Dear Mr. Tan
My 61 yr old mother has a Income Life annuity purchased with CPF retirement funds. We are thinking of converting the CPF annuity to a cash annuity using cash payments (since we bought the annuity at good terms previously). Then she would have funds both in CPF (from the annuity refund) and the Life annuity, which would both offer stable returns for a retiree.
Do you know whether NTUC Income allows policy holders to convert an existing CPF annuity policy to cash annuity if we pay cash?
REPLY
You can ask Income directly. The head of life insurance is Peh Chee Keong, pehck@income.com.sg.
Saturday, May 31, 2008
Capital adequacy ratio of 170%
Dear Mr Tan
I do not understand why Income change its policy?
1) Does it mean they are not making enough to pay like the old system?
2) Is it still safe to buy insurance from Income which I am consider Growth plan despite the bonus change which is lower in return? I read Saturday May 31st in Straits Times reported that such scheme was to improve Income solvency position. Will they go burst for year to come?
3) If there have decided to change the bonus plan. Why not take effect from 1 June 2008 after the AGM instead of from year 1993 which is not fair for those who bought during that year onwards. A vote for this to all policyholder to decide.
4) Yearly AGM, should they declare the special bonus that is put aside at Income but is not payable. This will give policyholder a peace of mind when their policy is due for payment as a form of some guarantee.
JT
REPLY
Income is still financially strong with a capital adequacy ratio of 170% (2006), compared to a minimum of 120%. It is quite safe to invest with Income, from this standpoint.
I hope that they will be able to earn a good yield in the future, and distribute it to the policyholders. The chairman had made a statement that the board is committed to give the best value to the policyholders. I hope that this means that the policyholder will get a better yield, compared to similar policies in the market.
I do not understand why Income change its policy?
1) Does it mean they are not making enough to pay like the old system?
2) Is it still safe to buy insurance from Income which I am consider Growth plan despite the bonus change which is lower in return? I read Saturday May 31st in Straits Times reported that such scheme was to improve Income solvency position. Will they go burst for year to come?
3) If there have decided to change the bonus plan. Why not take effect from 1 June 2008 after the AGM instead of from year 1993 which is not fair for those who bought during that year onwards. A vote for this to all policyholder to decide.
4) Yearly AGM, should they declare the special bonus that is put aside at Income but is not payable. This will give policyholder a peace of mind when their policy is due for payment as a form of some guarantee.
JT
REPLY
Income is still financially strong with a capital adequacy ratio of 170% (2006), compared to a minimum of 120%. It is quite safe to invest with Income, from this standpoint.
I hope that they will be able to earn a good yield in the future, and distribute it to the policyholders. The chairman had made a statement that the board is committed to give the best value to the policyholders. I hope that this means that the policyholder will get a better yield, compared to similar policies in the market.
Will writing service
Dear Mr Tan,
I intend to write a will and wonder if you could recommend a lawyer to me.
REPLY
I will ask Alan Chiu (achiu@income.com.sg) to help you. He manages a will writing service under NTUC Income. They have lawyers on a panel who charges a low fee for writing a standard will.
REPLY FROM ALAN CHIU
The cost of our simple Will Writing service is $160.50. This is a special price for our policyholders and Big Trumpet members.
If you are keen, kindly provide your contact number and we will ask our lawyer, to contact you directly on the details.
I intend to write a will and wonder if you could recommend a lawyer to me.
REPLY
I will ask Alan Chiu (achiu@income.com.sg) to help you. He manages a will writing service under NTUC Income. They have lawyers on a panel who charges a low fee for writing a standard will.
REPLY FROM ALAN CHIU
The cost of our simple Will Writing service is $160.50. This is a special price for our policyholders and Big Trumpet members.
If you are keen, kindly provide your contact number and we will ask our lawyer, to contact you directly on the details.
Transfer of Shares to Family Members
I am visiting SGX to open a share account for my family members. I will transfer some of my shares to them. The cost of transfer is $10 per account per family member. I will transfer some shares initially, and additional shares at a later date.
This will give my family members the experience of owning shares, receiving the annual report and dividend of the investee company. They can also attend the annual general meeting.
Later, they can buy their own shares, from their savings. This gives them a chance to learn about their own investments, instead of investing through a high cost life insurance policy.
I wish to post this suggestion, so that other parents who have shares accumulated during their working life, can consider to transfer some shares to their grown up children.
This will give my family members the experience of owning shares, receiving the annual report and dividend of the investee company. They can also attend the annual general meeting.
Later, they can buy their own shares, from their savings. This gives them a chance to learn about their own investments, instead of investing through a high cost life insurance policy.
I wish to post this suggestion, so that other parents who have shares accumulated during their working life, can consider to transfer some shares to their grown up children.
Uphold the cooperative values
Hi Mr. Tan,
My wife and I have got a living policy each with NTUC Income during your tenure as CEO. I have great admiration for you as a CEO because you have come across to me as the dying breed of CEOs who do not aim for Income to keep breaking new frontiers but rather give more consideration to your clients and members.
The moment I heard you are stepping down, I told my wife our policy returns will suffer as the next CEO will try all means to increase profits. Now I am proven right - the new structure is a change to the policyholders' disfavour. We have to sacrifice one per cent per annum to gamble on promised return scenarios amid greater uncertainties and the present investment experts never disclose how they will ensure the existing policy holders will not be worst off.
I support you strongly to ask for old structure as a choice for existing policy holders - otherwise the investment chief must disclose how the policy holders will not be worst off with the new structure not just for the next few years but for the length of the policy life, stating clearly all assumptions objectively.
The greatest disadvantage is to let so high weightage on the surrender year or the death year to decide all the returns of the policy. This is like a lottery and it is completely unfair to those who do not want to gamble! I am too aware that privatisation will only incur initial few years of savings in the case of clean and efficient government but will eventually become a heavy burden for lower middle income earners and below.
If even a 2.13% return cannot be guaranteed for such a long period of investment horizon, I don't know what are they doing. Very sad that even insurance companies are joining the banks in paying less than peanuts as interest.
The fear that new CEO will take NTUC Income closer to the commercial insurance companies in achieving lesser and lesser returns because of higher expense ratio but less effective investment realisations is taking shape.
I am indeed very sad and disappointed that Mr Lim Boon Heng and Mr Yao who also represent the government support the NTUC Income case. Please do not be disheartened by the less than expected response from the policy holders because many do not understand the implications of the new structure - some even may be unaware of the change. I do not know how many policyholders are affected too.
That day I was trying to give you my signature but as I was not tech savy, I failed. Surely I am not the only one and there are still many uncles and aunties who are not very familiar with internet technology.
Mr Tan, I at one time felt that NTUC Fairprice also would be going down to be another Cold Storage, until the rising economic problems facing the mainstream of Singapore saves it. I sincerely hope you could lead us to prevent NTUC Income to become like just another AIA, Prudential, etc to show that NTUC Income has arrived. NTUC Income should distinguish itself from the rest of the insurers by guaranteeing that there will always be a space for a constant consideration to be given to the policyholders in the temptation of 'commercial pyrotechnics'.
Best Regards,
HT
REPLY
Thank you for your letter. I hope that the new CEO and board will continue to uphold the cooperative values and achieve better results to give better value to the policyholders. Give them some time.
My wife and I have got a living policy each with NTUC Income during your tenure as CEO. I have great admiration for you as a CEO because you have come across to me as the dying breed of CEOs who do not aim for Income to keep breaking new frontiers but rather give more consideration to your clients and members.
The moment I heard you are stepping down, I told my wife our policy returns will suffer as the next CEO will try all means to increase profits. Now I am proven right - the new structure is a change to the policyholders' disfavour. We have to sacrifice one per cent per annum to gamble on promised return scenarios amid greater uncertainties and the present investment experts never disclose how they will ensure the existing policy holders will not be worst off.
I support you strongly to ask for old structure as a choice for existing policy holders - otherwise the investment chief must disclose how the policy holders will not be worst off with the new structure not just for the next few years but for the length of the policy life, stating clearly all assumptions objectively.
The greatest disadvantage is to let so high weightage on the surrender year or the death year to decide all the returns of the policy. This is like a lottery and it is completely unfair to those who do not want to gamble! I am too aware that privatisation will only incur initial few years of savings in the case of clean and efficient government but will eventually become a heavy burden for lower middle income earners and below.
If even a 2.13% return cannot be guaranteed for such a long period of investment horizon, I don't know what are they doing. Very sad that even insurance companies are joining the banks in paying less than peanuts as interest.
The fear that new CEO will take NTUC Income closer to the commercial insurance companies in achieving lesser and lesser returns because of higher expense ratio but less effective investment realisations is taking shape.
I am indeed very sad and disappointed that Mr Lim Boon Heng and Mr Yao who also represent the government support the NTUC Income case. Please do not be disheartened by the less than expected response from the policy holders because many do not understand the implications of the new structure - some even may be unaware of the change. I do not know how many policyholders are affected too.
That day I was trying to give you my signature but as I was not tech savy, I failed. Surely I am not the only one and there are still many uncles and aunties who are not very familiar with internet technology.
Mr Tan, I at one time felt that NTUC Fairprice also would be going down to be another Cold Storage, until the rising economic problems facing the mainstream of Singapore saves it. I sincerely hope you could lead us to prevent NTUC Income to become like just another AIA, Prudential, etc to show that NTUC Income has arrived. NTUC Income should distinguish itself from the rest of the insurers by guaranteeing that there will always be a space for a constant consideration to be given to the policyholders in the temptation of 'commercial pyrotechnics'.
Best Regards,
HT
REPLY
Thank you for your letter. I hope that the new CEO and board will continue to uphold the cooperative values and achieve better results to give better value to the policyholders. Give them some time.
Friday, May 30, 2008
Higher risk profile of new bonus structure
Dear Mr. Tan
I attend the annual general meeting of Income. I am quite confused with the statments made by several people in the panel. They said that the bonus restructuring will allow Income to give a better return, compared to the old bonus structure. They also said Income can invest more in equity,but it will not increase the risk profile. How is this possible?
I looked at the table of the asset allocation of the life companies shown in your blog. It seems that companies with high capital adequacy ratios, such as AIA, show have low allocation to equities.
REPLY
I am also quite confused with the statements. The new bonus structure allows Income to invest in a higher proportion in equities to earn a higher yield. I am not sure if this is their intention. This will certainly increase the risk profile.
I attend the annual general meeting of Income. I am quite confused with the statments made by several people in the panel. They said that the bonus restructuring will allow Income to give a better return, compared to the old bonus structure. They also said Income can invest more in equity,but it will not increase the risk profile. How is this possible?
I looked at the table of the asset allocation of the life companies shown in your blog. It seems that companies with high capital adequacy ratios, such as AIA, show have low allocation to equities.
REPLY
I am also quite confused with the statements. The new bonus structure allows Income to invest in a higher proportion in equities to earn a higher yield. I am not sure if this is their intention. This will certainly increase the risk profile.
Asset shares
As more insurance companies move towards distributing more bonus as non-guranteed terminal bonus, it is important to use a method that ensures that the bonuses and cash values are fair to policyholders. This cannot be left to the discretion of the appointed actuary and the board, as the payout to the policyholder may be less than fair amount.
Many companies are now using "asset shares" to determine this payouts. I found that life insurance companies in Malaysia have adopted this concept. It is stated in this webpage:
http://www.liam.org.my/cms/layout/Printer.asp?ProductID=237&catid=13
It seems that Malaysia is ahead of Singapore in adopting this good practice, to ensure that policyholders get fair values on surrender, claim and maturity. It seems that the "asset share" method is well adopted in England, Australia and South Africa.
Many companies are now using "asset shares" to determine this payouts. I found that life insurance companies in Malaysia have adopted this concept. It is stated in this webpage:
http://www.liam.org.my/cms/layout/Printer.asp?ProductID=237&catid=13
It seems that Malaysia is ahead of Singapore in adopting this good practice, to ensure that policyholders get fair values on surrender, claim and maturity. It seems that the "asset share" method is well adopted in England, Australia and South Africa.
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