Dear Mr. Tan,
If NTUC allows some policyholders to stay on the "old bonus structure", can NTUC punish these policyholders by giving a low rate of annual bonus in the future?
REPLY
The actuary and board of directors are required to act fairly in the distribution of the bonus among different groups of policyholders. If they act in a malicious manner, they can be subject to law suits and be personally liable.
Tuesday, May 6, 2008
Annual and special bonus
Dear Mr. Tan
I receieved a letter from NTUC showing changes to my bonus. They explained that the annual bonus has been reduced, but the surrender and maturity value is better. How is this possible?
REPLY
Read this FAQ:
http://www.tankinlian.com/faq/income.html
It explains the difference between annual bonus and special bonus and the impact on the policyholders.
I receieved a letter from NTUC showing changes to my bonus. They explained that the annual bonus has been reduced, but the surrender and maturity value is better. How is this possible?
REPLY
Read this FAQ:
http://www.tankinlian.com/faq/income.html
It explains the difference between annual bonus and special bonus and the impact on the policyholders.
Views from the management of NTUC Income
Some of the anonymous postings in my blog are clearly views from the management of NTUC Income.
I invite the management, or their representative, to send their views to my blog with their names. I shall be happy to give them their coverage, similar to letters in the newspaper.
In their anonymous replies, they often put words into my mouth. For example,"Mr. Tan, I am sure that if you are still the CEO of NTUC Income, you would have done the same thing". Let me speak for myself. Do not push your views on me.
I ask these commentators to act honourably and avoid attacking my character, with unstantiated statements, under the cloak of anonymity. I have allowed some of these attacks to be posted, so that other people are aware about what is going on.
If anyone has a point that you want my answer, you can send an e-mail to me. I will reply to it, and post it into my blog.
I invite the management, or their representative, to send their views to my blog with their names. I shall be happy to give them their coverage, similar to letters in the newspaper.
In their anonymous replies, they often put words into my mouth. For example,"Mr. Tan, I am sure that if you are still the CEO of NTUC Income, you would have done the same thing". Let me speak for myself. Do not push your views on me.
I ask these commentators to act honourably and avoid attacking my character, with unstantiated statements, under the cloak of anonymity. I have allowed some of these attacks to be posted, so that other people are aware about what is going on.
If anyone has a point that you want my answer, you can send an e-mail to me. I will reply to it, and post it into my blog.
Bad name to the life insurance industry
Someone attacked me for giving a bad name to the life insurance industry.
In my view, there are two segments of the industry:
1. Bad segment. This segment offers products that give poor value to consumers and pays high commission to agents to sell the products often through misleading means. This has been a problem of the life insurance industry for decades and continue to be a big problem today.
2. Good segment. This segment offers products that give good value to consumers, e.g. low cost term insurance. They give a good return to consumers on their long term savings, e.g. no load mutual funds. This segment represents a smaller share of the market. I hope that it will grow in the future.
In my articles, I wish to educate consumers on how to identify and avoid the bad segments. The agents involved in this market segment have caused disappointments to hundred thousands of policyholders over the years. These agents, and their insurance managers, have been giving a bad name to the life insurance industry.
I encourage consumers to find out and go to the good segment of the market. You need life insurance to provide financial security for your family. You need to grow your savings for your retirement.
I also encourage more insurance agents to move to the good segment of the market. You can earn an honest income (i.e. not at the expense of your customer) by selling good products in bigger volumes at lower margin.
In my view, there are two segments of the industry:
1. Bad segment. This segment offers products that give poor value to consumers and pays high commission to agents to sell the products often through misleading means. This has been a problem of the life insurance industry for decades and continue to be a big problem today.
2. Good segment. This segment offers products that give good value to consumers, e.g. low cost term insurance. They give a good return to consumers on their long term savings, e.g. no load mutual funds. This segment represents a smaller share of the market. I hope that it will grow in the future.
In my articles, I wish to educate consumers on how to identify and avoid the bad segments. The agents involved in this market segment have caused disappointments to hundred thousands of policyholders over the years. These agents, and their insurance managers, have been giving a bad name to the life insurance industry.
I encourage consumers to find out and go to the good segment of the market. You need life insurance to provide financial security for your family. You need to grow your savings for your retirement.
I also encourage more insurance agents to move to the good segment of the market. You can earn an honest income (i.e. not at the expense of your customer) by selling good products in bigger volumes at lower margin.
Charges of unit trusts
Here are the new types of charges you can expect:
Performance-related charges
Instead of paying a fixed fee, the charges are determined by the fund's performance. The better it performs, the higher the charge, but if it doesn't perform you don't pay.
Up-front charge
This can be compared with the present initial charge and is deducted from your money before it is invested.
Back-end charge
Also known as an exit fee, this is payable when you sell your units, and is usually levied on a sliding scale to attract investor loyalty. For example, if you sell after one year you could be charged 5%, after two years the fee drops to 4%, after three years to 3%, after two years to 2%, and after five years to 1%. After that you won't pay.
No-load funds
With no-load funds the investor does not incur any charges other than the annual service fee. These funds are suited to investors who invest directly with the asset management company (by-passing the broker and his commission).
Trailer fees
These are added on to the annual service fee and paid to brokers on a quarterly basis as an incentive not to switch investors to other funds. At present brokers are paid a one-off upfront fee.
All the above fee structures can be applied in combination, depending on the asset management company, for example, by lowering the initial fee but introducing an exit fee.
Performance-related fees would be levied on some of the existing funds if unitholders agree, and on new funds. The annual service fee may be raised for new funds.
Investors will need to compare the various products and their fee structures before committing their savings.
My recommendation
1. Select well diversified funds with low expense ratios, e.g. indexed funds
2. The upfront charge should be 1% or less. Better still, go for no-load funds.
3. The expense ratio should be 1.2% or less (for actively managed funds) or 0.6% or less (for indexed funds).
4. Transact directly through an internet portal, e.g. Fundsupermart, DollarDex, POEMS
Performance-related charges
Instead of paying a fixed fee, the charges are determined by the fund's performance. The better it performs, the higher the charge, but if it doesn't perform you don't pay.
Up-front charge
This can be compared with the present initial charge and is deducted from your money before it is invested.
Back-end charge
Also known as an exit fee, this is payable when you sell your units, and is usually levied on a sliding scale to attract investor loyalty. For example, if you sell after one year you could be charged 5%, after two years the fee drops to 4%, after three years to 3%, after two years to 2%, and after five years to 1%. After that you won't pay.
No-load funds
With no-load funds the investor does not incur any charges other than the annual service fee. These funds are suited to investors who invest directly with the asset management company (by-passing the broker and his commission).
Trailer fees
These are added on to the annual service fee and paid to brokers on a quarterly basis as an incentive not to switch investors to other funds. At present brokers are paid a one-off upfront fee.
All the above fee structures can be applied in combination, depending on the asset management company, for example, by lowering the initial fee but introducing an exit fee.
Performance-related fees would be levied on some of the existing funds if unitholders agree, and on new funds. The annual service fee may be raised for new funds.
Investors will need to compare the various products and their fee structures before committing their savings.
My recommendation
1. Select well diversified funds with low expense ratios, e.g. indexed funds
2. The upfront charge should be 1% or less. Better still, go for no-load funds.
3. The expense ratio should be 1.2% or less (for actively managed funds) or 0.6% or less (for indexed funds).
4. Transact directly through an internet portal, e.g. Fundsupermart, DollarDex, POEMS
Invest to earn 5% to 8%
Dear Mr. Tan,
If have S$200K in my saving account and S$75K in time deposit earning about 1.25%/year. How should I invest for a better return and what products to invest in ? Stock, property, time deposit or unit trust etc. I am for a net return of 5-8%.
REPLY
I hope that this FAQ will help you to find the answer:
http://www.tankinlian.com/faq/returns.html
If have S$200K in my saving account and S$75K in time deposit earning about 1.25%/year. How should I invest for a better return and what products to invest in ? Stock, property, time deposit or unit trust etc. I am for a net return of 5-8%.
REPLY
I hope that this FAQ will help you to find the answer:
http://www.tankinlian.com/faq/returns.html
Saving for a child's education
Hi Mr Tan,
I would like to seek your advice. Based on your years of experience in this industry, do you know of any insurance policy I can purchase for my twins who were born at 25 weeks?
If there is, how can I benefit from such policy as the parent? (e.g. When they turn 21 years old, I can also take it out and gain from the lower premiums paid for kids policies etc.)
They are both 1.5 years old now and growing healthy like any other kids (my younger kid has a certain malfunction but was operated successfully and growing like a normal child now)
I really don't understand why X rejected our application...(but one of my HR colleagues under the Benefits Section asked me to check out Y for congenital coverage).
Looking forward to your advice.
REPLY
I hope that this FAQ will help you to make the best decision for your twins:
http://www.tankinlian.com/faq/child.html
You can buy Medishield (from CPF) to cover their hospital expenses.
I would like to seek your advice. Based on your years of experience in this industry, do you know of any insurance policy I can purchase for my twins who were born at 25 weeks?
If there is, how can I benefit from such policy as the parent? (e.g. When they turn 21 years old, I can also take it out and gain from the lower premiums paid for kids policies etc.)
They are both 1.5 years old now and growing healthy like any other kids (my younger kid has a certain malfunction but was operated successfully and growing like a normal child now)
I really don't understand why X rejected our application...(but one of my HR colleagues under the Benefits Section asked me to check out Y for congenital coverage).
Looking forward to your advice.
REPLY
I hope that this FAQ will help you to make the best decision for your twins:
http://www.tankinlian.com/faq/child.html
You can buy Medishield (from CPF) to cover their hospital expenses.
Subscribe to:
Posts (Atom)