An agent who recommends a life insurance policy to you is required to provide a benefit illustration, which can take 10 pages or more.
You should ask the agent to show you the "effect of deduction" and calculate it as a percentage of the "value of premiums paid". The "effect of deduction" should not exceed the following percentage of the "value of premiums paid" in the case of a regular premium policy:
20 year policy - 15%
25 year policy - 18%
30 year policy - 22%
35 year policy - 25%
The above benchmark is my estimate of the fair amount to be deducted from your "value of premium paid" to cover the insurance protection and investment services provided by the insurance company. If the actual percentage is higher, the amount taken away is excessive.
The "value of premium paid" is the accumulated amount assuming that your premium has been invested to earn the assumed rate of return. The "effect of deduction" is the amount that is taken away from your accumulated amount to cover the charges by the insurance company.
Most insurance policies have an "effect of deduction" that takes away an additional 15% from the accumulated premiums (compared to the reasonable levels shown above). These insurance plans do not provide good value to consumers.
For an investment-linked policy, the "value of premiums paid" is not shown. You have to add the "projected net amount" plus "effect of deduction" to get the "value of premiums paid".
Tan Kin Lian
Monday, February 22, 2010
Shared bicycles
I posted a blog on the shared bicycles used in the University of Singapore. A few commentators like the idea while others felt that it will not work in Singapore. Here are some research about shared bicycles used in other countries:
http://en.wikipedia.org/wiki/Bicycle_sharing_system
http://www.veoliatransportation.com/transit/shared-bicycles
http://worksmancycles.com/shopsite_sc/store/html/page59.html
http://www.transalt.org/newsroom/media/1136
Tan Kin Lian
http://en.wikipedia.org/wiki/Bicycle_sharing_system
http://www.veoliatransportation.com/transit/shared-bicycles
http://worksmancycles.com/shopsite_sc/store/html/page59.html
http://www.transalt.org/newsroom/media/1136
Tan Kin Lian
Prepare for high inflation
Dear Mr. Tan,
The deficit at Federal and state levels in USA seems to be the next big thing i.e. bigger than Greek crisis. California is already facing the problem of not enough money to pay their civil servants. Some other states are facing the same problem. There are articles written about it and it seems very serious.
Are you able to share your opnion in your blog as well as letting us understand what is the impact to Singapore since we are very dependent on USA for our survival. Also what can we do to protect ourselves in the event the above happens e.g. buy gold and keep since US$ is going to crush.
REPLY
The USA is facing a large deficit as they are not collecting enough taxes to pay for their government expenditures (at Federal and State levels). Right now, they are issuing bonds to fund the deficit and pay a low rate of interest.
They have to raises taxes to balance the budget, but the politicians are reluctant to do so. They have to cut expenses, but that is also unpopular. At some point of time, they have to print money to fund the deficits. This will lead to higher rates of inflation. Many other countries face the same situation and may have to adopt the same solutions.
We have to prepare for high inflation in the future. In this environment, it will be bad to be invested in bonds that give a fixed rate of return. We have to invest in equities and properties that have a variable return that will increase with inflation. On the other hand, high inflation will burst the asset bubbles in equities and bonds. Maybe the safe asset classes will be gold and cash.
This situation may take many years before the correction occurs. In the meantime, many people continue to ignore the problem. Can I have your views on this matter also?
The deficit at Federal and state levels in USA seems to be the next big thing i.e. bigger than Greek crisis. California is already facing the problem of not enough money to pay their civil servants. Some other states are facing the same problem. There are articles written about it and it seems very serious.
Are you able to share your opnion in your blog as well as letting us understand what is the impact to Singapore since we are very dependent on USA for our survival. Also what can we do to protect ourselves in the event the above happens e.g. buy gold and keep since US$ is going to crush.
REPLY
The USA is facing a large deficit as they are not collecting enough taxes to pay for their government expenditures (at Federal and State levels). Right now, they are issuing bonds to fund the deficit and pay a low rate of interest.
They have to raises taxes to balance the budget, but the politicians are reluctant to do so. They have to cut expenses, but that is also unpopular. At some point of time, they have to print money to fund the deficits. This will lead to higher rates of inflation. Many other countries face the same situation and may have to adopt the same solutions.
We have to prepare for high inflation in the future. In this environment, it will be bad to be invested in bonds that give a fixed rate of return. We have to invest in equities and properties that have a variable return that will increase with inflation. On the other hand, high inflation will burst the asset bubbles in equities and bonds. Maybe the safe asset classes will be gold and cash.
This situation may take many years before the correction occurs. In the meantime, many people continue to ignore the problem. Can I have your views on this matter also?
Seminar on class action in USA - April 14, Fullerton Hotel
I have received the following information on the seminar:
Date Wednesday 14 April 2010
Place: Fullerton Hotel
Time: Morning, actual time to be confirmed
This date is delayed due to lack of available hotels and availability of speakers from the US firm. The lawyer was not able to arrange it for a weekend due to the above constraints.
More details will be provided when available. The above should be taken as Tentative.
PARTICIPANTS TO BRING DOCUMENTS
Date Wednesday 14 April 2010
Place: Fullerton Hotel
Time: Morning, actual time to be confirmed
This date is delayed due to lack of available hotels and availability of speakers from the US firm. The lawyer was not able to arrange it for a weekend due to the above constraints.
More details will be provided when available. The above should be taken as Tentative.
PARTICIPANTS TO BRING DOCUMENTS
Dear Mr. Tan,
There will also be a one-on-one meeting after the seminar with KM lawyers. These meetings will start about 2 p.m. Please request the investors to bring along photocopies of their investment documents, if this is possible. Then the meetings will bear immediate fruits.
KM - Kirby McInerney - US legal firm specialising in class action on securities.
Singapore contact person - Teo Guan Hock (email: tguanhoc@singnet.com.sg, mobile: 96695578)
website: http://www.kmslaw.com/
website: http://www.kmslaw.com/
Sunday, February 21, 2010
RED Map
I wanted to go to Gain City in Ang Mo Kio. I went to the RED Map and type in "Gain City Singapore". It showed the address and postal code and a map of the vicinity. It is very easy to use and fast to respond.
Here is the URL: http://projects.easyapps.sg/propinfo/
Here is the URL: http://projects.easyapps.sg/propinfo/
Better regulation to ensure a fair market
I welcome the move by the Government to put curbs to prevent a bigger bubble on the property market. It is necessary and desirable.
The frequent speculation in the property market is an example of the failure of the market to produce the right results for consumers. It allows certain parties to take advantage of the ignorance of consumers to make excessive profits for their businesses. Another example is the market for financial products.
We need the market to be better regulated to work better in producing fair outcome for all parties. Excessive profiteering, through deceptive means and abuse of pricing power, should be stopped. The regulator has to act to protect the interest of consumers, rather than to expect consumers to find redress through legal means - as they not have the financial resources to engage lawyers.
We have similar problems with public transport and the telecommunication services. They also need to be better regulated to ensure the interest of consumers and businesses are better balanced.
The government policy to allow matters to be decided by the market has boosted the profits of businesses but has caused hardship to consumers. It is time for the policy to be reviewed and for better regulation to be introduced.
Tan Kin Lian
The frequent speculation in the property market is an example of the failure of the market to produce the right results for consumers. It allows certain parties to take advantage of the ignorance of consumers to make excessive profits for their businesses. Another example is the market for financial products.
We need the market to be better regulated to work better in producing fair outcome for all parties. Excessive profiteering, through deceptive means and abuse of pricing power, should be stopped. The regulator has to act to protect the interest of consumers, rather than to expect consumers to find redress through legal means - as they not have the financial resources to engage lawyers.
We have similar problems with public transport and the telecommunication services. They also need to be better regulated to ensure the interest of consumers and businesses are better balanced.
The government policy to allow matters to be decided by the market has boosted the profits of businesses but has caused hardship to consumers. It is time for the policy to be reviewed and for better regulation to be introduced.
Tan Kin Lian
The Stingy Nanny
The Economist magazine had an article entitled "the stingy nanny". Here is the reply from the Singapore High Commission to the magazine.
SIR
SIR
I refer to your article “The stingy nanny” of Feb 13th.
Each society has to decide for itself the appropriate balance between unconditional welfare and self-reliance. Singapore has concluded that we cannot afford European-style state welfare, not because of dogma, but because our circumstances are different. We face competition from some of the most vibrant economies in the world, we have no hinterland or natural resources of our own to fall back on, and our future depends on being a dynamic and self-reliant people who strive our utmost to excel and create wealth for ourselves, our families and our society. Each generation must earn and save enough for its entire life cycle.
Our approach is based on time-tested values of hard work, self-reliance, family responsibility and community support for those in need. While we avoid over-generous welfare handouts, we have substantial state subsidies for education, health care and public housing. These are major investments that uplift the skills, promote the health and increase the assets of all Singaporeans. The result has been high growth, low unemployment, high savings and the highest home-ownership rates in the world.
No society has ever succeeded in totally eradicating poverty, nor in eliminating inequality of incomes, not even Communist systems. A generous welfare state, despite its theoretical attractiveness, is not a panacea. Singapore’s system is by no means perfect, but it has produced real results for the vast majority of Singaporeans, and enabled even the poor to live with dignity and hope. The burden of proof is on its critics to demonstrate that their proposals will in fact work, and improve on what Singapore has achieved, given our socio-cultural fabric and economic circumstances.
Michael Eng Cheng Teo
Each society has to decide for itself the appropriate balance between unconditional welfare and self-reliance. Singapore has concluded that we cannot afford European-style state welfare, not because of dogma, but because our circumstances are different. We face competition from some of the most vibrant economies in the world, we have no hinterland or natural resources of our own to fall back on, and our future depends on being a dynamic and self-reliant people who strive our utmost to excel and create wealth for ourselves, our families and our society. Each generation must earn and save enough for its entire life cycle.
Our approach is based on time-tested values of hard work, self-reliance, family responsibility and community support for those in need. While we avoid over-generous welfare handouts, we have substantial state subsidies for education, health care and public housing. These are major investments that uplift the skills, promote the health and increase the assets of all Singaporeans. The result has been high growth, low unemployment, high savings and the highest home-ownership rates in the world.
No society has ever succeeded in totally eradicating poverty, nor in eliminating inequality of incomes, not even Communist systems. A generous welfare state, despite its theoretical attractiveness, is not a panacea. Singapore’s system is by no means perfect, but it has produced real results for the vast majority of Singaporeans, and enabled even the poor to live with dignity and hope. The burden of proof is on its critics to demonstrate that their proposals will in fact work, and improve on what Singapore has achieved, given our socio-cultural fabric and economic circumstances.
Michael Eng Cheng Teo
High Commissioner for Singapore
London
London
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