Monday, November 9, 2009

Revised Pension Policy

The following news item from The Sun attracts my attention. There should be some explanations to all concerned. Was there a misunderstanding of the provisions in the revised pension policy announced 14 years ago, or is someone being very inefficient?
Pensioners fed up with PSD turn to PM for help
By Himanshu Bhatt

SEBERANG PRAI (Nov 8, 2009): Retired government officers disgruntled by the Public Services Department’s (PSD) failure to implement a revised pension policy - announced 14 years ago - are appealing to the Prime Minister to intervene.

The pensioners, many of whom are aged and debilitated, have come together in an informal network currently stretching across five states in the peninsula to submit a memorandum on the matter to Datuk Seri Najib Abdul Razak.

The group’s coordinator, former teacher Arumugam Suppiah, 65, said it had collected 814 signatures from pensioners supporting the memorandum.

According to the policy, introduced in a PSD circular dated Jan 30, 1996, government servants were to be entitled to pension calculated on the number of years served.

The policy was supposed to retroactively come into effect for pension payments issued from Jan 1, 1995 onwards.

“It has not been implemented till today despite countless appeals,” Arumugam told a press conference organised by the group at the Inderawasih Rukun Tetangga centre here today.

Currently, all government retirees are paid on the same scale, their pensions rounded up to similar figures, without consideration given to the numbers of years served.

“We, the poor pensioners who are drawing a few hundred ringgit of pension have been deprived of our rights in getting this revised pension formula and arrears,” he said.

Retired Malayan Railway staff Athimulam Rengasamay, 75, said the group had previously sent two letters to the prime minister’s office in 2005 and 2008.

The matter was referred to the PSD’s pensions section for action, but it had yet to take any action.

A copy of the letter sent last year was also sent to Cuepacs but the union has also yet to act on it.

Arumugam, however, said they were grateful to the prime minister for approving a RM500 bonus for government pensioners in the 2010 Budget.

Thursday, October 22, 2009

Visit to ETIQA

Yesterday (21 October 2009) the third year students of the Actuarial Science and Risk Management (ASRM) program at USIM visited ETIQA Insurance and Takaful in Bangsar. They were welcomed by the management of ETIQA and given briefings on the actuarial and risk management aspects of insurance and takaful.

Thank you ETIQA for the contributions to enriching the knowledge of ASRM students at USIM. Thank you Mr. Nik Rahmat, Head of Takaful Corporate Actuarial for your explanation on the role of actuaries in family takaful. Thank you Mr. Rudie Erman, Head of Risk Management for explaining the various aspects of risk management and how ETIQA view risk management. Thank you Mr. Effendy Norazman, Head of Non-Life Corporate Actuarial for highlighting the importance of actuarial science in general insurance and takaful.

There is a lot of opportunities for actuarial science and risk management graduates from USIM to be involved in the fields of risk management and general insurance and takaful. So there is no reason for them not to work hard at their studies because the world out there need their expertise very much.

Once again I would like to thank ETIQA for their willingness to accommodate a group of eager USIM students and look forward to more cooperation between USIM and ETIQA especially in the areas of actuarial science, risk management and general insurance and takaful.

Monday, October 19, 2009

Allow workers to revert to 11% deductions, says MTUC

The call by MTUC for the contribution from employees to EPF to be increased from 8% (suggested by the government) to the original 11% need careful study and analysis.

First of all how has the reduction of the contribution rate affected the economy of the country? How much spending money has been released to the retail sectors? Have they played any part in boosting our economy? Should such reduction be recommended again in the future when the situation requires it?

Secondly, how has it affected the employees' retirement benefit? Surely the amount at retirement would be less than if the contribution rate has not been reduced. Can this be overcome by an increase in the contribution rate when the economy has improved? Maybe EPF can increase the dividend rates in the future years with some help from the government. After all, the employees (EPF contributors)have played their part in helping the government to boost the economy when it was required by the government. So if the economy has improved as a result of the sacrifice made by the contributors, the government can help by providing subsidies to increase the dividend rates in the future.


Monday October 19, 2009
PETALING JAYA: The Malaysian Trades Union Congress (MTUC) yesterday called on the Government to allow the 2.2 million workers, who opted for the 8% Employees Provident Fund (EPF) deductions, to revert to 11% with immediate effect.

As the economy is recovering, MTUC vice-president A. Balasubrmaniam said EPF contributions were savings for old-age for private sector workers and it was important that the savings percentage be maintained.

Due to the economic downturn, the Government, in November last year, gave employees the option to either maintain the deductions at 11% or reduce it to 8% for a period of two years from Jan 1 this year.

According to the EPF, a total of 2.2 million or 40% of workers opted to reduce it to 8%.

Balasubramaniam said MTUC was now concerned for these 2.2 million workers as they were losing in terms of dividends and final pay out when they reach the retirement age.

He said that although the option was for two years, the Government should allow them to revert to the previous deductions now. — Bernama

Tuesday, October 6, 2009

CUEPACS: PENSION MORE BENEFICIAL THAN EPF

This is one of the many articles on pension planning that appears in the news recently. I will also post the other articles shortly.

Isnin, 2009 Oktober 05
CUEPACS: PENSION MORE BENEFICIAL THAN EPF
Malaysian Insider
By Shazwan Mustafa Kamal
5/10/2009

KUALA LUMPUR, Oct 5 — Cuepacs president Omar Osman said civil servants stand to lose more under the current Employees Provident Fund (EPF) scheme.
That is why Cuepacs, together with the workers’ unions in seven government agencies, will be submitting a memorandum to the prime minister in an effort to ensure the welfare of these civil servants after they retire.
“We are pushing the government to look at the current status of government employees who have been allotted separate retirement plans from other government agencies,” he said referring to the seven government bodies.
There are about 60,000 employees in the seven agencies. They are Socso, the, EPF, Lembaga Tabung Angkatan Tentera, Tabung Haji, Perbadanan Hal Ehwal Bekas Angkatan Tentera (KEBAT), Bank Simpanan National and the Inland Revenue Board.
These agencies have been accorded different retirement schemes from other government bodies because they “have been given the task of managing and handling the country’s finances.”
“We want our workers’ welfare guaranteed. Even though these bodies are separate, there should be equal benefits for them, and sadly the benefits are not the same,” explained Omar.
He said that under the EPF formula, the future of these workers is not guaranteed after they reach the retirement age of 58 unlike other government employees.
Instead of handing over a lump sum of money, a pension-based model would be more conducive and realistic as they would then be able to get a steady income every month, and would be able to use their money wisely.
“Getting RM300,000 won’t be worth anything in the year 2020. Even now, everything is so expensive, people end up spending everything they have instead of saving,” he added.
According to Omar, Cuepacs has also 10 more issues which it will be taking up with the prime minister.
Among these is a call to reduce the housing loan interest for civil servants from four per cent to one per cent.
“We are like barking dogs. We will bark until they hear us.”
The barking has apparently received the attention of Datuk Seri Najib Razak, as Omar has stated that he has personally met with the prime minister regarding the matter and that he is aware of the situation.
He also expressed confidence in Najib‘s administration, saying that the 60,000 affected workers will always remain loyal to the ruling government.
Posted by CUEPACS at 17:30

Tuesday, August 18, 2009

Marriage

This posting is a little bit different from my previous postings in this blog. I suppose everyone should be interested in this discussion whether you are pro or against the institution of marriage.

An article in the local Malay newspaper (Utusan Malaysia) attracted my attention and the topic was also discussed by a local radio station (Radio IKIM) that I listened to while driving to work. Below is the article in Bahasa Melayu. For those who do not understand the language, I would be willing to translate the gist of the article upon request.

However, another article in the Daily Mail (June 17)in London, entitled "Only Marriage can mend broken Britain" also attracted my attention. I read it from one of the blogs I read regularly (Malaysian Insider). I post this article followed by the article from Utusan Malaysia.

Only marriage can mend broken Britain, says top judge

LONDON, June 17 — Marriage should be promoted by the government to end the ‘social anarchy’ of family breakdown, a senior judge said last night.

Justice Coleridge accused mothers and fathers who fail to commit to each other of engaging in a game of ‘pass the partner’ that has left millions of children ‘scarred for life’.

In a hard-hitting speech in Parliament, he called for a change of attitude that would attach a ‘stigma’ to those who destroy family life and said a National Commission should be established to devise solutions for the ‘epidemic’ of broken homes.

Currently, one in three marriages ends in divorce. One in ten children lives with cohabiting parents and a quarter live with a single parent. Children from single-parent families are far more likely to do badly at school, suffer poor health, fall into crime, drug abuse, binge drinking and teenage pregnancy.

Sir Paul Coleridge, 60, who is married with three adult children, is a leading family judge, having presided over the divorce of Sir Paul McCartney and Heather Mills. He also made the ruling in Britain’s largest divorce settlement in which Beverley Charman received £48million (RM277.6 million) when she divorced insurance magnate John Charman.

The judge’s comments stopped short of condemning the government or any other political party for the breakdown of family life. But his support for marriage will be music to the ears of Conservative leader David Cameron, who has made clear that a Tory government would support marriage through the tax system.

By contrast, Labour ministers insist alternative family set-ups are equally valid. In his speech to the Family Holiday Association charity of which he is a patron, Justice Coleridge said: “I am drawing attention to the endless game of ‘musical relationships’, or ‘pass the partner’, in which such a significant portion of the population is engaged.”

Condemning the “endless and futile quest for a perfect relationship”, he said many parents were in ‘a complete and uncontrolled free-for-all where being true to oneself and one’s needs is the only yardstick for controlling behaviour’.

He added: “The children are caught up in the conflict of their parents unresolved relationship issues and it can leave them scarred, sometimes severely scarred, for life.”

The judge also said government should support “those who chose not to marry but live a committed life with a partner”, since they provide stability for children.

Calling for “a fundamental change in individual attitude and behaviour”, he said: “What is a matter of private concern when it is on a small scale becomes a matter of public concern when it reaches epidemic proportions.

“I am not suggesting that all relationship breakdown and termination can be avoided in all cases. Of course it cannot.” But he concluded: “The time has come for a major examination of all the issues surrounding family life, its support and maintenance, and especially the mechanisms and laws of its termination.” – Daily Mail



Ubah stigma tentang cari jodoh

Oleh NOOR FAZRINA KAMAL


MENCARI jodoh di Internet telah menjadi lumrah masa kini sama ada dari pihak perempuan atau lelaki. - Gambar hiasan

ADA rupa, ada gaya, berkerjaya dan berharta tetapi kenapa masih bersendiri? Itu antara soalan klise kerap menghujani lelaki mahu pun wanita yang pada pandangan kasar sudah memiliki hampir segalanya - kerjaya, wang ringgit, kediaman sendiri, kenderaan yang selesa, penampilan bergaya dan sebagainya - namun memilih untuk mengekalkan gelaran bujang atau solo.

Status solo memang menjadikan seseorang bebas tanpa sebarang ikatan untuk melakukan apa saja tanpa perlu meminta izin daripada suami atau isteri.

Tetapi benarkah 'kebebasan' alasan mutlak untuk memilih gaya hidup sebegitu ataupun mereka sebenarnya memang cerewet dalam memilih teman atau mungkin juga mereka hidup bujang kerana tiada pilihan.

Bagi golongan ini insiden ahli keluarga menjodohkan atau mengatur janji temu dengan seseorang yang mereka rasakan layak sudah menjadi perkara biasa.

Namun disebabkan berasa ego tercabar kerana dianggap tidak berupaya mencari pasangan sendiri 'niat murni' ahli keluarga akhirnya putus di tengah jalan.

Ramai juga di kalangan mereka ini percaya pada 'pertemuan yang tidak dirancang' dengan pasangan dan yakin itulah jodoh terbaik buat mereka. Dek kerana terlalu berpegang kepada prinsip itu juga mereka sanggup menunggu dan terus menunggu biarpun semakin dipanjat usia.

Pengurus Smart Builder Consultant Sdn. Bhd., Azhar Awang berkata, selain menunggu sebenarnya ada alternatif lain yang boleh dilakukan contohnya dengan bantuan agensi mencari jodoh.

Begitupun untuk berbuat demikian terlebih dahulu stigma masyarakat Malaysia tentang apa yang dikatakan dengan mencari jodoh perlu diubah.

"Ini kerana apabila bercakap tentang perkara cari jodoh, ramai menganggap bahawa mereka yang terlibat adalah golongan yang terdesak, sedangkan hakikatnya bukan begitu.

"Sejak portal mencari jodoh secara Islam ini dilancarkan saya mendapat banyak maklum balas positif daripada wanita golongan berkerjaya dan profesional.

"Rata-ratanya mengatakan sebab untuk kekal solo kerana masih belum berjumpa pasangan yang sesuai," ujarnya yang ditemui ketika hadir ke pejabat Utusan Malaysia, baru-baru ini.

Katanya, pencarian jodoh bukanlah satu perkara baru atau asing di negara luar.

Azhar yang pernah menuntut di Universiti Purdue, Indiana, Amerika Syarikat berkata, idea untuk mewujudkan program cari jodoh di Malaysia diambil ketika berada dalam satu majlis perjumpaan pelajar-pelajar Islam di sana.

"Dalam Islam 'takruf' bermakna perjumpaan antara calon yang bertujuan mengenali rupa, personaliti dan perbincangan yang makruf, dengan niat untuk berkahwin, calon wanita mesti ditemani oleh wali atau muhrim, di tempat awam yang sesuai.

"Kami tidak menggalakkan dating. Sebaiknya calon wanita hadir ditemani muhrim atau kawan baik yang sama jantina. Tempat perjumpaan pula mereka boleh tentukan sendiri tetapi mestilah di tempat terbuka seperti di restoran atau masjid.

"Kami juga menggalakkan calon wanita agar menutup aurat. Apabila peraturan asas telah diberi, cara perkenalan dan perjumpaan antara ahli portal adalah tanggungjawab mereka sendiri," jelasnya.

Beliau yang juga pengurus portal program cari jodoh Islam Almuslimin berkata, mencari jodoh atau jodoh yang diaturkan adalah sebagai satu usaha yang digalakkan dalam Islam untuk mencari pasangan.

"Sudah tentulah sebagai orang Islam kita perlu sentiasa berdoa, melakukan solat hajat dan istikharah dan yang berusaha untuk mendapatkan jodoh yang baik.

Dalam program cari jodoh Islam yang beliau jalankan, Azhar berkata, pihaknya sekadar menjadi pemegang amanah dan tanggungjawab yang diberikan oleh calon yang hendak mencari pasangan.

Proses pencarian dilaksanakan dengan bijaksana dan mengikut kehendak syariat Islam dengan syarat calon-calon memberikan butir peribadi yang sebenarnya agar tidak timbul masalah kelak.

"Calon terdiri daripada gadis iaitu wanita belum pernah berkahwin, teruna atau lelaki belum pernah berkahwin, duda, balu, janda, ibu tunggal, dan juga lelaki yang berhasrat berpoligami.

"Kebanyakan calon yang mendaftar terdiri daripada mereka yang berpendidikan tinggi, profesional, guru dan pendidik, usahawan, kakitangan kerajaan, tentera, polis dan ahli akademik. Ada juga ahli yang terdiri daripada ahli portal kami iaitu http://almuslimin.net/JODOH," ujarnya.

Tidak sesuai

Dalam pada itu melalui kajian yang dijalankan oleh sebuah agensi pencari jodoh berpusat di Singapura, Lunch Actually, mendapati jawapan paling popular yang menjadi sebab utama golongan profesional di Malaysia memilih untuk kekal bujang ialah kerana tidak bertemu dengan orang yang sesuai.

Ini bermakna mereka tidak bertemu dengan pasangan yang boleh berkongsi pendapat dan minat yang sama dengan mereka. Alasan kedua yang diberikan ialah orang yang mereka minat kebanyakannya sudah berkahwin atau tidak berminat terhadap mereka.

Menurut pengasas Lunch Actually, Violet Lim, dalam kajian yang diberi nama Regional Dating Survey 2009, menariknya, penemuan yang dibuat pada tahun ini adalah sama dengan yang pernah dibuat pada tahun 2005.

"Ini bermakna, walaupun tempoh empat tahun berlalu sebab musabab untuk individu kekal solo masih sama walaupun kini terdapat begitu banyak saluran untuk bersosial secara online mahupun perjumpaan terus," jelasnya ketika ditemui pada sesi pembentangan penemuan kaji selidik tersebut di Sri Hartamas, Kuala Lumpur, baru-baru ini.

Kaji selidik ini membabitkan tiga negara iaitu Malaysia, Singapura dan Hong Kong untuk mendapat jawapan lebih tepat tentang persepsi mereka yang solo terhadap temu janji dan perhubungan secara amnya.

Kajian ini juga telah berlangsung selama sebulan dan responden yang dipilih bukanlah klien atau pelanggan yang pernah berhubung dengan agensi pencari jodoh.

Trend temu janji

"Responden sasaran dipilih kerana kami mahu mendapatkan jawapan yang tulen dan realistik tentang mengapa mereka kekal solo dan juga trend temu janji di tiga negara yang dipilih," kata Violet.

Lebih menarik, dengan penemuan berharga menerusi kaji selidik ini, Lunch Actually akan lebih mudah mencari pasangan yang sepadan dengan apa yang diingini pelanggan mengikut trend di negara masing-masing.

"Kami mencari penyelesaian terbaik untuk klien bertemu pasangan mereka, demi memenuhi matlamat tersebut kami bukan saja perlu memahami diri mereka tetapi juga keadaan sekeliling yang mereka hadapi setiap hari. Kami begitu prihatin dan memberikan kualiti dan menepati keperluan klien kami," tambah Violet.

Justeru, tidak perlu bersikap tabu dengan perkhidmatan mencari teman kerana siapa tahu cara aturan janji temu yang mereka buat untuk anda adalah penyelesaian untuk apa yang anda cari.

Kata Violet, tempat makan lazimnya menjadi medan pertemuan paling ideal kerana sambil menikmati juadah mereka boleh berbual tentang apa saja dalam suasana yang amat tenang dan santai.

"Kebanyakan klien menyatakan mereka terlalu sibuk untuk bertemu calon pasangan, tapi tidak akan menolak jika pelawaan makan tengah hari.

"Apa pun kami akan menapis, merancang koordinasi dan temu janji, apa yang klien perlu lakukan ialah hanya menghadiri temu janji tersebut.

"Klien akan dipadankan dengan pasangan mengikut kriteria pilihan dan mereka boleh menandatangani pakej enam kali perjumpaan selepas bersetuju dengan pilihan dan syarat yang telah dibuat," ujarnya.

Ramadhan

The month of Ramadhan is fast approaching. I would like to wish all Muslim readers of this blog a happy and fruitful Ramadhan. May the upcoming month of Ramadhan bring us closer to our creator and make us more conscious of His blessings.

USIM students will start Ramadhan with their loved ones because of the mid-term break. They will then come back for four weeks of classes before they take another one week break for Eidulfitri. This makes the semester very well balanced between classes and breaks.

The semester started on 6 July for six weeks followed by a one week break and then four more weeks of classes during the month of Ramadhan and after one week break for Eidulfitri classes will carry on for four more weeks before the exam break and finally the exams (6-4-4). So students should be very well prepared for the upcoming exams and thus perform much better than the previous semesters.

Monday, August 3, 2009

Congratulations - USIM's 7th Convocation

Universiti Sains Islam Malaysia (USIM) held its 7th convocation on 1 August 2009. This was the second convocation of USIM that I attended. In this convocation, 27 students from the BSc program in Actuarial Science and Risk Management (ASRM) were awarded their degrees. They were the first graduates from this program.

Firstly, I would like to congratulate all the ASRM graduates who received their scrolls on Saturday. They are now competing with other actuarial science graduates form other universities in Malaysia and overseas. They should be able to compete with these other graduates and maybe have a little bit extra. These graduates have more knowledge about Islam and Arabic compared to other actuarial science graduates, by virtue of their courses taken while at USIM. They have also undergone six months of industrial training which few other graduates from other universities went through.

Finally, I would like to encourage all the graduates from USIM ASRM program to look at the risk management aspect of whatever they are involved in and to learn how they can apply risk management in their everyday lives.

Friday, July 24, 2009

Private Pension Plans

This is very good news for actuarial science students. Any pension scheme would require actuarial expertise. In fact, a large percentage of actuaries work with companies that manage pension schemes. With the introduction of private pension plans, there would be less dependent on the EPF to provide income to retirees.

To encourage the setting up of private pension schemes, amendments can be made to the law concerning contributions to EPF by employers as well by employees. Employers and employees involved in pension schemes can be allowed to reduce the contributions to EPF.

The above would then reduce the amount of fund handled by the EPF. A well-managed pension scheme should be able to provide a better retirement income than that provided by the EPF scheme.



Friday July 24, 2009
Private pension go-ahead
By YVONNE TAN and FLORENCE A. SAMY


KUALA LUMPUR: The much talked about private pension funds will kick off by the middle of next year.

Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop, who announced this, said the new scheme would target the two million self-employed and those who were outside the current pension scheme.

He said the new pension funds could either be operated by new fund management firms to be licensed by the Securities Commission, or by existing firms.

The funds would be regulated by the Securities Commission.

“Several fund managers have already shown keen interest,” he told a press conference after delivering his keynote address at the Forum on Private Pension Industry Retirement Funds here yesterday.

Nor Mohamed said the scheme would target self-employed individuals who currently did not contribute to the Employees Provident Fund or those who wanted to contribute more than the EPF’s statutory requirements.

“We have to ensure it is well managed as it is a pension fund, a fund for individuals in their old-age,” he said.

He said the EPF had a government guarantee of 2.5% return.

“The private pension funds should be able to provide a ‘market return’ at any point of time,” Nor Mohamed said when asked on investment returns.

“The EPF has RM340bil in assets now. These private pension funds have huge potential,” he said, adding that there were currently 5.7 million active EPF members.

Nor Mohamed said the funds were part of the Government’s effort to reform the pension fund industry.

“This is crucial as Malaysia moves towards a developed and high income nation,” he said, adding that such funds would be a boost to the nation’s capital markets.

He said the SC had been tasked to prepare a report containing further details within the next six months.

“The Government at the same time will look at its own pension scheme and the Employees Provident Fund (EPF), and head a committee to coordinate all aspects of the pension reform,” he said.

In a survey by the EPF, it was found that around 90% of members have less than RM100,000 in their accounts and more than 70% would have exhausted their money within three years of withdrawing the lump sum upon retirement.

“This underlying trend reflects the sole dependence of retirees on their EPF savings as a safety net and as such, the inadequacy of sustainable levels of income after retirement,” he noted.

He said Malaysia had pension coverage via EPF, the Public Sector Pension Scheme and Lembaga Tabung Angkatan.

“However, there are gaps in the existing pension framework,” he said.

SC chairman Tan Sri Zarinah Anwar said the regulator would make capital preservation and investor protection top priorities when it came to the funds.

“We are gathering input from successful private pension funds models in other countries. We will then try and adopt the best practices to start off on the right footing,” she said.

Areca Capital Sdn Bhd chief executive officer Danny Wong said it “would take some time” to see the impact of the funds on the capital market.

“It all depends how individuals respond,” he told The Star.

Friday, July 10, 2009

Bank Islam Malaysia Al-Awfar Scheme

When I opened the website for this scheme the first thing that I noticed was the big sign that said "DEPOSIT RM100 AND YOU MAY GET RM100,000!"

http://www.bankislam.com.my/About_Al-Awfar.aspx

My immediate reaction was that this was gambling. If you paid some money with the hope of getting a much bigger amount of money through a lucky draw, I would classify it as gambling. Gambling is definitely not permitted in Islam. However reading further, I saw that there is no bet involved because your RM100 is not lost if you do not win, like you would if you buy a lottery ticket.

So the question is what is gambling? Is it the bet or the lucky draw or both? Definitely you will not have a gambling situation if you just have a bet and there is no lucky draw for determining the winner of the prizes. However, in the case of Al-Awfar, there is a lucky draw to determine the winner of the prizes but there is no bet involved. Is this the case?

Normally, lucky draws are done to determine who get prizes that are not substantial financially. For example, lucky draws determine who gets a hamper worth around RM250. If a lucky draw is carried out to determine who would get 1 million ringgit among a million or more hopeful people, this would bring it closer to an act of gambling.

One of the reasons for prohibiting gambling is so that people will work to earn the money and not hope for luck. If I have RM1000 to save, I should deposit it in a bank and hope that the bank will invest the money and I will agree to share some of the profit with the bank, but if I deposit the money in the hope that I will get RM100,000 through a lucky draw which the bank conducts periodically, I feel it is a wrong objective of depositing the money. It would be worse if I do not expect the bank to give me any profit (or I do not mind getting a lower than the normal profit given by the bank for a normal deposit without lucky draws involved), as long as I am eligible for the draw, and I would deposit more money so that my chance of winning the substantial prize is increased.

Looking at it superficially, it seems there is no bet involved because the money you deposited will still be there whether you win the prizes or not. So who pays for the prizes and where is the money obtained from? The bank says that the prizes are paid from the bank's fund and that it does not involve the deposits by the depositors. So where does the bank get the money to pay the substantial amount of prizes from, and at regular intervals?

There is also an explanation that since this scheme is similar to that of Skim Sijil Simpanan Premium (SSSP) of Bank Simpanan Nasional (BSN) and that the National Fatwa Council has declared that this scheme is "harus", therefore the Al_Awfar scheme must also be syariah-compliant.

A similar scheme is advertised by Ar-Rajihi bank (i-Zamzam) where lucky depositors can win a free trip to do the Haj or the umrah. I find this scheme very similar to that of the Al-Awfar scheme, the difference being the nature of the prizes.

Lucky draws have been practiced during the time of the Prophet (pbuhahf) but they were not to determine who would win a financial reward that was substantial. They were used mainly to decide who would do some good deeds if there were several people who wanted to do the deeds concerned. In the case of the drawing of lots to determine who (among them Nabi Yunus) should be thrown into the sea, I do not agree that this is a justification for making drawing of lots to make decisions permissible, and thus legitimizing the drawing of lots for winning substantial monetary prizes. The objectives of the two are very different.

I hope the Syariah Advisory Councils appointed by various financial institutions in Malaysia will re-look at this scheme as well as the SSSP, and determine its status with respect to being syariah compliant. I have read many fatwas online that consider schemes like this as similar to gambling. One such fatwa is from Islam-On-Line at


http://www.islamonline.net/servlet/Satellite?pagename=IslamOnline-English-Ask_Scholar/FatwaE/FatwaE&cid=1119503544118

Tuesday, April 28, 2009

Don: You don’t need RM1mil to retire well

It has been quite sometimes since I posted anything on this blog. This is very busy time with exams being the most urgent. However, the Dean of Faculty showed me this news which attracted my attention. From The Star of Wednesday 24 April:

THE middle class and lower-income earners do not need savings of up to RM1mil to retire comfortably if spending is well planned, Kosmo! reported.
It quoted Universiti Sains Malaysia social science lecturer Associate Prof Dr Kamaruzaman Askandar as saying that the golden seven-digit figure would be difficult to achieve but it was not needed if they knew how to spend their income well.
He said there was also the culture of children helping their parents.
Economic specialist Datuk Prof Is¬¬mail Mohd Saleh said RM120,000 would be enough.
“For civil servants, they will get their pension as well as free medical coverage,” he added


The Star's report was on a news item from Kosmo of 23 April 2009 which is in Bahasa Melayu:

KUALA LUMPUR - Orang ramai daripada kelas bawahan dan pertengahan masih boleh mengekalkan taraf kehidupan sederhana dan selesa selepas persaraan walaupun mereka tidak ada simpanan sehingga RM1 juta.
Pensyarah Pusat Pengajian Sains Kemasyarakatan Universiti Sains Malaysia, Prof. Madya Dr. Kamaruzaman Askandar berkata, jumlah RM1 juta itu tidak perlu jika seseorang bijak mengatur perbelanjaan tanpa pembaziran.
Menurutnya, nilai simpanan tujuh angka itu memang sukar dicapai oleh golongan kebanyakan dan hanya dimiliki oleh mereka yang sudah biasa hidup mewah dan mempunyai pendapatan tinggi semasa masih bekerja.
"Walaupun pesara tiada lagi pendapatan tetap, bagi orang Malaysia, sudah menjadi budaya anak-anak akan membantu ibu bapa dan ini sedikit-sebanyak dapat membantu meringankan beban kewangan,'' ujarnya ketika dihubungi semalam.
Kamaruzaman mengulas laporan sebuah akhbar kelmarin bahawa rakyat Malaysia daripada golongan sederhana memerlukan sekurang-kurangnya RM1 juta untuk hidup selesa semasa bersara.

The Professor was commenting on a news item from Utusan Malaysia of 21 April 2009 which is also in Bahasa Melayu:

RM1 juta tidak cukup selepas bersara

JOHOR BAHRU 20 April - Rakyat Malaysia daripada golongan sederhana memerlukan sekurang-kurangnya RM1 juta ketika bersara sekiranya mahu mengekalkan gaya hidup semasa.
Pengurus Negara ESG Direct Asia Pte. Ltd. bagi Malaysia, K. Sasitharan berkata, bagaimanapun jumlah itu sebenarnya hanya sekadar 'cukup makan' jika diambil kira kos perubatan dalam tempoh berkenaan.
Beliau berkata, berdasarkan tinjauan yang dijalankan mendapati hanya 10 peratus rakyat Malaysia yang memiliki simpanan yang baik untuk menghadapi zaman persaraan mereka nanti.
''Namun, simpanan tersebut bukan hasil daripada tabiat menabung tetapi sebaliknya disebabkan mendapat gaji besar sehingga menyebabkan simpanan dalam Kumpulan Wang Simpanan Pekerja mencukupi," katanya kepada Utusan Malaysia selepas mengadakan Seminar Khas Perancangan Kewangan sempena Minggu Saham Amanah Malaysia 2009 di sini.
Beliau berkata, sejumlah 10 peratus didapati menjadikan amalan menyimpan untuk menghadapi persaraan manakala 80 peratus lagi tidak bersedia langsung dan terpaksa bergantung kepada anak-anak.
Sasitharan berkata, walaupun amalan menabung masih lagi rendah di kalangan rakyat Malaysia tetapi ia adalah perkara normal bagi negara yang memiliki populasi muda.
Bagaimanapun, situasi itu perlu diperbaiki sebelum menimbulkan masalah kepada negara kerana dalam tempoh 15 hingga 20 tahun lagi Malaysia berpotensi untuk mempunyai majoriti penduduk dewasa.
Beliau berkata, rakyat Malaysia sepatutnya menukar persepsi yang ada dan menjadi lebih bersedia dalam mengharungi dunia persaraan tanpa perlu mengurangkan gaya hidup sedia ada.
''Di Malaysia, pesara secara automatik akan mengubah gaya hidup kebelakang berikutan kekangan wang untuk meneruskan gaya hidup selesa semasa bekerja.
''Sebab itu, pesara akan balik ke kampung selepas bersara dengan harapan dapat mengawal perbelanjaan harian, sekali gus mengurangkan beban kos hidup,'' jelasnya.
Beliau menafikan bahawa amalan menabung hanya berupaya dilakukan oleh golongan yang memiliki gaji yang lumayan.
''Dakwaan ini tidak benar kerana golongan pekerja yang memiliki gaji RM1,000 pun menabung, secara perlahan-lahan kerana gaji yang diperoleh akan mengalami kenaikan seiring tempoh bekerja,'' jelasnya.
Sasitharan menegaskan, masalah di Malaysia adalah kebanyakan rakyatnya lebih mengutamakan gaya hidup berbanding menabung.
Sambil memberi contoh, katanya, rakyat Malaysia sekarang dilihat lebih cenderung berbelanja terlebih dahulu sebelum mendapat gaji.
''Sekarang ini, kad kredit telah mengawal perbelanjaan rakyat Malaysia, ini memang budaya bahaya kerana setiap kali mendapat gaji, kita akan mendahulukan hutang,'' katanya.
Ditanya apa yang perlu dilakukan jika tabungan pekerja masih tidak mencukupi pada usia 55 tahun, Sasitharan berkata: ''Pekerja itu perlu terus bekerja kerana usia persaraan 55 tahun adalah masih muda berbanding negara maju pada usia 65 tahun. Ini bukan bermakna pesara yang tidak mempunyai cukup simpanan masih mempunyai 10 tahun lagi untuk menabung,'' kata beliau.

Surely, these news items need to be clarified by people who are more thorough so that the public who are the most affected can have a clearer picture of how to plan for their retirement. The public should not be left wondering whether you have to save up to 1 million Malaysian Ringgit or you can survive with only RM120,000 for your retirement. More explanations as to the level of retirement expenditure that each retiree wants and the effect that inflation would have on retirement income when one retires, must be clearly given.

Wednesday, March 18, 2009

PNB declares lowest ASM dividend

The effect of the fall in the stock market is now showing in dividends declared by unit trusts. After the EPF declared dividends of 4.5% (lowest in so many years), PNB now declares its lowest ever payout for the ASM. However PNB has been able to declare a reasonable dividend rate for its fixed-price equity income fund. The 6.25% dividend declared is so much higher than that offered by fixed deposit takers.

KUALA LUMPUR: Permodalan Nasional Bhd (PNB) declared the lowest ever payout for Amanah Saham Malaysia (ASM), 6.25 sen per unit for fiscal 2009, as it decided to keep some money for a rainy day.
It could have paid 7.92 sen but decided on the lower figure, ASM's lowest since the fixed-price equity income fund was launched in 2000.

The payout is still more than double the current 12-month fixed deposit rate of 2.5 per cent.

"We still have a reasonable amount of cash. The ASM fund size is 7.6 billion, of which 2.1 billion is in cash and this can be used to buy good stocks," said PNB president and group chief executive Tan Sri Hamad Kama Piah Che Othman yesterday.

PNB had to contend with a stock market that fell some 40 per cent last year as investors worried a recession would hurt corporate earnings.
Hamad declined to predict how PNB would fare for the year till March 31 next year, but said it would strengthen its investment portfolio. Since last year, the purchase of ASM units has risen by a quarter.

PNB chairman Tun Ahmad Sarji Abdul Hamid said 402,513 unit holders who subscribed to 7.21 billion units of ASM would benefit from the total payout of RM407.58 million.

Last year, a record payout for ASM was declared with income distribution of 7.8 sen, compared with 6.8 sen in 2007. ASM made a gross income of RM440.73 million for fiscal 2009.

Meanwhile, ASM transactions nationwide will be halted from March 25 to 31 for the calculation of income distribution.

Tuesday, March 17, 2009

Global meltdown hurt performance, says EPF

This article is from The New Straits Times. The lower rate of dividends declared will cause the amount at retirement of contributors to be reduced.

This dividend rate is however better than most other saving institutions but not as good as those declared by some other investment vehicles such as PNB and government bonds. Contributors who moved their EPF savings into Unit Trusts suffer paper losses instead of getting any dividend.


KUALA LUMPUR: The Employees Provident Fund (EPF) has declared a dividend of 4.5 per cent for 2008, its lowest since 2003, and warned members not to expect more than that for this year.

The EPF's dividend was 5.8 per cent for 2007, 5.15 per cent in 2006, five per cent in 2005, 4.75 per cent in 2004 and 4.50 per cent in 2003.

"Up until September last year, the EPF was doing well in equities. However, with the global financial meltdown, our performance in equity investments recorded a drop of less than 20 per cent, which impacted our dividend pay-out.

"This, however, compares better with that of the Kuala Lumpur Composite Index, which was down approximately 40 per cent from the end of December 2007 to December 2008," EPF chairman Tan Sri Samsudin Osman said in a statement.

Net income for the year was RM14.26 billion, after deducting allowances for the diminution in value of equities and doubtful debts, dividends for withdrawals, investment expenses, operational expenses, and death and incapacitation benefit payments. This represented a decrease of 15.47 per cent over 2007's net income of RM16.87 billion.

EPF made allowances of RM4.69 billion for the diminution in value of both overseas and local equities, compared to only RM520 million in 2007. Of the 2008 provision, RM3.20 billion was allocated for overseas equities.

"The fundamentals of the companies we invested in remain strong and we are confident that this provision will be written back once recovery takes place," said Samsudin.

As at Dec 31 2008, the EPF's total investment funds had grown by RM28.99 billion to RM342 billion compared to RM313.01 billion a year ago.

The three main contributors to EPF's record gross income of RM20 billion in 2008 were loans and bonds (RM6.78 billion), equities (RM6.67 billion), and Malaysian Government Securities (RM4.94 billion).

Dividends will be credited to members' accounts on March 23.

"We are bracing ourselves for a tough year ahead as the effects of the global financial crisis continue to be felt.

"However, we believe that in every crisis, there is opportunity to be seized. The key is to remain vigilant and continue delivering results for the benefit of our members through our prudent investment strategy."

Sunday, March 1, 2009

Problems in Compound Interest

This article from The Star interests me from the point of view of students at USIM who are taking The Actuarial Science & Risk Management Program and The Financial Mathematics Program. It involves practical problems in compound interest. Students can prepare spreadsheets showing the numerical computations involved and provide arguments to support or disagree with the proposal. They can even provide mathematical solutions.

Sunday March 1, 2009
It pays to continue paying the same amount

PETALING JAYA: Should houseowners take advantage of the lower base lending rate (BLR) and enjoy more disposal income with lower monthly home loan repayments? Or should they pay the same amount and complete their loan repayments faster?

Financial planners urge homeowners to opt for the second option if their income level has not been affected by economic downturn.

By shortening the tenure of their loan repayment period, they pay significantly less interest in the long run.

Based on the expected reduced BLR of 0.4% which comes into effect next week, a borrower with a RM200,000 home loan over a tenure of 20 years stands to save more than RM19,000 if he continues to pay the same amount.

On the other hand, he will save only close to RM11,000 if he reduces his monthly payment in keeping with the lower BLR (see chart).

Bank Negara Malaysia reduced the Overnight Policy Rate (OPR) from 2.5% to 2% on Tuesday to allow for more disposable income in the hands of the public, which translates into a lower BLR. This follows a cut in OPR by 75 basis points to 2.5% last month.

Financial planner with MAAKL Mutual Rajen Devadason says individuals who still have their jobs and normal income levels should maintain their monthly repayment sum as each ringgit channelled towards the home mortgage will reduce the interest component.

“However, for those in dire straits, maintaining the loan tenure while reducing the monthly payments will help them reduce their monthly outflow of cash. So, what to do depends upon the current circumstances of the individual,” he adds.

Thursday, February 26, 2009

The World's Economy

I got this from another website. This kind of warning about the world's economy have been going on for quite sometimes. Many take them seriously but most ignore them. They would go about their lives as if everything is normal and things would go back to normal at the end of each cycle.

To me it is just like one of those Ponzi schemes. One day it will just collapse. The only thing is we do not know when it will collapse. We cannot really picture what will happen when the whole thing (the economy of the world) collapses. Perhaps, this together with global warming, and the strange movements of the planets will be the end of the world as promised by Allah in the Quran.


The Monetary Domino Effect

Wednesday, 25 February 2009 23:46
Do not believe what our homespun economists predict about the domestic economy; in fact, don’t believe what any economists predict at all, period.

Consider this scenario. The biggest creditor in the entire world has never ever had a balanced budget before. This is because a central government will not risk stagnating a robust economy just to show that it is capable of balancing its budget. Neither will it risk turning a bullish market bearish. A small deficit is always good for the economy because it exhibits a potential for further growth, money well spent one would say.

Look at the US of A, the biggest importer of finished goods and raw material the world has ever seen. To finance this venture, the banks have to extend credit to the importers as one need to sell off its wares before showing a profit on the bottom line. We are not talking about a couple of billion greenbacks here. American import figures exceed the trillion mark every year. Now, having understood this, one would ask just where do these financial institutions get the money to loan it to these importers? The answer is the US Federal Reserve.

Money does not grow on trees and a government cannot just run it off the printing press as need be. There is after all such a thing called inflation. The more cash flooding the market, the higher the purchasing power and when demand outstrip supplies, the intrinsic value of goods escalates and henceforth inflation. So, in order to finance this endeavor without inflating the economy, the US Federal Reserve created Treasury Securities (TS), which are in fact governmental public debt financing instruments. There are four types of TS, namely Treasury Notes, Treasury Bills, Treasury Bonds and Treasury Inflation Protected Securities (TIPS). All in all, money is suddenly created from debt.

First, we look at T-Bills. Maximum one-year maturity zero-coupon bonds (no interest upon maturity) that are traded at a discount to create a positive yield. T-Notes and T-Bonds have a longer maturity period but these possess a market-controlled coupon payment twice a year. TIPS are basically inflation-indexed bonds whereby the constant coupon rate is adjusted to the Consumer Price Index.

So, who buys these TS to create the money for the US Federal Reserve to loan to the banks? In the US, it is these same banks that purchase them. The other major investment firms that acquire them also finance these purchases through their banks. All national central banks also invest in them to hedge their currencies against the US Dollar. Suddenly un-backed money is literally created from thin air. Not too bad a thing because these debts are created to expand the economy and to generate more income.

TS are also the means for the government to finance their budgetary deficits and here is the start of all our current troubles. When we mention US Budget Deficits, we are looking not at a few tens of billions US dollar but rather something like 800 billion greenbacks for 2008 alone. To provide a perspective of what USD800B is like, the entire Malaysian Budget for the last decade (2000-2009) is only worth RM1,290.3 billion or USD368.7 billion – less than half of what the US 2008 Budget Deficit is. Still cannot visualize it? Imagine winning the Big Sweep (RM3 million) every month without fail for the next 77,778 years. Get it now? Imagine just how big a hole the US Government had dug for themselves and in the same process, for the rest of the world as well.

Because of these baseless funds used to finance their imports, the exporters from all over the world enjoyed more profits. Trade surpluses are evident once a nation exports more to a country than it imports from. When a nation earns more than it spends, the monetary value of its currency grows stronger and inflation creeps up as well. To offset this, more new local money is introduced into the system to balance things up a bit and to ensure that the value of its exports remain low and stable. This mirrors exactly what the US is doing, albeit for different reasons, but with the same consequences.

Come one fine day and the US faces an Economic Tsunami because there is only so much “unwarranted” money that the system can withstand before it breaks down. Well, that day has arrived and henceforth the credit crunch, and when the US economy goes downhill, all global economies follow suit. Domestic economist might say that the Malaysian economy is decoupled from the US economy and henceforth the impact will be minimal. BS! During those years of trade surpluses and high growth, the Ringgit became stronger. Bank Negara Malaysia (like all other central banks in Asia) had to keep it low to sustain the growth rate that was primarily propelled by exports. This is achieved by the introduction of new money into the Malaysian market. Now that the exports are no longer there, this “new money” is still floating around, fiat money not backed by gold, an almost exact scenario replicating the US economy. Will it affect Malaysians the same way it affected the Americans? Definitely so because the Laws of Economics follow the same principles no matter where it is applied and doubly so because BNM would have also invested in these American TS instruments – the major factor because US Dollars are the defacto international trading currency.

The ultimate conclusion is that there is no avenue of escape from the impact of the US credit crunch and its thereafter consequences no matter what anybody tells you. It is akin to a domino effect whereby the first toppled domino will take out the next in line and so forth. Malaysia might be way down the line but the effects will be encountered here nonetheless. It is just a matter of time. Subsequently, what are the consequences?

Next stop, hyperinflation.

- Hakim Joe

Thursday, February 19, 2009

Ponzi Scheme Victim

This article, also from The Time Magazine tells of one case where a person and his family got wiped out financially through participation in the Ponzi scheme created by Bernie Madoff. The interesting thing is that, even with the tight regulatory situation in the US and the supposedly highly educated nature of the rich there, such scheme is still able to operate and convince people to participate in it.

Beware Malaysians!!! Such schemes are also going on in Malaysia.

How I Got Screwed by Bernie Madoff
By Robert Chew Monday, Dec. 15, 2008


The call came at 6 p.m. on Thursday, Dec. 11. I had been waiting for it for five years. When the call finally arrived, it was my wife Sarah who answered. What the person said on the other end of the phone was both simple and devastating: we were financially wiped out.

Of course, I knew this instantly from the look on my wife's face. Her words to the caller, the person handling our financial matters, grew insistent: "You're joking? This is a joke, right?"

We didn't know it yet, but we had been playing in the Bernard Madoff Investment Securities LLC Fantasy Financial League. It began when we sold our home at the peak of the market, collected what was left from an old divorce, found other monies and then, with a combination of pleasure and trepidation, handed over our life savings to someone named Stanley Chais, the Los Angeles network organizer for a man named Bernard Madoff.

Of course, we never heard the name Madoff — which has a peculiarly Dickensian ring now — and had no idea how he achieved such fantastic returns over the past 40 years. All we knew was that my wife's entire family had been in the fund for decades and lived well on the returns, which ranged from 15% to 22%. It was all very secretive and tough to get into, which, looking back, was a brilliant strategy to lure suckers. Unlike the usual Ponzi mechanics, the fund even stopped investments into accounts a few years back, at least in our network. There were the usual warnings prior to investing — we all knew it was a risk, we were told to make sure we were diversified, blah-blah — but, my God, it had been going strong for so long and with such fantastic returns, we had to get in. The Securities and Exchange Commission even gave Madoff a clean bill of health several years ago, we now find out. Well, maybe not a clean bill, but it didn't shut him down either. In the topsy-turvy world of investment, we were quietly, richly safe. Until the call. (See the top 10 worst business deals of 2008.)

I think everyone knew the call would come one day. We all hoped, but we knew deep down it was too good to be true, right? I mean, why wasn't everyone in on this game if it was so strong and steady? We deluded ourselves into thinking we were all smarter than the others. When it came to the investment game, we had it figured. And what was the game anyway? The way it was vaguely described to us was that the "New York people" had a system whereby they placed a series of instant trades — at once with futures, currencies and stocks — and out of this magic recipe fell a tiny 1% guaranteed, no-risk profit for the group. You do that 20 times a year, take away management fees and, voilà, a steady 15% return. Man, these guys were good.

But of course the call did come, as it always does with such things. It was not an ordinary Ponzi scheme we were all part of; it was the biggest in the history of the world, valued at some $50 billion. Lucky us. Small investors, institutions, hedge funds, global banks, pension funds — all fell victim to usual suspects: a smooth huckster and greed.

You never want to hear the words that come with such a phone call. "We are all wiped out." But they came, and we went numb. We lost, on paper, $1.2 million. My wife's family's combined losses are close to $30 million. We're talking old ladies and men, lawyers, children with Madoff trusts, students in college and an array of others who thought they had the world beat — and they did, at least for a time.

Now, we, they, everyone in this fraud, are all wiped out. Even Stanley says he's lost everything. It's the kind of news that's been known to cause shortness of breath, sudden cardiac arrest, revolvers pulled from bedside drawers. It harks back to December of 1929 and the image of bodies falling from buildings. But what can you do? (See the top 10 scared stock traders.)

There's a line from The Shawshank Redemption that is apropos. It's spoken by Tim Robbins' character: "Get busy living or get busy dying." We've lost it all, but we're choosing to get on with living.

Robert Chew, a former Madoff investor, lives in Colorado

Ponzi Schemes

The following article from Time Magazine has hit the limelight recently. It should be read by all Malaysians who have been known to participate in similar schemes in Malaysia. My previous posting told of Malaysian government servants being involved in such schemes.

There are, however genuine multi-level marketing schemes that encourage participants to market genuine products. These would be similar to setting up stalls to sell the products. However schemes that promise extremely high returns are definitely designed to attract a larger crowd and the final outcome is usually the benefit of the few at the expense of the many.


Ponzi Schemes
By Alex Altman Monday, Dec. 15, 2008


The $50 billion Ponzi scheme allegedly masterminded by former Nasdaq chairman Bernard Madoff punctuated a miserable year for Wall Street in the worst possible way: by underlining, yet again, that savvy market-makers can harness arcane financial instruments as weapons of mass destruction. Left in Madoff's wake are bankrupt investors, mortified regulators and a raft of unnoticed red flags. Madoff's methods previously had been investigated by the SEC, and in 2001, a prescient article raised questions about his inscrutable strategies: "Madoff's investors rave about his performance — even though they don't understand how he does it," wrote Barron's Erin Arvedlund, who quoted a "very satisfied investor" as conceding, "Even knowledgeable people can't really tell you what he's doing." But for investors pocketing windfalls, the lure of easy money outstripped suspicions raised by Madoff's shroud of secrecy. When that shroud was lifted, however, Madoff's investment fund stood revealed as a classic Ponzi scheme: a con game in which the illusion of solvency was created by paying off early investors with capital raised from later entrants. As long as new investment continued to come in the door, the earlier adopters reaped fat rewards; once markets tumbled and investors withdrew, however, the whole thing collapsed like a house of cards.


Though a Boston businessman named Charles Ponzi was the scam's namesake, he wasn't its original practitioner. According to Mitchell Zuckoff, a Ponzi biographer, the reigning king of the "rob Peter to pay Paul" scam was a New York grifter named William Miller, who bilked investors out of $1 million — nearly $25 million in today's dollars — in 1899. After drumming up interest by claiming to have an inside window into the way profitable companies operated, Miller — who earned the nickname "520 percent" due to the astonishing rate of return he promised investors over the course of a year — salted his scam by paying out the first few investors. After his racket was exposed by a newspaper investigation, he was sentenced to 10 years in prison. According to Zuckoff, his creditors got just 28 cents back for every dollar they'd invested. (See the top 10 scandals of 2008.)

Ponzi was a charismatic Italian immigrant who, in 1919 and 1920, coaxed thousands of people into shelling out millions of dollars — including a staggering $1 million in a single three-hour period — to buy postage stamps using international reply coupons. This strategy, Ponzi promised, enabled one to purchase postage at European currencies' lower fixed rates before redeeming them in U.S dollars at higher values. "For instance," Zuckoff explained in a Dec. 15 article for FORTUNE, "a person could buy 66 International Reply Coupons in Rome for the equivalent of $1. Those same 66 coupons would cost $3.30 in Boston," where Ponzi was based. But there weren't enough coupons in circulation to make the plan workable. The ploy bore the hallmarks of both Miller's scheme and others to follow it: it trumpeted the possibility of massive gains (Ponzi promised a 50% return in just 90 days), parried questions about its legitimacy by paying out the first few investors, and collapsed when Ponzi couldn't rustle up enough fresh marks to keep up with the money going out the door.

Ponzi, who was released from prison and deported back to Italy in 1934, set the standard in the genre. But the golden age of Ponzi and pyramid schemes didn't arrive for decades. (The two highly similar cons are often conflated, though in Ponzi schemes, a ringleader facilitates the entire enterprise; in a pyramid scheme, rungs of collaborators recruit new investors.) In the boom years of the 1980s and '90s, as traders developed increasingly sophisticated investment vehicles, the cons cropped up with increasing regularity. In 1985, a San Diego currency trader named David Dominelli was revealed to have fleeced more than 1,000 investors to the tune of $80 million. During the 1990s, a Florida church called Greater Ministries International bilked nearly 20,000 people out of $500 million in a pyramid scheme hatched by leader Gerald Payne, who claimed God would double the money of pious investors. (Dominelli pleaded guilty and was sentenced to 20 years in prison, while Payne was convicted and sentenced to 27.) The spate of incidents wasn't limited to the U.S., either. When communism crumbled in Eastern Europe, one of the earliest side effects of free-market capitalism was the proliferation of people looking to get rich quick. In Albania, under Communism the poorest nation in Europe, citizens sank some $1.2 billion dollars into pyramid schemes in 1996. When they collapsed the following year, investor outrage brought down the government.

This ignominious group has had some high-profile recent entrants, including Democratic fundraiser Norman Hsu, who was charged in October with operating a $60 million Ponzi fraud, and former boy-band impresario Lou Pearlman, who in addition to foisting N'Sync on an unsuspecting public also stole $300 million in investor capital over two decades. Earlier this month, Minnesota businessman Tom Petters was indicted by a federal grand jury on 20 counts of fraud, conspiracy and money laundering stemming from his alleged role in a 13-year, $3.5 billion Ponzi ring. Still, the $50 billion fraud Madoff allegedly perpetrated is the most egregious Ponzi scheme to date—unless you subscribe to an argument advanced by financial consultant Janet Tavakoli. In a neat summary of the anger millions of people are channeling toward Wall Street, Tavakoli wrote on her company website: "The largest Ponzi scheme in the history of the capital markets is the relationship between failed mortgage lenders and investment banks that securitized the risky overpriced loans and sold these packages to other investors—a Ponzi scheme by every definition applied to Madoff." By comparison, she wrote, the fallen fund manager is just "a piker."

Wednesday, February 18, 2009

Britain's First Islamic Motor Insurance

This article appears on Islamonline.net and should interest many students of insurance. The Islamic insurance product is marketed online as many insurance products nowadays are. In Malaysia, more and more people are turning to Islamic insurance for their motor insurance and many insurance companies now offer takaful (Islamic insurance) motor insurance.

Britain's First Islamic Motor Insurance

By IslamOnline.net & Newspapers

CAIRO — A London-based Islamic insurance firm has hit UK roads with a Shari`ah-compliant car insurance product that immediately attracted Muslim and non-Muslims for its ethical nature.
"There has been a lot of interest," Kaye Pimblett, motor insurance manager at the price-comparison Moneysupermarket.com site, told The Independent on Sunday, February 15.

"During its first seven days on Moneysupermarket.com, Salaam Halal returned more than 37,000 quotes," she added.

"And when they returned a quote, they appeared in the top three positions on over a third of occasions."

Salaam Halal Insurance has launched the new motor policies through Moneysupermarket.com and its own website.

The new product is based on the Takaful principle, which requires all participants to share risk equally and addresses key features associated with conventional insurance that is incompatible with Shari`ah.

Instead of premiums, people taking out a policy with Salaam Halal pay contributions into a pool and that money is then put into Shari`ah-compliant investments.

The central pool of funds is used to pay any claims that arise, and at the end of the year, if the pool is over-funded, the surplus will be redistributed to policyholders through a discount on their next premium.

But if claims outweigh contributions, shareholders pay excess claims and they recover their money in times of profit.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Ethical

The new product has been a great welcome to British Muslims, who were longing for insurance product that complies with their faith.

"Salaam Halal car insurance appealed to me as it is competitively priced, but most importantly, it's compliant with the Muslim faith, something a have never had before," said Hassan Ahmed, a Muslim client.

Britain is home to a sizable Muslim minority of nearly two millions.

Salaam Halal Insurance, Britain's first Shari`ah-compliant insurer, was launched last July to offer policies in line with the Muslim faith.

The nascent firm also plans to launch home insurance policies shortly.

The ethical nature of the Salaam Halal product has proved appealing to non-Muslims as well.

"What is unique is the ethical nature of what we do," Bradley Brandon-Cross, the chief executive of Salaam Halal Insurance, told The Independent.

"It's a transparent process and the opportunity to get something back is attractive to customers, both Muslims and non-Muslims alike."

Emile Abu-Shakra, a spokesman for Lloyds Banking, said the new product attraction is part of the popularity of Islamic finance services.

"Although as a market UK Islamic finance is in its infancy, it's still set to become big business," notes Abu-Shakra, whose bank has pioneered Islamic finance in the UK.

"We offer Islamic current and business accounts, mortgages and investment funds," she added.

"We piloted these in just five branches in 2005 but that quickly expanded to all 2,000 the following year."

In recent years, London has established itself as a hub of Islamic finance.

There are four licensed wholesale Islamic banks - the only ones in the European Union - in Britain.

There are also 21 conventional banks offering Islamic banking products, the newest of which is Gatehouse, which has received its license in April.

Sunday, February 15, 2009

Retirement Plan

It is not the intention of this posting to promote this retirement plan, but this article is related to what is being taught in most actuarial science programs. The idea is to have a program that guarantees an income for life after retirement, that is funded by contributions during the working years. Students in actuarial science would be able to work out the monthly contribubtions to be made during the working years that would provide a guaranteed monthly income during the retirement years. Provisions should be made for inflation because this planning involves a very long period of up to 50 years and inflation can eat up all the savings and potential income from the plan. To give a rough idea, at an inflation rate of 7%, an amountof money now will double in ten years time. So, RM1,000 in ten years time will buy approximately the same thing as RM500 would buy now.

Individuals have to plan for their retirement years and a guaranteed income for life will go a long way to providing financial security during those years. Insurance and takaful companies should design the most appropriate plans to be marketed to consumers. At the same time, individuals who are working now must be made aware of the importance of making contributions now so that they will have enough income during their retirement years.

These savings for retirement will create a huge pool of capital for investment.

Surah Yusuf verses 43 to 55 in the Quran tells the story of Prophet Yusuf who interpreted the dream of an Egyption king to mean that the country must work diligently for 7 years and save some of the harvests to be used during the next 7 dreadful years. This can be likened to the retirement planning required by each individual.

Below is the article:

Malaysia: Prudential Launches New retirement Plan
Business 2008-11-13 16:37
KUALA LUMPUR, MALAYSIA: Prudential Assurance Malaysia Bhd has launched its latest regular premium investment-linked plan designed for retirement.

The plan, the PRUretirement accumulator, offers a guaranteed monthly income to customers on retirement besides capital protection.

Its chief executive officer, Bill Lisle said the new plan is ideal given the current economic backdrop and high inflationary prices.

"Our recent independent survey, the Prudential Retire-Meter 2008, found that 48% of Malaysians fear they might not have enough money to take care of retirement needs in view of the current high inflation," he told reporters when unveiling the new plan Thursday (13 Nov).

The PRUretirement accumulator functions in two distinct stages - the accumulation and payout stages, where terms for both are determined by the customers at policy inception.

In the accumulation stage, the monthly premium paid by the customer will be invested for a fixed period ranging from five to 40 years.

Premiums for the plan start from RM100 per month.

At the end of the accumulation stage, the customer will begin to receive a stream of guaranteed monthly income over a specific number of years known as the payout stage.

The plan also gives customers greater control over their funds by providing the flexibility to make withdrawals during both the accumulation and payout periods as well as the option to top up premiums to match growing retirement goals.

Beyond its savings benefit, the Pruretirement accumulator also ensures that the customer is covered for misfortunes such as death or total and permanent disability.

The PRUretirement accumulator is the second retirement specific product developed by Prudential after the launch of the highly successful PRUlink income, a single premium investment-linked plan at the end of last year. (Bernama)

MySinchew 2008.11.13

Friday, January 30, 2009

Get-rich Schemes

This news item is very disturbing indeed. The question I would like to ask is why do these people believe in such schemes? I understand that the promoters of these schemes are very convincing even to the extent of taking prospective members on trips to see their economics projects that they claim are the sources of their income that they distribute to the members. Some even claim that they have rich donors from the middle east who would help them to make the payments to members.

If so many people are influenced by such promises, studies must be made to expose the flaws of the claims.

Efforts must also be made to expose the false claims made by the operators and to show to each individual how these schemes are actually just victimizations of the many to benefit the few. This could be done in a mathematical way so that no one will believe that these schemes are viable.


50,000 civil servants involved in get-rich-quick schemes

KUALA LUMPUR: More than 50,000 government employees are believed to be actively involved in promoting dubious “get-rich-quick” schemes.

Worse, many senior officers and heads of department were encouraging their subordinates to participate in such schemes, which promised quick and multiple returns for a small investment, said Cuepacs secretary-general Ahmad Shah Mohd Zin.

He said that Cuepacs was very concerned with the development as it eroded the people’s confidence in the civil service.

He said that the problem was so serious that the Public Services Department (PSD) had issued a special circular banning civil servants from joining such schemes.

Circular 2/2009, signed by PSD director-general Tan Sri Ismail Adam, took effect on Jan 13 and bans all categories of civil servants from promoting, participating or investing in such schemes.

The circular, which also covered those in statutory bodies, local authorities and state government authorities, also instructed those involved in such schemes to cease their activities immediately or face disciplinary action.

It said that the participation by a large number of civil servants in such schemes could mislead the public into thinking that the schemes were approved by the Government.

The circular described get-rich-quick schemes as a marketing method which promised high returns with a small investment while the organisations that promoted such schemes were not registered with any licensing authority.

The Federation of Malaysian Consumers Associations (Fomca) fully supported the Government’s move to ban civil servants from these activities.

Its secretary-general, Muhammad Shaani Abdullah, said the schemes were not only promoted by Malaysians but also foreigners through the Internet.

The schemes were usually based on the multilevel marketing model where early entrants gained more than those who join later.

Muhammad Shaani described the schemes as a “victimisation of the majority by the minority early birds.”

He said these schemes thrived on greed and eroded the true business value of honesty and fair play.

Ahmad Shah said that although the Government had given permission to some civil servants to engage in business on a part time basis, it did not mean that they should get involved in dubious activities. -- Bernama

Monday, January 19, 2009

EPF Conversion to Pension

My comments are posted at the end of the article

Published: Monday January 19, 2009 MYT 4:43:00 PM
EPF conversion to pension not viable


KUALA LUMPUR: The proposal to convert the Employees Provident Fund (EPF) scheme to a monthly pension scheme for private sector employees is not viable as individual savings are too small.

Malaysian Trades Union Congress (MTUC) secretary general G. Rajasegaran said that on average, savings of the majority of the seven million private sector employees in the EPF upon retirement was less than RM50,000.

"Assuming the retiree lives for the next 20 years and if this savings was given to him in monthly installments instead of one lump sum, he would receive about RM214 monthly as pension," he told Bernama on Monday.

He said this amount was definitely insufficient for the retiree to sustain himself.

Rajasegaran was commenting on a statement by Human Resources Minister Datuk S. Subramaniam that the cabinet had given the green light to the ministry to study the possibility of converting the EPF scheme to a pension scheme for private sector employees.

Public sector employees in Malaysia are already enjoying a pension scheme, including free medical treatment at government hospitals for life.

Rajasegaran said the proposal was nothing new, as this was discussed between the MTUC and EPF Board more than 15 years ago and no viable solution had been found, so far.

Meanwhile, the Malaysian Employers Federation (MEF) suggested that to make it viable, the government should give the employees an option either to withdraw their savings in a lump sum or on a monthly instalment basis.

Its executive director, Shamsuddin Bardan, said savings in the EPF rightly belonged to the employees and they had a right to do what they wanted and the government could not decide for them. - Bernama

It looks like a brick wall here. If the savings are too small to be converted to a pension, does allowing the retirees to draw all the money at retirement help them? Assuming the figures given are correct, and the retirees use the savings for spending during retirement at a higher monthly rate of RM1000, the savings would be finished within 55 to 60 months. What would this retiree do for his expenditure for the rest of his life?

There may be some retirees who have RM200,000 to RM300,000 in their account at retirement. Would allowing these retirees withdraw the lump sum at their retirements help them?

Efforts must be made to increase the amount in their savings at retirement. One way is to increase the monthly contribtions from the current 11% for employees and 12% for employers. A more reasonable rate would be 15% for employees and 20% for employers. This may seem a big burden to both employees and employers but we have to make this choice if we want to plan so that the retirees have enough money at their retirements.

Next the retirement age for private sector employees will have to be raised to 60 or 65. In this way, there will be more years for the contributions to be made,thus accumulating to a higher amount and less years in which to spend the savings, resulting in a higher monthly pension.

ASRiM Seminar












The Actuarial Science and Risk Management (ASRiM) seminar was successfully held on 12 January 2009. Three papers were presented. They are

1. Financial Planning and Wealth Management by En. Ahmad Sanusi Hussain
2. The Prospect and Challenges in Takaful: The need to Reinsure the Risk on a Conventional Basis by Jefferey Zain, FSA
3. Watson Wyatt Integrated Financial Planning by Prof. Jeyaraj Vadiveloo PhD, FSA

The participants include those from industry and students from USIM, UM, UKM, and UiTM.