Saving for the future, investing for returns, and protecting against risk – these are the fundamentals of managing our finances.  Yet so few of us do it well.  We are far better at earning an income than investing it and protecting against risk.

As an affluent individual, you already have the knowledge and abilities to make good income and may have accumulated substantial wealth. However, your challenge always lies in protecting this wealth for the next generation and ensuring the growth.

This becomes especially more difficult today when interest rate is extremely low and stock market is uncertain.

If you are comfortable with US dollar exposure,  the AIA Platinum Legacy series plans may come in handy.

AIA Platinum Legacy is a universal life insurance and the premium is typically paid on a lump sum basis. Universal life plans offer whole of life death coverage are different from traditional whole life insurance products, whose cash value is dependent on the investment performance of the insurer’s life fund. Instead, the cash values of universal life products are dependent on so-called ‘interest-crediting rates’ declared by the firm. Most of these plans come with a minimum guaranteed interest rate.

AIA Platinum Legacy offer a guaranteed minimum crediting interest rate of 2% for life time. 2% is contractual minimum. In reality, even with the current near zero interest rate environment, it is still offering 4.5% interest rate now.

One key advantage is that a universal life policy is not an off-the-shelf product. It can be tailor-made to suit the needs of you. Moreover, you can surrender your policy or make partial withdrawals to cash out the accumulation value even after first year (with much less penalty comparing to traditional whole life insurance where you get back nothing for the first two years). You can also choose to settle the premium with Multipay.

If you choose No Lapse privilege feature, it keeps your policy in force even when the accumulation value becomes zero or less than zero (subject to minimum premium requirements being met).

The product was enhanced since May last year with the following features:

• Guaranteed crediting rate on the Initial Premium for the first 7 years;
• No Lapse Privilege to age 111;
• New A+ country grouping for Singapore residents;
• Shorter Surrender Charge period and lower Surrender Charge;
• Accelerated Terminal Illness benefit;
• More premium payment choices.

You can contact me if you are interested in this product.

Investopedia further explains that “An investor sells out the following day typically because of bad news or a sudden change in long-term expectations”.

From my experience, the reality is just the opposite. Many investors buy a security with the intention of selling it the following day for a quick gain, but subsequently hold it for the long term if the stock price drops ever since.

When I do portfolio review for my clients, many of them hold shares from many different companies. Most of them are usually penny stocks which have dropped substantially in value in the past years. It is easy to understand the situation because many of these stocks were bought with the intention of one night stand, but end up became a long term commitment.

Just like one night stand, short term happiness always leads to long term pain.

In Singapore, The Intestate Succession Act (Cap. 146) applies in these situations. According to the law, regardless what the person may have intended, the remaining assets will be distributed as below:

If you do not have a will, the law decides how your assets are distributed, even if the consequences may seem unfair and undesirable. There are many cases where the remaining family and relatives fell apart due to fight over the distribution of the assets. Your hard-earned money may be given to people whom you don’t like or someone whom you don’t even know. It is simply common sense that you make sure that you have a valid and up-to-date will

There are many other practical difficulty to distribute assets without a will, I will discuss it in another post.

Using SIBOR is more common in the Asian region and set by the Association of Banks in Singapore (ABS).

Buyers and sellers or their salespersons no longer need to obtain the pre-printed hardcopy OTP form from the HDB.  You can now download and print the OTP form in the comfort of your home, at your own convenience and round the clock via the HDB InfoWEB.

You need to print only one copy of the OTP form. Each form has a unique Serial Number. From 1 Aug 2012, buyers and sellers must state the Serial Number of the OTP when they submit a resale application to the HDB.

I believe the soaring HDB price is partly due to ignorance of first time home buyers. When I bought my first HDB many years ago, the property agent never show us the OTP until the day we commit. Many first time buyers act impulsively and never utilize their rights efficiently.

Check the Frequently Asked Questions for more details.

The Medisave Maternity Package enables you to use your Medisave for the delivery and pre-delivery medical expenses of your first four living children. For the fifth and subsequent child, you and your spouse will need to have a combined Medisave balance of at least $15,000 at the time of delivery in order to use Medisave for delivery and pre-delivery medical expenses.

Click here for a complete list of hospitals participating in the Medisave scheme.

You may wish to use your own Medisave, your spouse’s or your parent’s Medisave for hospitalisation expenses. Multiple Medisave Accounts can be used to co-pay the hospital bill. However, the same Medisave withdrawal limits will still apply for each hospitalisation, regardless of the number of payer. This means that the Medisave withdrawal limits will not increase with the number of Medisave Account holders paying for the bill.

Under the Medisave Maternity Package, you can use Medisave for pre-delivery medical expenses as well as delivery and daily hospital charges. The Medisave withdrawal limit applicable to each of the Medisave Maternity Package depends on the delivery procedure (e.g. caesarean or normal delivery).

If you do not wish to use Medisave for pre-delivery expenses, you can still withdraw Medisave for the delivery procedure and daily hospital charges. Each delivery procedure has a different withdrawal limit.

Withdrawal limits for Maternity Expenses

Withdrawal limits for Maternity Expenses before 1 June 2009.

Withdrawal limits for Maternity Expenseson or after 1 June 2009

Example for admission before 1 June 2009:

Example for admission on or after 1 June 2009:

Do choose a hospital or ward that is within your budget. The Medisave withdrawal limits will generally be sufficient for you to meet charges incurred as a subsidised patient or in a C/B2 class ward of a restructured hospital. As a private class patient, you would need to co-pay with out-of-pocket cash as the bill charges are usually higher. Above are information compiled from CPF Website which may change from time to time.

On 25 Apr 2012 Press Release, the Housing and Development Board (“HDB”) has issued Notes under its S$12 billion Multicurrency Medium Term Note (“MTN”) Program.

The issuance comprises two series of Notes:

• S$360 million 5-year Fixed Rate Notes (the “Notes”) with a coupon of 1.165% per annum payable semi-annually in arrear. The Notes were issued on 24 April 2012 and will mature on 24 April 2017.
• S$800 million 10-year Fixed Rate Notes (the “Notes”) with a coupon of 2.185% per annum payable semi-annually in arrear. The Notes were issued on 25 April 2012 and will mature on 25 April 2022.

Given the creditability of HDB, the coupon rate is rather pathetic. This kind of offer is more suitable for institutions than retails for different reasons.

I have been consistently receiving queries from clients for “higher interest products”. Recently Hong Leong Finance is promoting a 3 year fixed deposit with mere 1.7% interest rate but attracted much attention.

What is interesting is that in the same day newspaper, the headline news was “Inflation hits 5.2% in March“. I always wonder how do people cope with inflation by putting money into fixed deposits.

However, do you have to bite the bullet even if you really need to buy a car?

First of all, you must understand what is Certificate Of Entitlement (COE) Rebate.

According to onemotoring website, If the vehicle is de-registered before its COE expires, the registered owner may be granted a rebate on the Quota Premium (QP), the price of COE which he has paid. The rebate is pro-rated to the number of months and days remaining on the vehicle’s COE.

That means COE is a straight line depreciation. If you pay $91,000 for the COE, theoretically your car’s annual COE depreciation is $9,100. Many car salesmen will tell you that COE is an asset, it is ok to pay a higher COE as the resale value will be higher too. It never makes sense to me since the COE price will go down to 0 after 10 years no matter what.

Secondly, you must understand Preferential Additional Registration Fee (PARF).

The PARF rebate is computed based on the age of the car at de-registration .

You may use the PARF/COE rebate to offset the various upfront vehicle taxes and fees when you register a car. Effective from 1 September 2008, you may encash your un-used and valid PARF/COE rebate(s) if you don’t want to buy a new car.

For cars registered with COEs obtained from May 2002 tender onwards, PARF rebate for cars deregistered just before COE expires is 50% of ARF paid

For cars registered with COEs obtained from March 2008 tender exercise and onwards, the Additional Registration Fee (ARF) is 100% of Open Market Value (OMV). For cars registered with COEs obtained from March 2004 to February 2008 tender exercises, the ARF is 110% of OMV.

Now you should understand that a car is a depreciating asset, it should be effectively expensed every year and the residual value of this asset is PARF rebate.

Therefore, the simplified average yearly depreciation expense (excluding interest paid) of the car should be:

(Purchasing Price – PARF Rebate) / number of years left before COE expires

Here I will use a popular model Toyota Wish 1.8 to illustrate. Using Open Market Value calculator, you can see that the OMV of Toyota Wish 1.8 is around $21,000.

If you buy a NEW Wish today, it will cost you around $165,000,  the PARF Rebate is 50% * $21,000 = $10,500.

Yearly Depreciation = ($165,000 – $10,500) / 10 = $15,450

Wow, that is a lot of money! But hold on, you have another option to buy a 4 years’ old 2008 Wish. I just randomly pick up one example from sgcarmart.com shown below.

The selling price is $65,300 and OMV is $16,313. If you drive this car for 6 years and deregister it just before COE expires, the PARF rebate is 50% * 110% * $21,000 = $11,550. Since the car was registered on 31 Jan 2008 and COE expires on 31 Jan 2018, the number of years left before COE expires is 5.75 years.

Yearly Depreciation = ($65,300 – $11,550) /  5.75 = $9,348 

That sounds like a lot of savings!

In conclusion, It is no doubt that there are many factors to consider when buying a car, but it is very obvious that, in today’s situation, used car can be much more economical to own from money sense point of view. After all, the first owner will always suffer the blunt of depreciation in the initial years.

However, driving a car till COE expires may not the optimal solution. If you are savvy enough and willing to switch cars along the years, you can reduce the costs substantially.

Today, I happened to attend International Adivser Pensions Forum. Although the main topics of the seminar are UK pension and QROPS schemes, a lot of information shown are astonishing and definitely relevant to Singaporeans.

If you read the news paper article today, it says “Richer countries would have to set aside another 50 per cent of their 2010 gross domestic product (GDP) and developing nations, an extra 25 per cent” for the costs of ageing. “Singapore, which has the world’s third-fastest ageing population, it is not likely to be spared.”

If you earn $100,000 a year now. How much do you think you need to set aside per year if you were to retire at age 65 and maintain the same standard of living? 30%, 50%?

JPMorgan’s research shown that you need to save more than 2 times of your annual income to retire comfortably! How can it be possible? Think about it…

You might also think: “I can depend on government pension scheme”

A few days ago, I wrote an article “Can you retire with $1,100 per month?” if you plan to depend on CPF minimum sum scheme.

In the talk today given by Peter Davis from PenTech, “The increasing complexities of UK and international pensions”, he  highlighted the solvency issue faced by defined benefit pension plan, which is once regarded as “safe”. It does not take a PHD to understand that once the new money flowing into the pension is not enough to cover the outflow, the pensioners’ future cash flow is at risk.

We are blessed that CPF, much like a pension scheme, is sound and solid now. However, don’t forget you are earning 2.5% to 4% interest for you CPF money now. That is outflow of the fund.

When the population is ageing, when the investment return is harder to obtain, when there are more outflows than the inflows, what is going to happen? Think about it…

Can you stop people around you from living longer and longer? If you cannot, you’d better start plan for your own future now.

Genting Singapore last month raised S$1.8 billion from a perpetual securities issue–the largest ever single tranche Singapore-dollar bond deal.

This month, its retail offering of up to $500 million in perpetual securities has been subscribed fully.

As at the close of offer on Monday, valid applications amounting to $731.3 million were received under the public offer. A further $3 million in application monies was received for the reserve tranche.

In a statement, Genting Singapore said it will sell about S$497 million of the securities via a public offer. It will sell about S$3 million in the reserve offer, equal to the amount of subscriptions.

The notes will bear a 5.125% annual coupon until Oct. 18, 2022, and 6.125% thereafter.

You can read the announcement here.

While many people are begging the institutions to take their money, it is interesting to note that many investors are not even sure what they are getting into. Even the main stream media journalists got it wrong. You should read this article: Perpetual securities not the same as perpetual bonds published in Straits Times Forum.