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.