A policyholder found that the bonus on his maturing policy had been cut by 40% compared to the original projection issued on the point of sale. The reason given by the insurance company was that the bonus was cut due to several economic crisis during the past years. The policyholder argued that one company - who had gone through the same crises- did not cut the bonus, but his the insurer rejected his argument.
The policyholder asked my views on the fairness of the bonus cut and if there is any point in lodging a complaint with FIDREC.
I encourage him to lodge this complaint with FIDREC. A large part of the bonus cut is probably due to the cut in terminal bonus. This cut might have been necessary earlier during this year, when the stock market dropped sharply. However, the stock market had recovered by 60% (from its lowest point) during the past six months. It is only fair that the cut should be partially restored. I hope that FIDREC will consider this point in its adjudication.
Tan Kin Lian
Wednesday, September 23, 2009
Highest life expectancy
The top 10 countries with the highest life expectancy are:
Andorra 83.5
San Marino 8.16
Japan 81.2
Singapore 80.7
Australia, Switzerland, Sweden 80.4
Hong Kong 80.2
Canada, Iceland 80.1
Singapore ranked 4th in the world, just behind Japan.Andorra and San Marino are quite small countries.
This has implications on CPF Life. People are living longer. They need a life annuity to pay them an income for a lifetime.
Andorra 83.5
San Marino 8.16
Japan 81.2
Singapore 80.7
Australia, Switzerland, Sweden 80.4
Hong Kong 80.2
Canada, Iceland 80.1
Singapore ranked 4th in the world, just behind Japan.Andorra and San Marino are quite small countries.
This has implications on CPF Life. People are living longer. They need a life annuity to pay them an income for a lifetime.
Tuesday, September 22, 2009
Difficult and costly to get a taxi
It was difficult and costly for me to get a taxi this morning, during an unexpected emergency. Many people faced the same difficulty. Read here.
RED Portal (9)
There were 240 unique visitors to the RED website on 22 September 2009 (according to the 4th day of the site meter). The visitors are picking up. I have received two requests to list a property for sale and rental, but this will only be ready in October.
Several enhancements to the website will be introduced soon. It will make the website easy to search and provide useful information for owners, buyers and tenants.
The BMP (benchmark price) and AMX (amenity index)are getting to be quite good and useful. They give a good indication to the consumer and arm the consumer of the relevant factors to consider in deciding on their property transactions.
Property agents will also find the RED website to be a valuable source to provide useful information for their clients. They can convince the client better by showing the information from the RED website.
Tan Kin Lian
Several enhancements to the website will be introduced soon. It will make the website easy to search and provide useful information for owners, buyers and tenants.
The BMP (benchmark price) and AMX (amenity index)are getting to be quite good and useful. They give a good indication to the consumer and arm the consumer of the relevant factors to consider in deciding on their property transactions.
Property agents will also find the RED website to be a valuable source to provide useful information for their clients. They can convince the client better by showing the information from the RED website.
Tan Kin Lian
Invest in stocks for the long term
In a chapter in my financial planning book, I quoted an important statistic that investing in the component shares of the Straits Times index over the past 15 or 20 years (up to 2006) produced an average yield of 9.2% per annum. This is a good yield.
However, this result could be due to factors that may not recur in the future, e.g. the stock market was under-priced at the start of the period, over-priced at the end of the period or the economy went through high growth during this period (and may see slower growth in the future).
To offset these factors, we can apply a discount of 30% on the total appreciation. Suppose, the stock market was 30% higher at the start or 30% lower at the end of the period, the yield would have reduced from 9.2% to 6.6%. This is still attractive.
For the next 10 years or more, I use an average yield of 5% per annum. This is quite conservative, and reflect a low interest, low inflation environment.
Many investors are afraid of the risk of investing in stocks as the price can be quite volatile. In my view, it is better to take the risk as stocks provide a better yield compared to other asset classes. The investor should diversify the risk by investing in a low cost indexed fund (such as the exchange traded fund or ETF) and by invseting for 10 years or longer (to average out the good and bad years).
An example of a good ETF is the StateStreets Traker Fund, which is traded in SGX. The investor pays a transaction fee of 0.3% to the stockbroker and an annual fund management fee of 0.3% to the fund manager. The bulk of the underlying return on the ETF goes to the investor.
Thee are other ETF that are invested in other asset classes. Learn about them. But, if you are not sure, choose the StateStreets Tracker Fund (or other similar funds) that mirror the Straits Times Index, as it reflects the Singapore stock market.
Tan Kin Lian
However, this result could be due to factors that may not recur in the future, e.g. the stock market was under-priced at the start of the period, over-priced at the end of the period or the economy went through high growth during this period (and may see slower growth in the future).
To offset these factors, we can apply a discount of 30% on the total appreciation. Suppose, the stock market was 30% higher at the start or 30% lower at the end of the period, the yield would have reduced from 9.2% to 6.6%. This is still attractive.
For the next 10 years or more, I use an average yield of 5% per annum. This is quite conservative, and reflect a low interest, low inflation environment.
Many investors are afraid of the risk of investing in stocks as the price can be quite volatile. In my view, it is better to take the risk as stocks provide a better yield compared to other asset classes. The investor should diversify the risk by investing in a low cost indexed fund (such as the exchange traded fund or ETF) and by invseting for 10 years or longer (to average out the good and bad years).
An example of a good ETF is the StateStreets Traker Fund, which is traded in SGX. The investor pays a transaction fee of 0.3% to the stockbroker and an annual fund management fee of 0.3% to the fund manager. The bulk of the underlying return on the ETF goes to the investor.
Thee are other ETF that are invested in other asset classes. Learn about them. But, if you are not sure, choose the StateStreets Tracker Fund (or other similar funds) that mirror the Straits Times Index, as it reflects the Singapore stock market.
Tan Kin Lian
Work close to home
Here are some suggestions to make it possible for employees to work close to home and reduce the commuting time and cost.
14 day free look period for insurance
If you have just bought an insurance policy, you are given 14 days of free look. You can cancel your policy during this period and get a full refund (subject to any price movement in an investment-linked policy). Most importantly, if you were not aware about the high upfront charges or was over-paying a high premium (compared to similar products sold by other companies), you can ask for a refund.
If you need assistance from FISCA on reviewing of this matter, go to www.fisca.sg. There is an administrative fee of $50, but you can save a few thousand dollars in fees charged on your insurance policy (that you might be unaware of).
If you need assistance from FISCA on reviewing of this matter, go to www.fisca.sg. There is an administrative fee of $50, but you can save a few thousand dollars in fees charged on your insurance policy (that you might be unaware of).
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