Build FISCA

A young man thanked me for replying promptly to his question about an insurance policy that is being offered to him, especially (as he pointed out) on a public holiday.

I run a small start up (see www.tankinlian.com for a range of my consulting, software development and other activities) and have to spend most of my working time there.

I can and have to do the educational work (i.e my blog and website) mostly in the evenings, weekends and public holidays. I also have to spend a lot of time looking for volunteers for FISCA and to get their commitment to spend time on its educational activities. That is also a lot of work and sacrifice. But the work has to be done, in the interest of educating the public about financial issues and giving them the knowledge to make better financial decisions.

I like to ask those who have benefited from my blog and FAQs in my website to give tangible support for FISCA in the following ways:

• Join FISCA as a member (only $36 a year) 
• Attend the educational talks of FISCA ($30 for public, reduced rate for members)
• Donate to FISCA (say 10% of the distribution cost that you saved by avoiding a bad policy)

FISCA needs funds to pay an allowance to its volunteers (some of whom are not gainfully employed). I am not able to handle FISCA on my own.  More people are joining FISCA (and I thank them for their support), but I need much more. So please spread the word around.

Remember - if you have gained from my educational activities, you could save $100,000 over the next 30 years,. That is a lot of money - not to be taken for granted. Make a generous donation to FISCA.

www.fisca.sg

Tan Kin Lian

Bill Gates and Education

Read what Bill Gates say about education.

My view
I qualified to be an actuary through self-study, before the days of the Internet. Today, the process would have been much easier for someone to learn through self-study. They can also interact with class mates thorugh social media, Skype and conference calls. It is possible to learn using the methods proposed by Bill Gates.

I also have experience teaching a course at a local university and is familiar with the structure of the learning, delivery and testing. It is possible to build a new university that is entirely virtual. But it needs a properly designed learning management system that suits this environment.

Happy 45th National Day

The article below the editorial by the Straits Times on 9 August 2010 carried this title "Celebrate achievements, strive hard for the future".

I was struck by the cartoon of a person with a broad smile, but his mouth was covered by the flag of Singapore. This thought crossed my mind, "Is this a subtle message that Singaporeans should smile and keep their mouth shut?"

I was also surprised that the chairman of the Public Utilities Board was given the top honors in this year's National Day. The timing seemed to be quite out of place, as Singapore had recently suffered from three unprecedented floods and the flooding problem had not been explained, let alone solved. Is this a message that public opinion does not count? (On a personal level, I know Mr. Tan Gee Paw to be humble and friendly, has made significant contribution to Singapore and is deserving of this award).

And here is my personal mesage for our national day.

Happy 45th National Day!

Tan Kin Lian

Lesson for Singapore

I was attracted to an article in the Straits Times entitled "Change of Tack: One pro-business S Korea Leader now raps corporate giants".

Quote:
South Korean President Lee Myung Bak has turned on the country's powerful business congolomerats, or chaebol, blaming them for the hardship faced by workers.


"Conglomerates rake in  hundreds of billions of won in profits, but the ordinary Koreans are still suffering from economic hardship. They must feel socially responsible", he said.


The criticism got harsher when be visited a micro-credit bank, which the government launched last year to provide cheap loans to the poor.


There, Mr Lee blasted the chaebol for practising "social injustice" by running consumer finance companies that charge low-credit borrowers "usury" rates. 


"I am not coercing the conglomerates, but I am telling them to play fair. They have a large amount of cash on their hands, but they are not making investments, and instead, worsening the hardship of the working class" he said.


The chastisement is surprising as Mr Lee had spent 30 years of his working life in the Hyundai Group before going into politics.
Unquote.

I was struck that the situation in South Korea had strong resemblance to what is happening in Singapore.
President Lee knows that businesses will focus on making profits, the more the better, and cannot be coutned to play the role of government to achieve social justice and improve the lot of the ordinary people. He has decided to take the lead to achive the national goals.

When I first visited South Korean in 1985, it was under martial law. Today, South Korea has made significant progress in economic and social development. It is time for Singapore to catch up.

Which type of attachment brings bliss?

Extract from Tommy Wong's book, "Wisdom on How to Live Life"
Tom: Can you tell me more about living as souls?
Guru: By living as souls, we’re not too motivated by physical rewards. That’s why we can live with no attachment to physical objects.
Tom: This no attachment part, is it really achievable?
Guru: It’s not a question whether it’s achievable. It must be achieved in order to avoid pain.
Tom: Attachment leads to pain.
Guru: Yes, actually this saying only applies to physical and emotional attachments.
Tom: You mean there is a type of attachment that can bring joy?
Guru: Yes, by attaching to the Divine, it actually brings bliss. It’s called spiritual attachment.

Tommy Wong's books (book 1 and 2) can be ordered here.

Cancel the policy during free look period

Dear Mr. Tan,
I am 21 years old and have recently bought an ILP. I have read your blog extensively to find out what the terms in my Benefit Illustration mean. I worked out the figures in an Excel sheet and found out that the Effects of Deductions take at least ~25% from the Accumulated Premiums, and that the Annual Rates of Return  is reduced by at least 1.9% depending on when I choose to surrender the policy. 


Is this a good policy to buy? The 14 day free-look period will start tomorrow and I am considering cancelling this policy as I feel that this is an expensive policy. Please do help me take a look at the files and let me know if my calculations are correct. 


Your blog is very informative for a starter like me and I will continue to read it to find out more about financial planning. :)

REPLY
The distribution cost at end of 5 yers is $3,929 which represents 164% of the premium. This is high.

The effect of deduction at the end of 25 year is:

      Cash value  Accumulated    Effect of     % of               
                   premium      deduction     Acc Prem
5%     85,900      120,272       34,372        29%
9%    153,000      221,578       68,578        31%

For 25 years, the effect of deduction should not exceed 20%. In this case, it is too high.

As you are still in the free look period, it is better to cancel the policy and get a full refund. As you are young, you can buy term insurance from SAF and invest the difference in a low cost investment fund, such as the STI ETF. Read my book Practical Guide on Financial Planning and also attend the talk organised by FISCA.

All the best for your future.

Avoid a promotion on life insurance

Hi Kin Lian,
I recently just graduated from university and have been approached by a friend to purchase an investment linked policy. I m in dire need of some advise. The policy goes like this:

• approximately about $450 premium each month with a coverage of 300k (100k for 30 critical illness and 200k for death)
• I can draw out the cash when it break-evens, estimated at 9 - 10 years. The promise of interest earned will be at 5 to 9%
• The funds chosen for investment are Singapore equities.
• There is a ongoing promotion that for every 1.8k premium i pay this year, I get $300 "free". 

Do I really need something like this? Or should I go for Life/term insurance? As this is my first time buying insurance, I really do not know what to do.

REPLY
Send the benefit illustration to me.
Read my book Practical Guide on Financial Planning and the FAQs in the website.
Be careful about buying something (especially a life insurance policy ) on a promotion, as it will usually color your judgement.

Insurance against unemployment

In this FAQ, I explain why insurance is not available to cover unemployment and what is the best way for consumers to be financially secure against the risk of unemployment. I also explain why consumers should avoid paying a high premium towards a critical illness policy.

www.tankinlian.com (see Ask Mr. Tan or Latest)