On the lighter side:
A beer addict orders 5 glasses of beer. He gulped it down. Then he ordered 4 glasses, and gulped it down. He ordered 3 glasses and gulped it down. Then he ordered 2 glasses.
The bar tender said, "I have never seen a customer drink beer in this manner. It's surprising." The addict said, "Yes. I am also surprised. It seems that the less beer I drink, the more drunk I get."
Larry Haverkamp said, "The beer addict is focusing on the first derivative and not on the absolute quantum". Can you understand Larry?
Saturday, May 3, 2008
Silent majority and bonus cut
Dear Mr. Tan,
I am one of the many silent majority that approves of your public admonishment of NTUC Income over the bonus issue. Frankly most of us have no idea of what we buy.
I am x years old now, married with a daughter. My wife is not working. My apartment is fully paid up. I have limited cash resources, thus I have to cash up my LIVING policies when my daughter goes for university. I have very limited insurance coverage, all with NTUC. That's why I am concerned over the bonus issue.
We have 2 LIVING policies. If we surrender the LIVING policies, is there something else that we can do? I need ultimately the cash values for a university education.
REPLY
i suggest that you ask NTUC Income to quote to you the surrender value for the next five years on your Living policy.
Read this FAQ:
http://www.tankinlian.com/faq/existinglife.html
With the surrender value, you will get a better idea about your options. You can send it to me, and we can discuss it together.
I am one of the many silent majority that approves of your public admonishment of NTUC Income over the bonus issue. Frankly most of us have no idea of what we buy.
I am x years old now, married with a daughter. My wife is not working. My apartment is fully paid up. I have limited cash resources, thus I have to cash up my LIVING policies when my daughter goes for university. I have very limited insurance coverage, all with NTUC. That's why I am concerned over the bonus issue.
We have 2 LIVING policies. If we surrender the LIVING policies, is there something else that we can do? I need ultimately the cash values for a university education.
REPLY
i suggest that you ask NTUC Income to quote to you the surrender value for the next five years on your Living policy.
Read this FAQ:
http://www.tankinlian.com/faq/existinglife.html
With the surrender value, you will get a better idea about your options. You can send it to me, and we can discuss it together.
More than 1,000 visitors on Saturday
There were 1,134 visitors to my blog on Saturday (yesterday). Previously, I received an average of 600 visitors on a Saturday. It seems that the bonus cut continues to attract many visitors.
The daily average has now exceeded my target of 1,000 visitors.
The daily average has now exceeded my target of 1,000 visitors.
Letter on Bonus Cuts
Some policyholders have not received any letter from NTUC Income. They asked if they are affected by the bonus cut.
To my understanding, most of the policies taken during the last 10 or 15 years are affected by the bonus cut. The policies taken earlier are not affected.
NTUC Income appears to be sending out the letters in batches. I have not received the letters addressed to me, until I asked for them. My family members have not received their letters as well.
If you have not received the letters yet, you may also be affected by the bonus cut. The letter will arrive later.
If you wish to check, you can write directly to NTUC Income. Give them your NRIC. They will be able to check and inform you.
To my understanding, most of the policies taken during the last 10 or 15 years are affected by the bonus cut. The policies taken earlier are not affected.
NTUC Income appears to be sending out the letters in batches. I have not received the letters addressed to me, until I asked for them. My family members have not received their letters as well.
If you have not received the letters yet, you may also be affected by the bonus cut. The letter will arrive later.
If you wish to check, you can write directly to NTUC Income. Give them your NRIC. They will be able to check and inform you.
Annual General Meeting of NTUC Income
I was told that the AGM will be held on 30 May. All life policyholders and shareholders of NTUC Income are entitled to attend the AGM. You have to register your interest with the cooperative secretary and get a pass.
I intend to attend the AGM and voice my views. I hope to see other policyholders turn up at the AGM.
I intend to attend the AGM and voice my views. I hope to see other policyholders turn up at the AGM.
Indexed funds or unit trust?
I made a posting about the unit trust that can be purchased through Fundsupermart. They allows regular savings plan at only 1.75%.
The expense ratio of several of the unit trusts marketed by Fundsupermart are between 1% to 1.5%. They are not low, but not too high (i.e. high cost fund charges between 1.5% to 3%). You can select a broadly based unit trust that shows a good yield over a 10 year period.
Some people have recommended to invest in indexed funds, which have low expense ratio. I agree. I hope that the low cost indexed funds will be available within the next 6 to 12 months. In the meantime, the StateStreet STI ETF is a good option, but it requires an investment of $3,300 each time.
For those who wish to invest in monthly sums, the unit trust offered by Fundsupermart is a good choice. The fee of 1.75% is much lower than the charges imposed by ILPs sold by insurance companies.
These high fees charged by ILPs are:
> allocation rates that take away two years of savings
> investment spreads of 3% to 7%
Apart from Fundsupermart, you can also study the options provided by DollarDex and by POEMS (Philipps Securities). I am sure that their marketing people will be posting their offers in my blog.
Lesson: Avoid ILPs sold by life insurance agents, as they have high charges that take away up to two years of your savings.
The expense ratio of several of the unit trusts marketed by Fundsupermart are between 1% to 1.5%. They are not low, but not too high (i.e. high cost fund charges between 1.5% to 3%). You can select a broadly based unit trust that shows a good yield over a 10 year period.
Some people have recommended to invest in indexed funds, which have low expense ratio. I agree. I hope that the low cost indexed funds will be available within the next 6 to 12 months. In the meantime, the StateStreet STI ETF is a good option, but it requires an investment of $3,300 each time.
For those who wish to invest in monthly sums, the unit trust offered by Fundsupermart is a good choice. The fee of 1.75% is much lower than the charges imposed by ILPs sold by insurance companies.
These high fees charged by ILPs are:
> allocation rates that take away two years of savings
> investment spreads of 3% to 7%
Apart from Fundsupermart, you can also study the options provided by DollarDex and by POEMS (Philipps Securities). I am sure that their marketing people will be posting their offers in my blog.
Lesson: Avoid ILPs sold by life insurance agents, as they have high charges that take away up to two years of your savings.
Smoothing or bunching
COMMENT POSTED IN MY BLOG
There is some confusion of this new scheme with "income smoothing" whereby the insurance company pays steady bonuses, regardless of its investment returns.This new bonus scheme is not income smoothing. It is the opposite. It is "income bunching". The policyholder's steady bonus stream is removed and a hefty terminal bonus is substituted.
Larry Haverkamp
There is some confusion of this new scheme with "income smoothing" whereby the insurance company pays steady bonuses, regardless of its investment returns.This new bonus scheme is not income smoothing. It is the opposite. It is "income bunching". The policyholder's steady bonus stream is removed and a hefty terminal bonus is substituted.
Larry Haverkamp
Reasonable expectation of policyholders
NTUC Income has given me the two scales of terminal bonuses (for surrender and maturity/death claims) payable on each of my policy for each year in the future. In total, I have four complicated scales for two policies.
The scales appear to be calculated to give terminal bonus that is slightly more than the cut in the annual bonus. They may suit these policies at the present time, but it is unclear how the scales will be changed in the future to reflect changing cirumstances.
I have asked NTUC Income to clarify the following questions:
1) Will the same scales of terminal bonus apply to all policies in the same series, or will they differ according to year of entry as well?
2) How will the scales of special bonuses be changed in the future, to reflect changes in the investment yield?
3) What are the principles that will be followed to maintain fairness between the policyholders with different entry years and different policy types?
4) To what extent is the higher rate of special bonus guaranteed, as it is intended to compensate for the cut in the annual bonus?
5) Will NTUC Income be prepared to lay out these principles in a transparent manner to be disclosed to all affected policyholders?
6) For policyholders who have suffered a reduction in annual bonuses for a few years since 2003, does NTUC Income intend to use some of the exceptional
surplus in 2007 to pay additional bonuses to policyholders to make good their shortfall (as compared to the projected bonuses at the time that they bought the policies)?
7) Will NTUC Income give an option for policyholders to remain on the old bonus structure, if they do not accept the change to the new bonus structure?
My personal preference is to stay with the "old" bonus structure, as it is more transparent and a higher proportion of the bonus is vested each year.
I do not like the "new" bonus structure as it can be subject to arbitrary adjustments and the terminal bonus can be withdrawn in the future. I am also less confident of getting a higher payout, if the investment yield improves.
The scales appear to be calculated to give terminal bonus that is slightly more than the cut in the annual bonus. They may suit these policies at the present time, but it is unclear how the scales will be changed in the future to reflect changing cirumstances.
I have asked NTUC Income to clarify the following questions:
1) Will the same scales of terminal bonus apply to all policies in the same series, or will they differ according to year of entry as well?
2) How will the scales of special bonuses be changed in the future, to reflect changes in the investment yield?
3) What are the principles that will be followed to maintain fairness between the policyholders with different entry years and different policy types?
4) To what extent is the higher rate of special bonus guaranteed, as it is intended to compensate for the cut in the annual bonus?
5) Will NTUC Income be prepared to lay out these principles in a transparent manner to be disclosed to all affected policyholders?
6) For policyholders who have suffered a reduction in annual bonuses for a few years since 2003, does NTUC Income intend to use some of the exceptional
surplus in 2007 to pay additional bonuses to policyholders to make good their shortfall (as compared to the projected bonuses at the time that they bought the policies)?
7) Will NTUC Income give an option for policyholders to remain on the old bonus structure, if they do not accept the change to the new bonus structure?
My personal preference is to stay with the "old" bonus structure, as it is more transparent and a higher proportion of the bonus is vested each year.
I do not like the "new" bonus structure as it can be subject to arbitrary adjustments and the terminal bonus can be withdrawn in the future. I am also less confident of getting a higher payout, if the investment yield improves.
Regular savings plan at 1.75% sales charge
I received an advertising mailer from Fundsupermarket. They offer a range of investments funds with an sales charge of 1.75%, and are available for regular savings plans. Details are shown here.
http://www.fundsupermart.com/main/research/viewHTML.tpl?lang=en&articleNo=2289
The sales charge of 1.75% is even lower than the spread of 3% chargeable for single premium investments by insurance companies. The expense ratio of some of the funds are quite accepable, between 1% and 1.5%.
If you have invested in some of these funds, please share your experience. I shall be contacting Fundsupermarket to learn more about these funds.
http://www.fundsupermart.com/main/research/viewHTML.tpl?lang=en&articleNo=2289
The sales charge of 1.75% is even lower than the spread of 3% chargeable for single premium investments by insurance companies. The expense ratio of some of the funds are quite accepable, between 1% and 1.5%.
If you have invested in some of these funds, please share your experience. I shall be contacting Fundsupermarket to learn more about these funds.
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