Dear Mr Tan
In the CPF-Life form they ask two questions (which I feel is irrevelant):
- annual assessable income
-annual value of house.
I am doing some part-time job with provides an irregular income and may downgrade to a smaller flat later on. I do not know if the CPF will pay me more, less or the same amount in the future, due to my change of circumstances.
I intend to put $75000.00 into my retirement account to join this scheme. Should I go ahead or put my money here or go elsewhere?
REPLY
The CPF ask you for the annual assessible income and the annual value of your house to determine if you quality for the full amount of the L-Bonus of $4,000, or a partial bonus or none at all. Apart from the L-Bonus, the monthly payout from the CPF Life will not be affected by your income or housing.
In my view, the CPF Life is attractive to the members as it is run operated as a non-profit and on mutual principles (i.e. all the members share the experience of the scheme fairly), has low expense ratio and earns an attractive interest rate of around 4%.
The annuity plan offered by the insurance companies, will not be able to offer this attractive payout.
Saturday, November 28, 2009
Family Income Benefit
A family income benefit is a life insurance policy that pays a monthly income to the family following the death of the life assured. The income is payable for the remainder of the term.
I consider this type of insurance to be the most suitable policy for a person to take care of the financial needs of the family. It is more suitable than a term insurance policy.
Take the example of a male aged 30 with a monthly income of $3,000 and young children. He can buy a term insurance policy to cover $300,000 for 25 years and pay an annual premium of $720. For the same premium, he can buy a family income benefit to pay $3,000 a month from death until the end of 25 years.
If death occurs during the first year, the total payout is $3,000 X 12 X 25 = $900,000, but paid monthly over 25 years. This is 3 times the amount payable under level term insurance. If death occurs at end of year 15, the total payout is $3,000 X 12 X 10 years = $360,000, which is still more than the payout under the level term.
The monthly payout is better to meet the family needs, as the spouse does not need to worry about how to invest the lump sum.
Unfortunately, the insurance companies in Singapore are not keen to sell the family income benefit. Most of their sales are made through the agent, who wants to sell other life insurance policies that pays a higher commission to them. The agent will try to convince the customer to buy a policy that gives a return on the premiums, although the return is rather poor and is usually less than 2% per annum.
Some companies offer family income benefit, but they loaded up the premium to a much higher rate, to give a high profit and expense margin. The premium could be two times of what it should be.
To get a competitive rate, the customer should ask a few insurance companies to quote for a family income benefit to pay $X a month for a term of 25 years. If several companies are willing to quote the rate, they are likely to offer a more competitive rate, that reflects the actual cost of claims plus a fair margin for expenses and profit.
I hope that life insurance companies will offer this plan to be sold directly to customer through the internet.
Tan Kin Lian
I consider this type of insurance to be the most suitable policy for a person to take care of the financial needs of the family. It is more suitable than a term insurance policy.
Take the example of a male aged 30 with a monthly income of $3,000 and young children. He can buy a term insurance policy to cover $300,000 for 25 years and pay an annual premium of $720. For the same premium, he can buy a family income benefit to pay $3,000 a month from death until the end of 25 years.
If death occurs during the first year, the total payout is $3,000 X 12 X 25 = $900,000, but paid monthly over 25 years. This is 3 times the amount payable under level term insurance. If death occurs at end of year 15, the total payout is $3,000 X 12 X 10 years = $360,000, which is still more than the payout under the level term.
The monthly payout is better to meet the family needs, as the spouse does not need to worry about how to invest the lump sum.
Unfortunately, the insurance companies in Singapore are not keen to sell the family income benefit. Most of their sales are made through the agent, who wants to sell other life insurance policies that pays a higher commission to them. The agent will try to convince the customer to buy a policy that gives a return on the premiums, although the return is rather poor and is usually less than 2% per annum.
Some companies offer family income benefit, but they loaded up the premium to a much higher rate, to give a high profit and expense margin. The premium could be two times of what it should be.
To get a competitive rate, the customer should ask a few insurance companies to quote for a family income benefit to pay $X a month for a term of 25 years. If several companies are willing to quote the rate, they are likely to offer a more competitive rate, that reflects the actual cost of claims plus a fair margin for expenses and profit.
I hope that life insurance companies will offer this plan to be sold directly to customer through the internet.
Tan Kin Lian
Keep cash, and be safe
Someone asked for my views on how to invest money at this time. It is a difficult question.
I think that it is better to keep cash, i.e. put in a bank to earn 0.5% per annum. This may be a poor return, and does not cover inflation, but it is safer. I do not like the stock market as it has been inflated due to cheap money from the government stimulus packages around the world.
The underlying problems of the global economy has not been solved, as there is still high unemployment and lower consumer demand. People will be unwilling to spend, if they are not sure about the security of their jobs and incomes. When people spend less, more people will become unemployed. This leads to a depression.
While the global economy remains gloomy, and the underlying problems are not solved, it is better to keep cash. Some people rushed into gold and commodities, but their prices may be too high now.
I would be more confident when the governments around the world start to adopt Keynesian principles, i.e inflate the global economy by creating more jobs funded by the state. This will cause inflation a few years later, but will have the impact of reviving the global economy. At that time, I will start to invest in the stock markets. If the bond markets gives a higher yield (better than inflation), I may invest in bonds also.
Tan Kin Lian
I think that it is better to keep cash, i.e. put in a bank to earn 0.5% per annum. This may be a poor return, and does not cover inflation, but it is safer. I do not like the stock market as it has been inflated due to cheap money from the government stimulus packages around the world.
The underlying problems of the global economy has not been solved, as there is still high unemployment and lower consumer demand. People will be unwilling to spend, if they are not sure about the security of their jobs and incomes. When people spend less, more people will become unemployed. This leads to a depression.
While the global economy remains gloomy, and the underlying problems are not solved, it is better to keep cash. Some people rushed into gold and commodities, but their prices may be too high now.
I would be more confident when the governments around the world start to adopt Keynesian principles, i.e inflate the global economy by creating more jobs funded by the state. This will cause inflation a few years later, but will have the impact of reviving the global economy. At that time, I will start to invest in the stock markets. If the bond markets gives a higher yield (better than inflation), I may invest in bonds also.
Tan Kin Lian
Friday, November 27, 2009
New immigrant's loyalty to Singapore
An alternative to the free market economy
Many people dream of being a multi-millionaire. They love the free market economy, as it gives them the opportunity to pursue their dream. Let us stop chasing this dream for a while and reflect on what this issue is all about.
At any time, there is a limited number of assets in the world. These assets have to be shared by the people. If some people are multi-millionaires, other people have to be poorer to allow the rich to own more of the limited assets. This leads to income and wealth inequality.
It is possible for the world to produce more assets to be owned by more people. However, the over-production has lead to a depletion of the natural resources, damaging the environment and leaving less resources behind for the future generation. Is this what we really want? Do we really want to work hard to accumulate more assets than is really necessary? What about spending more time for family and friends?
Many people do not have the choice. They have to work hard to keep a job. Other people gets unemployed, so they have to offer their labor at lower rates to compete for the same jobs. This allows the business owners to make more profit and be richer.
This is what has been happening during the past two decades with global competition and the free market. It has lead to wide disparity of income and poorer living conditions for many people, while a few becomes super rich.
My observation is not new. It has happened in history. I am bringing the great philosophers of earlier times, such as Confucius and Karl Marx. Spend time to read about their teachings.
These philosophers tell us that there is an alternative system to the free market and competitive business environment. Do not be misled that the free market environment, that we are used to in recent years, is the only way or the best way to prosperity and a happier life.
Tan Kin Lian
At any time, there is a limited number of assets in the world. These assets have to be shared by the people. If some people are multi-millionaires, other people have to be poorer to allow the rich to own more of the limited assets. This leads to income and wealth inequality.
It is possible for the world to produce more assets to be owned by more people. However, the over-production has lead to a depletion of the natural resources, damaging the environment and leaving less resources behind for the future generation. Is this what we really want? Do we really want to work hard to accumulate more assets than is really necessary? What about spending more time for family and friends?
Many people do not have the choice. They have to work hard to keep a job. Other people gets unemployed, so they have to offer their labor at lower rates to compete for the same jobs. This allows the business owners to make more profit and be richer.
This is what has been happening during the past two decades with global competition and the free market. It has lead to wide disparity of income and poorer living conditions for many people, while a few becomes super rich.
My observation is not new. It has happened in history. I am bringing the great philosophers of earlier times, such as Confucius and Karl Marx. Spend time to read about their teachings.
These philosophers tell us that there is an alternative system to the free market and competitive business environment. Do not be misled that the free market environment, that we are used to in recent years, is the only way or the best way to prosperity and a happier life.
Tan Kin Lian
Confucianism
Source: http://www.religion-cults.com/Eastern/Confucianism/confuci.htm
Confucianism is a "code of conduct" to live this life, and it has had a tremendous impact on how the Chinese live their lives... with a great influence in Chinese government, education, and attitudes toward correct personal behavior and the individual duties to society.
Confucius wanted to be a politician, even a Prime Minister, but he failed... and dedicated to preach good moral conduct... after his death he is the Chinese most influential in the history of China, and had all the honors he never had in life: The Government ordered the "worship of Confucius", and named him the "Co-Assessor with the deities of Heaven and Earth". His precepts and principles were incorporated into the Chinese Law in 210 BC.
His way to please God or the gods is through a "good conduct" with your family, neighbors, and society... if you are a good person, God is going to like you.
Some say that Confucianism is no religion in reality, because Confucius is a philosopher, moralist, statesman and educationist, but no religionist. They say that the thoughts and teachings of Confucius are ethical philosophy, political and educational principle, but not religious philosophy.
The "Jen": The essence of all his teachings may be summed up under this one word ‘Jen’. The nearest equivalent to this difficult word is "social virtue". All those virtues which help to maintain social harmony and peace like benevolence, charity, magnanimity, sincerity, respectfulness, altruism, diligence, loving kindness, goodness are included in Jen.
His "Golden Rule" is: "What you do not want done to yourself, do not do unto others". "The injuries done to you by an enemy should be returned with a combination of love and justice".
The "universal virtues" are: Wisdom, Benevolence, and Fortitude... Asked about what is "Benevolence", he answered: "It is to love all men"; what is "knowledge?: "It is to know all men"... The "perfect virtue": "Gravity, generosity of soul, sincerity, earnestness, and kindness".
Confucius laid great stress on the cultivation of character, purity of heart and conduct. He exhorted the people to develop a good character first, which is a priceless jewel and which is the best of all virtues.
The nature of man, according to Confucius, is fundamentally good inclined towards goodness. Perfection of goodness can be found in sages and saints. Every man should attempt to reach the ideal by leading a virtuous life, by possessing a very noble character, and by doing his duty unselfishly with sincerity and truthfulness. He who is endowed with a good character and divine virtue is a princely type of man. The princely man sticks to virtue, and the inferior man clings to material comfort. The princely man is just while the inferior man expects rewards and favours. The princely man is dignified, noble, magnanimous, and humble while the inferior man is mean, proud, crooked, and arrogant.
His teaching was largely concerned with the problems of good government. He said, "The Ruler himself should be virtuous, just, honest and dutiful. A virtuous ruler is like the Pole-star which, by keeping its place, makes all other stars to evolve round it. As is the Ruler, so will be the subjects."
Confucianism is lived in syncretism with any other religion in China... any Confucianist would be very happy to become a Christian!.
Confucianism is a "code of conduct" to live this life, and it has had a tremendous impact on how the Chinese live their lives... with a great influence in Chinese government, education, and attitudes toward correct personal behavior and the individual duties to society.
Confucius wanted to be a politician, even a Prime Minister, but he failed... and dedicated to preach good moral conduct... after his death he is the Chinese most influential in the history of China, and had all the honors he never had in life: The Government ordered the "worship of Confucius", and named him the "Co-Assessor with the deities of Heaven and Earth". His precepts and principles were incorporated into the Chinese Law in 210 BC.
His way to please God or the gods is through a "good conduct" with your family, neighbors, and society... if you are a good person, God is going to like you.
Some say that Confucianism is no religion in reality, because Confucius is a philosopher, moralist, statesman and educationist, but no religionist. They say that the thoughts and teachings of Confucius are ethical philosophy, political and educational principle, but not religious philosophy.
The "Jen": The essence of all his teachings may be summed up under this one word ‘Jen’. The nearest equivalent to this difficult word is "social virtue". All those virtues which help to maintain social harmony and peace like benevolence, charity, magnanimity, sincerity, respectfulness, altruism, diligence, loving kindness, goodness are included in Jen.
His "Golden Rule" is: "What you do not want done to yourself, do not do unto others". "The injuries done to you by an enemy should be returned with a combination of love and justice".
The "universal virtues" are: Wisdom, Benevolence, and Fortitude... Asked about what is "Benevolence", he answered: "It is to love all men"; what is "knowledge?: "It is to know all men"... The "perfect virtue": "Gravity, generosity of soul, sincerity, earnestness, and kindness".
Confucius laid great stress on the cultivation of character, purity of heart and conduct. He exhorted the people to develop a good character first, which is a priceless jewel and which is the best of all virtues.
The nature of man, according to Confucius, is fundamentally good inclined towards goodness. Perfection of goodness can be found in sages and saints. Every man should attempt to reach the ideal by leading a virtuous life, by possessing a very noble character, and by doing his duty unselfishly with sincerity and truthfulness. He who is endowed with a good character and divine virtue is a princely type of man. The princely man sticks to virtue, and the inferior man clings to material comfort. The princely man is just while the inferior man expects rewards and favours. The princely man is dignified, noble, magnanimous, and humble while the inferior man is mean, proud, crooked, and arrogant.
His teaching was largely concerned with the problems of good government. He said, "The Ruler himself should be virtuous, just, honest and dutiful. A virtuous ruler is like the Pole-star which, by keeping its place, makes all other stars to evolve round it. As is the Ruler, so will be the subjects."
Confucianism is lived in syncretism with any other religion in China... any Confucianist would be very happy to become a Christian!.
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