A consumer sent to me the benefit illustration of a universal life policy. I found the features of this policy to be as follows:
1. The policy requires an investment of a lump sum of $186,000
2. The distribution cost of the policy is $32,000. This is the money that is taken from the premium to pay commission to the agent and the profit of the company. It is a large sum of money to give away.
3. There is a guaranteed interest rate of 3% per annum, but I am not sure how safe or long is the guarantee. In any case, this is not really attractive, especially after considering the deduction of the distribution cost.
4. The policyholder has to incur a monthly expense charge of $500 or $6,000 a year. This seems to be rather high.
5. There is a monthly deduction for the life insurance cover at a rate that is stated in the policy data. This is not shown in the benefit illustration. I am not sure if this charge is reasonable or high.
6. Based on the benefit illustration, the cash value based on guaranteed interest rate of 3% per annum actually decline over the years. The deductions are higher than the guaranteed intereset of 3% giving a negative return.
7. The cash value under the projected interest rate of 5% will show a gain on your investment after 6 years. This projection (which is not guaranteed) is unrealistic.
See Practical Guide on Financial Planning
Wednesday, June 9, 2010
Education and reflection
My friend stopped work for one year to study for an masters degree in a UK university. Here are his thoughts as he reflected on his father (who had since passed away)
Hi!
Looking further backward, I didn't really study well when I was a student in both primary school & lower secondary school - because I was too playful. This is my regret.
If my father is still around, he will be quite surprised to know the route that I have chosen and came this far.
He is wise. From his point of view, university education is probably a luxury and he probably never expected me to graduate from a university.
He was correct in pointing out that the most important education was probably during primary and secondary schooling because if the student was brilliant, he or she could gain all the necessary and sufficient knowledge and character to succeed as in business.
He once told me that, the years spent by the top 10 richest Chinese businessmen in Malaysia was less than 15 years. The most important criteria were attitude, determination, willingness to work hard, confidence, self-esteem, respect of elders and teachers.
Treat others like you would like to be treated and have a willingness to serve or help others. These characteristics would made him a successful businessman by bringing valuable products to serve a particular market.
Giap
Hi!
Looking further backward, I didn't really study well when I was a student in both primary school & lower secondary school - because I was too playful. This is my regret.
If my father is still around, he will be quite surprised to know the route that I have chosen and came this far.
He is wise. From his point of view, university education is probably a luxury and he probably never expected me to graduate from a university.
He was correct in pointing out that the most important education was probably during primary and secondary schooling because if the student was brilliant, he or she could gain all the necessary and sufficient knowledge and character to succeed as in business.
He once told me that, the years spent by the top 10 richest Chinese businessmen in Malaysia was less than 15 years. The most important criteria were attitude, determination, willingness to work hard, confidence, self-esteem, respect of elders and teachers.
Treat others like you would like to be treated and have a willingness to serve or help others. These characteristics would made him a successful businessman by bringing valuable products to serve a particular market.
Giap
Tuesday, June 8, 2010
Office position
I am looking for a person to work part or full time in my office for administrative and accounts work. If you are interested, please reply to kinlian@gmail.com.
Do not follow a bad idea
Hi Mr Tan, I found the insurance information listed on your website very informative and useful. I met up with the insurance agent who has come up with the insurance plan. I am not sure whether I am paying a high premium after looking through his proposal.
I find there are quite a few plans that cover disability so I am concerned whether there is any duplication. I am not to keen to put my savings in an investment-linked policy but my friends, brother all purchase the ILP. It could be good to have one. I would like to seek your advise whether there are anything else that I should take note of.
SY
REPLY
The distribution cost is nearly two years of your savings. The effect of deduction is more than 30% of the value of accumulated premium. These are too high. Read my book, Practical Guide on Financial Planning for an explanation of these concepts.
Do not follow your brother and friends into making the same mistake with a high cost investment-linked policy.
I find there are quite a few plans that cover disability so I am concerned whether there is any duplication. I am not to keen to put my savings in an investment-linked policy but my friends, brother all purchase the ILP. It could be good to have one. I would like to seek your advise whether there are anything else that I should take note of.
SY
REPLY
The distribution cost is nearly two years of your savings. The effect of deduction is more than 30% of the value of accumulated premium. These are too high. Read my book, Practical Guide on Financial Planning for an explanation of these concepts.
Do not follow your brother and friends into making the same mistake with a high cost investment-linked policy.
World Peace Index - ranking of countries
Hi Mr. Tan,
The latest Global Peace Index by The Institute for Economics and Peace:
http://www.visionofhumanity.org/wp-content/uploads/2010/06/2010-GPI-Results-and-Methodology-Report.pdf
Some rankings:
1) New Zealand
2) Iceland
3) Japan
10)Sweden
18) Switzerland
19) Australia
22) Malaysia
30) Singapore
31) United Kingdom
85) United States of America
HL
The latest Global Peace Index by The Institute for Economics and Peace:
http://www.visionofhumanity.org/wp-content/uploads/2010/06/2010-GPI-Results-and-Methodology-Report.pdf
Some rankings:
1) New Zealand
2) Iceland
3) Japan
10)Sweden
18) Switzerland
19) Australia
22) Malaysia
30) Singapore
31) United Kingdom
85) United States of America
HL
A vision for an egalitarian economy
In recent years, Singaporeans have experienced a higher cost of living, widening wage gap, stagnant incomes and insecurity of jobs. This is reflected in a falling birth rate, which has become among the lowest in the world. Something is wrong.
What is the alternative? I read a few articles from the website of the Singapore Democratic Party. Here is a summary of their key proposals. You can read more details in separate articles in their website. I find their proposals to be quite sensible.
What is the alternative? I read a few articles from the website of the Singapore Democratic Party. Here is a summary of their key proposals. You can read more details in separate articles in their website. I find their proposals to be quite sensible.
Banks cash top-up scheme
Dear Mr Tan,
I am a regular reader of your blog. I have found it informative and helpful. Many have found the space you have provided a very useful forum. Thank you.
I would like to find out whether there are others like me, finding banks "top-up" schemes unfair and tiring. Because only fresh funds can enjoy higher interest rate, you need to transfer funds and for all the trouble you can only enjoy the higher rate for a short period of time. Initially only Standard Chartered Bank has such scheme. Now UOB and other banks follow suit. I find such schemes very meaningless.
I hope that you can raise this problem in your blog so that others who feel the same way can come together to do something.
Liangxin
My comments
I agree that banks should treat their existing customers fairly. They should not get the customer to go through a lot of trouble just to enjoy a decent rate of interest that is offered to new customers for their deposits.
I am a regular reader of your blog. I have found it informative and helpful. Many have found the space you have provided a very useful forum. Thank you.
I would like to find out whether there are others like me, finding banks "top-up" schemes unfair and tiring. Because only fresh funds can enjoy higher interest rate, you need to transfer funds and for all the trouble you can only enjoy the higher rate for a short period of time. Initially only Standard Chartered Bank has such scheme. Now UOB and other banks follow suit. I find such schemes very meaningless.
I hope that you can raise this problem in your blog so that others who feel the same way can come together to do something.
Liangxin
My comments
I agree that banks should treat their existing customers fairly. They should not get the customer to go through a lot of trouble just to enjoy a decent rate of interest that is offered to new customers for their deposits.
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