dislike GST and prefer the government revenue to come from income tax. But, it seemed that many countries are implementing GST.

My view: In Singapore's case, there is no need to have GST as the government collects a lot of revenue on sale of land and vehicle tax. Furthermore, welfare benefits in Singapore is quite low. We are in a similar situation as Hong Kong, which does not have GST. 

Inefficient and bureaucratic bank process

Contributed by Anthony Hobrow

Banking in Singapore leaves me frustrated at every turn. I am not sure how much is the fault of the bank and how much is detailed regulation by MAS but the end result is a system where there appears to be no authority granted to the front line, excessive paperwork and very long process times. It is not the same in London.

With the same international bank I can get an overdraft facility in one short phone call. Here it has taken paperwork and two weeks! I even had to provide copy payslips when the bank has access to every receipt and payment in my account in UK and in Singapore and has access to 40 years of my banking history!! What possible purpose can a payslip serve?

I needed a new credit card as my card failed sometimes to work when I was travelling. In UK this would have been couriered next day to wherever I was. Singapore could not send me a new card. I had to be with a faulty card until the end of my trip and then collect a new one when I got back. BUT the worst thing was they cancelled my old card and took the account off the internet banking facility, before I had the new one! The card was not lost or stolen, just worn and intermittently didn’t swipe well.

Anthony Hobrow
Direct Asia

Mortgage insurer in big deficit

It seems that there will be extremely difficult times ahead for the USA. The Federal Housing Agency insures the mortgages on many homes. They are facing a big deficit and need to be bailed out by the Government. Wow! http://www.cnbc.com//id/45305350

If we look at the problem of the housing market in the USA, the lesson is that property prices should not be allowed to go up too high - as it will eventually have to burst. A good benchmark in the past is that property prices should be 3 years of the average income of the main bread winner (and excludes the income of the spouse). The USA has allowed the property prices to go up under a deregulated environment - and is now suffering the pain of adjustment.

The situation in Singapore is worse, as our property prices - in relation to the average income - is worse than USA. It is now being propped up by foreign buying - but we cannot count on this source of support for a long time. (Note: Dubai was in a similar situation with its property market at a high level due to foreign funds, but it has now burst.)
  

Bank failed to get customers to accept fees

JP Morgan Chase has to give up the trial on several bank fees, due to non-acceptance by its customers:
http://money.cnn.com/2011/11/15/pf/chase_bank_fees/index.htm?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

Pension and provident fund

There is a difference between the operations of a pension fund and a provident fund. A pension fund promises fixed benefits to the pensioners and may face a deficit when the value of its assets fall below its obligations. This is explained here: http://www.cnbc.com//id/45307724

In a provident fund, the amount due to the members vary according to the value of the assets. If the assets earn a low yield, the interest credited can be quite small and may fall below the rate of inflation. The members have to bear the fluctuations of the market.

I am personally in favor of a provident fund system, as it is better for the risks to be spread among its members, rather than in the government. But, it is also important that the provident fund be invested efficiently to earn a market rate of return for its members, and the administration expenses, including the cost of managing the investments, be kept at a low level (which is possible due to the economy of scale).

The Central Provident Fund in Singapore started on the right track, but over the years, it has grown to be too complicated. It is time to move back to its basics.

Better to have small businesses

A good economic system has many small businesses that compete in the market to offer good service at a transparent price. You can see many good examples in the retail trade, food and in hair dressing, tailoring and other personal services.

Large businesses are needed for manufacturing, but the distribution can be done through small retailers. This is the model for the sale of household and electronic products.

It should be possible for banking services to be operated by small banks who can serve the customers in the community for banking services. There is no need for each bank to develop an expensive computer system, as they can tap into a common system, similar to the arrangement where the Singapore Exchange provide a centralized service to the stockbrokers.

The argument that we need big banks to be able to afford the investment in computer system to operate efficiently is flawed. It has led to large banks increasing their profits to excessive levels, by charging high fees to customers, and also engaging in risky trading. We now have the situation of "too big to fail" when banks make big losses on their large bets - which has to happen from time to time.  We need to make banks smaller, so that they can be subject to the discipline of the market. See http://www.cnbc.com//id/45307122

There is a similarity with the operations of large transport and telephone companies. There is a similar argument that they need to be large to afford the investment in the infrastructure. It is easy for these large businesses to abuse their pricing power to make big profits. A better approach is for the infrastructure to be developed and owned by the state and rented out to the service providers.

The current business model in many countries, including Singapore, favors big businesses, but it also leads to excessive profit margins for these businesses - leading to higher cost for consumers. We need to have a new economic and business model for the future.

Scam - invest in gold bars

This is a way for the scammer to mark up the price of the gold bar by 23%, without the investor realizing it. The scammer distracts the investors by offering a complicated structure of interest payment, buy back guarantee and delivery of the physical gold bar. The investor overlooked checking the real price of gold. http://tankinlian.com/admin/file.aspx?id=186

Live trading account shows profit

There were a few comments about a particular forex trainer who was able to impress the audience with a live trading account that showed profit. If I want to deceive people, I can also show a live trading account that shows profit for the previous day, and I can do it on any day. How do I do this impressive show? Make a guess. It is not difficult - for people who knows how to perform magic!

Positive experience with online website

I have made online bookings with a few airlines. My best experience is with Sri Lanka Airlines. Their website is simple. I completed the online booking with little effort and quite quickly. They focused on what needed to be done, and did not distract the customer with options that are not really needed.

Simplify and make life better

I have quoted a few examples about how things are being done in Singapore that lead to a stressful life ,  unnecessary work and expenses. They are caused by blind adherence to rules, disregard for the trouble caused to the other party and excessive focus on security (even for small amounts or risks). I have also suggested some practical ways to simplify these processes for the benefit of the customers and the staff.

We should be ready to ask "Can we simplify the way that things can be done, to make life easier for all?" I like to ask my readers to help identify other issues and suggest how they can be simplified.

Bank fees

Banks are adding new fees and increasing existing fees to boost their profits. This is happening in America and is likely to be implemented in Singapore in the future.

http://www.cnbc.com//id/45286104

Difficulty with booking an air ticket

I booked a ticket with JetStar. Their website is slow and buggy, so it was quite a hassle to make a booking. They offer many complicated and unnecessary choices - which are meant to give additional marketing revenue, but increased the difficulty of using the website.

After going through the hassle of selecting the itinery and the seats, I had to make payment. I painfully entered the details of my credit card (as MAS refused to allow the airline to store the credit card details) and confirmed the payment. I had next to wait to receive a verification code sent to the mobile phone. When it arrived (after some delay), I entered the verification code. There was a long wait and finally the website went blank. I clicked on another webpage and found that the payment was not processed - as the verification code had expired.

I went through the pain of making another booking. This time, it was rejected as it was a "duplicate booking". I am unable to recall the previous booking, so I deleted the original booking and make a new booking.
My third booking was  rejected as a "duplicate booking". So, I am now caught in limbo and don't know what to do. I searched for the hotline of Jetstar and could not find it.

I draw this conclusion - the website designers try to put in too many options, which made the process complicated. MAS comes in to impose requirements in the name of security, but no one looks at the whole process and think about simplifying the process for the consumer.

Creating hassle

I wrote a cheque for ABC Property for $1,000. There was a mistake in the name - as it should be ABC Properties. The bank refused to bank in the cheque. They refused to call me to verify if I had intended it to be for ABC Properties. They just returned the cheque for correction.  It had to be sent to the payee who has to mail it to me. And I have to mail it back.

Wow - this is Singapore! All this hassle for a relatively small sum. The bank is so rigid and so unthinking; the staff prefer to avoid responsibility and stick to the rules blindly. Do you wonder why life is so stressful and costly in Singapore? The reason is found all over the place!

Difficulty with Open Net

I had a lot of difficulty with Open Net. A few months ago, they sent me a letter asking to arrange for installation of Open Net in my home. I responded.

Their engineers were not able to install the line. There was some problem that involved the PUB. I do not understand what the problem was. The matter was not attended for four months.

This morning, I called the hotline of Open Net to find out the status. I made many calls over two hours. Their automated system keeps saying "all our lines are busy". Busy - the whole morning? No indication on when they are able to take my call? I wonder if they really have any staff answering the phone calls!

This type of bad service is quite common with many organisations in Singapore - government agencies and businesses. I suspect that they created so much hassle with their regulations and procedures that they staff are not able to cope with the calls for assistance.

Let me relate my experience with a telco in Cambodia. They may be less advanced in their infrastructure, but they have much better service on their call centers. When I was placed on hold, the message was ... "you are placed 5th in the queue". This keeps reducing on each announcement. I did not have to wait long to be served.