Saturday, December 05, 2015

Get a benefit illustration, instead of a brochure

Hi Mr Tan, I am a graduate and is saving for the future. What do you think of prudential pruwealth policy?

Send the benefit illustration to me.

Mary sent a brochure of the policy.

TKL This is a brochure. It does not show the essential information that help you to make a proper decision. You should ask the agent to give you a "benefit illustration" so that you can look at the "effect of deduction" and "distribution cost" and the surrender values. You should register to attend this talk so that you know what is a better way to invest for the future. Get your friends to attend as well.

Do not miss this talk on financial planning, 9 Jan 2016, 2 pm HDB Hub

Do not miss this talk on financial planning. The next talk will be held in 6 months' time.

By attending this talk, you learn how to manage your personal finances, to put aside savings from your regular income, and invest the savings in the right way to earn the best long term return. You also avoid being sold a bad financial product that eats into your savings!

Register now. Do not miss this talk.

Thursday, December 03, 2015

Financial Planning Talk, 9 January 2016

HDB Hub, Toa Payoh
Saturday 9 Jan 2016
Time 2 - 5 pm
Venue: Bedok Room (HDB Hub Basement 1)
Duration - 3 hoursFee - $10 (FISCA member) $30 (public)
Outline of the Talk
1. Tips on Financial Planning
2.How to invest your savings
3. Life insurance and structured products
4. Buying insurance-managing risk

Profile of the speaker

Mr. Tan Kin Lian started work in 1966 and qualified as an actuary in 1975. He joined NTUC Income in 1977 as the general manager (later re-designated as chief executive officer) and retired after 30 years.  NTUC Income was a leading life and general insurance co-operative in Singapore.
He is now the President of the Financial Services Consumer Association (FISCA), a non-profit organization formed to educate the public on financial planning.

Tuesday, December 01, 2015

Rental for high end condos have fallen sharply

Two years ago, a participant at my financial planning talk asked - "Mr. Tan. You advised us not to buy property at the current high price. But, it is also very expensive to pay rental. Surely it is better to buy property now, to avoid the high rental"?

My reply was - "You pay a high rental for one year at a time. It may not stay at a high level for many years. When you buy a property at a high price, you will be stuck with this price for the next 30 years".

A property agent told me that the rental for high end condos have fallen by 40% during the past two years. The property prices have not corrected to this extent, but it will probably come within the next two years.

There is a large over supply of new properties that will come into the market within the next two years. This may cause the property prices to correct sharply downwards. An increase in interest rate will help to trigger this fall..

Disappointing outcome of FIDREC adjudication

A consumer told me her disappointing experience with the adjudication in FIDREC.

She was not properly advised by the insurance agent and signed up for a life insurance policy. The agent had assured her that she could reduce the premium in the future, but did not tell her that she would suffer a large loss in her savings. The agent did not explain the concept of the surrender value.

She had taken a premium that is bigger than what she could afford to pay over the term of the policy. She was able to pay the higher premium in the initial years due to past savings.

Unfortunately, she had signed on the application form that she did not require any advice. She did not understand what it meant.

The final decision by FIDREC was not in her favor. She had to suffer the loss in the excess premium that she had paid, if she were to reduced the premium to a level that she could afford.

She had signed a confidentiality agreement with FIDREC that she would not disclose the proceedings in FIDREC. She felt that she was not adequately advised at the FIDREC hearing and the final decision was unfair to her, as it ignored the lack of proper advice given by the agent.

I agree with her that the FIDREC finding was unfair. It was clearly a case that the insurance agent had recommended an annual premium that the policyholder could not afford to pay over the term. The FIDREC adjudicators should have taken this obvious fact into account in its decision. Apparently, the adjudicators decided to go along the written statements that she had signed at the time of application, even though she had argued that the statements were not clearly explained to her.

There is a law about unfair contract terms. A party cannot be held to the terms of a contract that the court decide is clearly unfair to that party, when the terms were written by the other party. It is clear to me that this concept should be applied to the statements signed by the consumer at the time of applying for a policy, and that the FIDREC adjudicators should observe the spirit of the law regarding "unfair contract terms".

Why is ILP (investment linked policy) very bad?

WS- What are your views on ILPs?

TKL - Very bad.

WS- In what way? I find ILPs nowadays very flexible. Can adjust sum insured amount and type of investment and can even adjust premium.

TKL - The upfront charges make the ILP policy very bad. It is better to invest in the STI ETF directly, and get the return for yourself. When you invest in the ILP, the insurance company takes away 40% of the accumulated amount.  The STI ETF gives you all the flexibility that you need, and allows you to keep 95% of the total return. You can buy the insurance cover separately.

Ridiculous process from CPF

Each month, I paid the CPF contributions for my staff.

CPF sends this email to me.
Dear Employer
The electronic Record of Payment (eROP) for payment received on 27 Nov 2015 under CPF Submission Number 200700231C-PTE-01 is ready for viewing.
To view your eROP:1) Please login to CPF e-Submission (Employers) Service and click "View Record of Payment".2) Select the Statement No. to view the eROP.
Please check that the details in the Record of Payment are correct and inform us immediately if there are any discrepancies.

Yours faithfully
Electronic Submission SectionCentral Provident Fund Board
Instead of sending the information directly to me, they insist on asking me to login to their complicated website to retrieve the payment record.

This is just one example of the troublesome process that our government agencies impose on the business and the public.

They are paranoid about sending information by e-mail, even if the information is not sensitive. All they need to say is that they have received a sum of $X being CPF contribution for a specific month. There is no sensitive personal data in the email.

This practice is adopted not only by CPF. It is the practice in most government agencies. Somebody, somewhere, a long time ago, said that e-mail is not secure for government communication, and must have banned the use of e-mail for all types of "official communication". Nobody bothers to ask if this instruction can be reviewed, or relaxed for non-sensitive information. They just followed the Standard Operating Procedure (or SOP) blindly.

Monday, November 30, 2015

Warning - do not lock your savings in an investment that yields less than inflation

Twenty years ago, it was safe for working families to put their savings in a life insurance policy for their retirement or as a gift for their children. The insurance companies gave a fairly attractive return on their policies that was higher than inflation and comparable to other types of investments.

The situation has changed in recent years. A life insurance policy now gives a poor return, which is often lower than inflation. Worse, the surrender value paid on the policies, even if the policy is kept for 15 years, is lower than the premiums paid, i.e. a negative return.

A life insurance policy is now a terribly poor form of investment for long term savings.

What is a better way? Attend this talk and find out. It give practical and useful advice. Spend $30 and 3 hours and get an honest view that is good for your future.

Joke - waits for instructions

I heard this joke 20 years ago.

There was a shipwreck and the 3 male passengers were stranded. The island had many pretty teenage girls.
The Australian found a local girl and taught her how to play beach volleyball.
The French found a local girl and started an affair with her.
What did the Singaporean do?

The Singaporean telephoned back to ask the boss for instructions.

20 years ago, I felt that this joke was funny. Today, I am worried. Many Singaporeans do not exercise their initiative and have to be told what to do. This has become a habit. It is a bad habit that has to be changed.

Inconsiderate call center IVR system

I get very angry with call centers that ask me to press many buttons before I could speak to the staff.

I had, all along, thought that the buttons were required to divert the caller to the staff handling the category of calls.

I was told recently that this is not the case. The calls are handled by the same group of staff. The buttons that I had to press was for the system to collect statistics.

I got very angry when I heard this explanation. How inconsiderate can the organization be? Just because they want to collect the statistics, they make the customers listen to many messages and press the buttons. Do they realize that it can be very stressful to the customer who has many things to attend to?

I also suspect that the statistics are not important to the organization. If they want to know how many people open an utility account or close an utility account, they do not need to ask the customer to provide this information in the call center IVR system. They have the statistics from their backend system.

How can we stop this inconsiderate behavior of the big organizations in Singapore? They include the government agencies, banks, telcos, and other big companies.

I wish that our MPs do not sleep in Parliament. They should be bringing up these issues to discuss in Parliament. I will write to my MP (Lee Hsien Loong) to ask him to bring it up.

Convenient to travel by bus

Many people in Singapore do not realize that it is often more convenient to travel by bus, rather than take the train.

I use the app "GoThere" which tells me the travel time and fare between bus/bus and bus/train option. Often the bus/bus option is faster and more convenient than the bus/train option.

If you take a bus and change to a train, you often have to spend about 5 minutes to walk from the bus stop to the train station. But if you take the bus and transfer to a bus, you do it at the same bus stop.

The bus/bus option also brings you to a bus stop that is close to your destination. If you take the train,  you may have to make another transfer to a bus at the destination.

The bus is not as crowded as the train (except for peak hours). You are likely to get a seat during the off-peak hours. You will find it more comfortable to travel by bus.

The disadvantage is that the bus is jerky and the travelling time is longer, as the bus has to make many stops. However, the journey time can be reduced if the government changes the system.

Here is a way for the travel time to be reduced, but it requires the government to introduce express services that stop every 2 km rather than 0.35 km now. The express service will reduce the number of stops by 80%, i.e. it will bypass four stops and stop at every five stops compared to the current service. To take the express service, you need to take a feeder service to the express stop.

You can read more details of this new system in this article.

I estimate that the travel time can be reduced by 30% under the new system. It will also improve the efficiency of the bus service, and allow the operators to serve the commuters with a smaller number of services.

I hope that you like this concept.

Sunday, November 29, 2015

The risks of outsourcing

Many government agencies are outsourcing their essential duties. This include security and policing work. This has several harmful impacts, especially if the outsourcing is done for the purpose of reducing cost.

In some countries, the government outsource certain government duties to the private sector, but they provide a minimum wage or a standard wage. So, the outsourcing is for more flexible management and not for reducing cost. When the contractor gets an adequate fee, they are able to maintain the required standard.

In Singapore, our public service appears to be outsourced for cost reduction. To compete, the contractor has to quote a low price. When they are awarded the contract, they may cut down on quality or safety.

Even if they get an adequate price, they may still cut down on quality or safety, to earn a bigger profit.

It requires considerable skill to ensure the that the expected standard is maintained when the work is outsourced to a contractor. This is usually more challenging than employing direct workers.

It is suitable to outsource work that is ad-hoc or irregular. But for regular work, it is better to use direct employees. If external expertise is needed, this can be purchased when it is needed.

Feeder and express bus system can reduce travel time

If a passenger takes a bus journey for 10 km, there is an average of 30 stops. The journey time will be 70 minutes, including 10 minutes of waiting time.
If the passenger takes a feeder bus and change to an express bus (that stops every 2 km) and change to another feeder bus, the number of stops will be reduced by half. This will reduce the travelling time by about 30% (allowing for waiting time for the feeder services).
While this requires one or two more transfers, the transfers are made at the same bus stop. Passengers will get used to this system soon. (Right now, they have to take a bus and transfer to a train anyway).
If we restructure the bus system to be based on express and feeder buses, we can half the number of bus services from 380 to 200 services. It will also simplify the planning of the frequency of buses to meet the demand.
I first raised this suggestion in 2007. Already 8 years have passed.

Here is a recent article written yesterday.

Average travel time for each bus stop

I took bus 857 to Raffles City on a Sunday morning to meet a friend for breakfast. I took bus 857 back to my home.
I paid attention to the average time taken for each stop, On the way there, the average time was 1.5 minutes per stop as it was a Sunday morning and the traffic was light. On the way back, the average time was 2 minutes per stop.
On both occasions, I ignored the stretch where the bus traveled on the Central Expressway.
I wanted to collect this information to support my concept of changing the bus system to have express and feeder services. The express service stops every 2 km. The intermediate stops can be served by a feeder service. This new structure will reduce the travel time on buses.

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