Friday, April 2, 2010
Poor financial future for Singaporeans
I feel sad for the people of Singapore. Most of them work hard and are frugal. They save for their future and for their children. But, when they come to retire, you do not have enough savings and are asked to continue to work longer.
What went wrong? Most of them get a poor deal from the financial products that they invested in. Take an example of a family which saves $500 a month over 35 years. They should have earned a return of 5% p.a. and received $570,000 for retirement,. But the yield obtained by most of them would probably be 2% p.a. giving them only $306,000 (or 54%). The difference of $264,000 (i.e. 46% of the total) went to pay the high earnings and profits of the financial services industry. I am not aware of any other country in the developed world where as much as 46% is taken away from the hard earned life time savings of the people.
If each family contribute $7,500 a year (i.e. $264,000 over 35 years), the total contribution from one million families would amount to nearly $8 billion a year. This is a lot of money. This is why the top executives in banks and life insurance companies can earn several million dollars a year. And in recent years, higher salaries are being paid for top executives who are willing to be unscrupulous in over-charging customers and giving them a poorer deal.
This arrangement works well for the board of directors, as their fees are benchmarked to the profits and to the government leaders whose remuneration are benchmarked to the top earners in the country. Of course, the people are condemned to a bleak financial future, but the government leaders do not seem to care.
Tan Kin Lian
What went wrong? Most of them get a poor deal from the financial products that they invested in. Take an example of a family which saves $500 a month over 35 years. They should have earned a return of 5% p.a. and received $570,000 for retirement,. But the yield obtained by most of them would probably be 2% p.a. giving them only $306,000 (or 54%). The difference of $264,000 (i.e. 46% of the total) went to pay the high earnings and profits of the financial services industry. I am not aware of any other country in the developed world where as much as 46% is taken away from the hard earned life time savings of the people.
If each family contribute $7,500 a year (i.e. $264,000 over 35 years), the total contribution from one million families would amount to nearly $8 billion a year. This is a lot of money. This is why the top executives in banks and life insurance companies can earn several million dollars a year. And in recent years, higher salaries are being paid for top executives who are willing to be unscrupulous in over-charging customers and giving them a poorer deal.
This arrangement works well for the board of directors, as their fees are benchmarked to the profits and to the government leaders whose remuneration are benchmarked to the top earners in the country. Of course, the people are condemned to a bleak financial future, but the government leaders do not seem to care.
Tan Kin Lian
Singapore Goal 2010
In 1998, Prime Minister Goh Chok Tong said in a National Day speech that one day Singapore could qualify to play in the World Cup. The Football Association of Singapore set Goal 2010 as the year that Singapore could achieve this dream. We are now at year 2010 and this dream is still far away. It seems that the last 10 years have been quite disappointing for Singapore on many angles, including sports. More information here.
Develop your child's thinking with the shape quiz
The shape quiz can help your child's thinking, creativity and problem solving. Watch the video here:
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Special promotion. Buy 10 mini-paks for $15 (usual price $20) as a gift for children and friends.
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www.easysearch.sg/videos
Special promotion. Buy 10 mini-paks for $15 (usual price $20) as a gift for children and friends.
To order: www.easysearch.sg/ishop
A valuable gift to your children or friend
If you invest $12 and 6 hours in my book, Practical Guide on Financial Planning, you will be able to save $12,000 by avoiding the wrong type of investment. For example, if you save $500 a month in a life insurance policy and the distribution cost is 24 months, you will be losing $12,000 of your savings.
You can also help your children or friend to avoid wasting their savings on the wrong financial product. Present them with this book for them to read and keep. This may be a much appreciated gift.
Order here. www.easysearch.sg/ishop
You can also help your children or friend to avoid wasting their savings on the wrong financial product. Present them with this book for them to read and keep. This may be a much appreciated gift.
Order here. www.easysearch.sg/ishop
Hub and spoke system for public transport
A few people have written to the newspaper to complain about the proposed change to the hub and spoke system for public transport. They do not like having to transfer from one bus to another. They prefer the current system of many buses that travel long distance.
I believe that the hub and spoke system is more efficient and will benefit commuters as a whole. It will simplify the transport system and encourage more people to take public transport. The only drawback is the need to make a transfer, but this can be an advantage as the short walk will be good for health.
Commuters do not like to spend 10 minutes to wait for a transfer. When the new system if fully implemented, I expect that the waiting time will be shorter as there will be more buses to run the shorter routes.
Some people argued that the elderly and disabled will be inconvenienced. I believe that it is better for some other arrangements should be made for them, instead of using public transport.
Tan Kin Lian
I believe that the hub and spoke system is more efficient and will benefit commuters as a whole. It will simplify the transport system and encourage more people to take public transport. The only drawback is the need to make a transfer, but this can be an advantage as the short walk will be good for health.
Commuters do not like to spend 10 minutes to wait for a transfer. When the new system if fully implemented, I expect that the waiting time will be shorter as there will be more buses to run the shorter routes.
Some people argued that the elderly and disabled will be inconvenienced. I believe that it is better for some other arrangements should be made for them, instead of using public transport.
Tan Kin Lian
Platform fee on Fundsupermart
Hi Mr Tan,
I am unsure if you are aware that the famous online Unit Trust distributor Fundsupermart is imposing a platform fee in a month's time.
http://www.fundsupermart.com/
Many retail investors are very unhappy about this new fee to be implemented in such a short notice. In addition, we always try to keep our cost down but FSM, due to various reasons, go in different direction as its clients.
I have not receive any email or letter regarding this change in fee structure until a forumer alerted the rest.
JL
REPLY
Please ask Fundsupermart to show you where, in the contract, they have the legal right to impose such a fee. If you withdraw from this platform, are you able to keep your record directly with the unit trust or move the units to another platform? You can also ask the unit trust that you invested in.
UPDATE
Fundsupermart plans to levy a quarterly fee of 0.125% (0.5% p.a.) plus GST for equity funds. A lower charge applies for investments above $500,000. This is rather high, as the investor has to bear a management fee to the asset manager as well.
An investor told me that she plans to transfer her funds to Dollar Dex. There is no transfer charge. Dollar Dex indicated in their website that they do not plan to implement a platform fee. She said another option is to tranfer to POEMS.
I am unsure if you are aware that the famous online Unit Trust distributor Fundsupermart is imposing a platform fee in a month's time.
http://www.fundsupermart.com/
Many retail investors are very unhappy about this new fee to be implemented in such a short notice. In addition, we always try to keep our cost down but FSM, due to various reasons, go in different direction as its clients.
I have not receive any email or letter regarding this change in fee structure until a forumer alerted the rest.
JL
REPLY
Please ask Fundsupermart to show you where, in the contract, they have the legal right to impose such a fee. If you withdraw from this platform, are you able to keep your record directly with the unit trust or move the units to another platform? You can also ask the unit trust that you invested in.
UPDATE
Fundsupermart plans to levy a quarterly fee of 0.125% (0.5% p.a.) plus GST for equity funds. A lower charge applies for investments above $500,000. This is rather high, as the investor has to bear a management fee to the asset manager as well.
An investor told me that she plans to transfer her funds to Dollar Dex. There is no transfer charge. Dollar Dex indicated in their website that they do not plan to implement a platform fee. She said another option is to tranfer to POEMS.
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