Invest in Bonds - SGX

SGX launches initiatives to enhance listing, trading of fixed income products
By Jonathan Peeris | Posted: 05 August 2010 1131 hrs 

	Photos 1 of 1 SGX Exchange

SINGAPORE : Singapore Exchange (SGX) has launched its first initiatives to enhance the listing, trading and distribution of fixed income products to build a more vibrant bond market in Asia.

These initiatives include drawing more Singapore-listed companies and other organisations to issue bonds for listing and trading on SGX.

The listing and trading of fixed income securities such as preference shares and convertible bonds will also be encouraged.

SGX also plans to halve the time taken to approve bond listings by streamlining the processes involved.

By the first quarter of next year, SGX expects to offer an on-exchange secondary market for individual and institutional investors to trade Singapore Government Securities (SGS).

SGX's Central Depository has been a custodian of individual investors' SGS holdings since April 1 this year.

A total of 1,229 bonds are currently listed on SGX.

In fiscal year 2010, 200 bonds were listed involving programmes to raise over S$100 billion.

SGX has also appointed Ms Tng Kwee Lian, formerly from UOB Asset Management, as Senior Vice President and Head of Fixed Income to drive the promotion of bond trading to high net worth and individual investors.

President of SGX Gan Seow Ann said SGX offers an unparalleled value proposition to issuers and investors of bonds.

That's because issuers can leverage on SGX's international distribution platform while market participants will have access to one of the world's leading trading venues.

- CNA/il

Life insurance sales

Life insurance sales saw a rapid growth during the first six months of 2010.
http://www.businesstimes.com.sg/sub/news/story/0,4574,398392,00.html

Blatant cheating

Mr. Tan,
In your earlier blog, you mention that a life insurance company have a deduction of 50% of the accumulated premium. Which company is this? What is the significance of this 50%? What is a fair amount of deduction?

REPLY
The insurance company is a foreign company and the policy is investment-linked. When you buy a life insurance policy, you are entitled to receive a benefit illustration that discloses certain information about the product. You should look for the following information:

• value of accumulated premiums - this is the amount that your premiums will accumulate to the maturity date, based on the assumed interest rate (3.75% or 5.25% or 9%)
• effect of deduction - amount that is deducted from your accumulated premium to pay the cash value to you

In my book, Practical Guide to Financial Planning, I have given the benchmark on the amount that should be deducted from you and the balance that should be paid to you. For a 25 year policy, the maximum deduction should be 20% to cover the expenses of providing the life insurance protection (less than 10%) and the cost of investing the funds.

Most life insurance policy take away 35%, which I consider to be too high. For the specific policy mentioned above, the deduction is 50%, which I consider to be "blatant cheating". Imagine - if you work hard and save  prudently for 25 years and  the accumulated savings should be $500,000, do you like to see $250,000 taken away from you? Many people are not aware about this excessive deduction and would not have been willing to pay so much, if they knew.  

I will try my best to educate consumers in my blog and in my website, www.tankinlian.com. It is important for consumers to be educated on financial matters through my book and by attending the educational talks conducted monthly by FISCA, www.fisca.sg. 

If an insurance agent approaches you to buy a life insurance policy, you should be careful. Read my FAQ on "marketed financial products" here, www.tankinlian.com/ask.aspx. The same tip applies to any financial product that is being marketed to you, such as land banking, structured products and properties.

Tan Kin Lian

Stamping a contract

Someone write to the Straits Times to complain about paying $25 to the Post Office as handling fee to stamp a contract? I was surprised. It seemed to be excessive. I wish to check the facts. Is this correct?

Read here.

If this is correct, here are a few issues:

• What is the cost to the Post Office to provide this service? If a commuter pays $2 for a train ride, surely the work involved in the Post Office to handle the stamping is much lower? 
• Is there a choice for commuters to stamp the contract through other channels, instead of the Post Office?
• Is this abuse of monopolistic power? What is the role of the Competition Commission on such matter?
• This seems to be adding to the cost of living and the cost of doing business

Tan Kin Lian

Invest in Bonds

I have written a FAQ Mr. Tan on investing in government and corporate bonds in Singapore.

www.tankinlian.com (Ask Mr. Tan)

Motor insurance claims

Here are two letters written about inflated motor claims
Insurance companies need to take responsibility
Insurance muddle bears highway robbery

My view
I agree with the writers that insurance company managers can be more active in combating the inflated claims and to stop the unjustified increase in premium rates.

Opening of Youth Olympic Games

Read this article. I wonder if the facts are correct?