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
Sunday, February 15, 2009
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
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.
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.
Friday, December 26, 2008
Improved pension benefits
This news article from The New Straits Times tells us that the government can afford to pay an extra RM1.3billion next year to pensioners because of revision in the rules pertaining to pension payments to retired government servants and their family members, after their deaths.
Among the changes made are that the maximum amount of pension is increased from half of last drawn salary to six tenth of last drawn salary. Also the payment to spouses and eligible children of deceased pensioners after 12.5 years, will be increased from the current 70% of the retiree's pension to a full 100% of the retiree's pension.
These are very good improvements to an already excellent pension benefits to civil servants.
The only setback to the government pension scheme is the lack of vesting and guarantee. A government servant who decides to leave the government service after a substantial number of years will not get any pension benefit and neither will benefit from contributions to EPF for his/her past services. This may not encourage staff with good opportunities to serve outside the government to leave. Also if the retiree falls foul of the law to the extent that the pension benefits can be withdrawn the whole pension benefit is withdrawn and the family members will suffer during their years of needs.
Additional RM1.3b for pension benefit
PUTRAJAYA: The government will spend an additional RM1.3 billion on remunerations, gratuities and other benefits for more than 500,000 retirees and dependants next year.
This year, the pension benefit payout is estimated at RM7.6 billion.
Pension Department director Datuk Yeow Chin Kiong said additional expenditures would have to be incurred following the implementation of several new benefit and derivative pension schemes as well as revised pension formula as endorsed by the government.
Beginning January, under a revised formula, pension will be computed based on a maximum of 30 years of service as opposed to the current 25 years.
The government has also agreed to restore derivative pension to 100 per cent to those who receive 70 per cent after 121/2 years from the date of retirement or death of a civil servant.
Also from January, a mother or father of an unmarried civil servant who died while in service will be paid an ex-gratia in one lump sum.
"This is the best offer pensioners or their dependants could ever have hoped for. Pension is like a lifetime gratuity.
"The government, taking into account affordability, could pay the significant increases despite the current economic climate," Yeow told a press conference in his office yesterday.
The department also anticipated a "change in heart" in some 66,000 civil servants who had opted for the Employees' Provident Fund prior to the implementation of the revised pension perks.
"I believe more than half of them will opt for pension scheme in view of the better and improved benefits," he said, adding that civil servants have until Feb 1 to do so.
"The government would also spend about RM32 million on 1,989 retirees who had migrated next year. "In the past, we did not pay non-resident retirees."
Yeow said most of the retirees migrated to follow their children or work overseas.
Retirees or dependants who have doubts or queries can call the department at its hunting line at 03-88854906, or Yeow's assistant director Ahmad Nizam Norati at 03-88854125.
They can also surf its website at www.jpapencen.gov.my or go to the department's branch office on the fifth floor of the Maju Junction Hall in Jalan Sultan Ismail or the Public Service Department headoffice at Presint 1 here.
These "goodies" were among improved pension perks revealed by Prime Minister Datuk Seri Abdullah Ahmad Badawi at a public sector Workers' Day gathering in May.
Among others, Abdullah had said the government decided to raise the retirement age from 56 to 58 in view of the longer life span of Malaysians.
In recognition of their contributions to the country, Abdullah had also said retirees with at least 25 years of service would be given RM720 in pension, also effective January.
Among the changes made are that the maximum amount of pension is increased from half of last drawn salary to six tenth of last drawn salary. Also the payment to spouses and eligible children of deceased pensioners after 12.5 years, will be increased from the current 70% of the retiree's pension to a full 100% of the retiree's pension.
These are very good improvements to an already excellent pension benefits to civil servants.
The only setback to the government pension scheme is the lack of vesting and guarantee. A government servant who decides to leave the government service after a substantial number of years will not get any pension benefit and neither will benefit from contributions to EPF for his/her past services. This may not encourage staff with good opportunities to serve outside the government to leave. Also if the retiree falls foul of the law to the extent that the pension benefits can be withdrawn the whole pension benefit is withdrawn and the family members will suffer during their years of needs.
Additional RM1.3b for pension benefit
PUTRAJAYA: The government will spend an additional RM1.3 billion on remunerations, gratuities and other benefits for more than 500,000 retirees and dependants next year.
This year, the pension benefit payout is estimated at RM7.6 billion.
Pension Department director Datuk Yeow Chin Kiong said additional expenditures would have to be incurred following the implementation of several new benefit and derivative pension schemes as well as revised pension formula as endorsed by the government.
Beginning January, under a revised formula, pension will be computed based on a maximum of 30 years of service as opposed to the current 25 years.
The government has also agreed to restore derivative pension to 100 per cent to those who receive 70 per cent after 121/2 years from the date of retirement or death of a civil servant.
Also from January, a mother or father of an unmarried civil servant who died while in service will be paid an ex-gratia in one lump sum.
"This is the best offer pensioners or their dependants could ever have hoped for. Pension is like a lifetime gratuity.
"The government, taking into account affordability, could pay the significant increases despite the current economic climate," Yeow told a press conference in his office yesterday.
The department also anticipated a "change in heart" in some 66,000 civil servants who had opted for the Employees' Provident Fund prior to the implementation of the revised pension perks.
"I believe more than half of them will opt for pension scheme in view of the better and improved benefits," he said, adding that civil servants have until Feb 1 to do so.
"The government would also spend about RM32 million on 1,989 retirees who had migrated next year. "In the past, we did not pay non-resident retirees."
Yeow said most of the retirees migrated to follow their children or work overseas.
Retirees or dependants who have doubts or queries can call the department at its hunting line at 03-88854906, or Yeow's assistant director Ahmad Nizam Norati at 03-88854125.
They can also surf its website at www.jpapencen.gov.my or go to the department's branch office on the fifth floor of the Maju Junction Hall in Jalan Sultan Ismail or the Public Service Department headoffice at Presint 1 here.
These "goodies" were among improved pension perks revealed by Prime Minister Datuk Seri Abdullah Ahmad Badawi at a public sector Workers' Day gathering in May.
Among others, Abdullah had said the government decided to raise the retirement age from 56 to 58 in view of the longer life span of Malaysians.
In recognition of their contributions to the country, Abdullah had also said retirees with at least 25 years of service would be given RM720 in pension, also effective January.
Visit to Bank Negara Malaysia
On Wednesday 24th December 2008 the third year students of the Actuarial Science and Risk Management (ASRM) program at Universiti Sains Islam Malaysia (USIM) visited Bank Negara Malaysia (BNM). They were given a briefing on career opportunities for ASRM students at BNM. According to the speaker, graduates in ASRM can apply for employment at BNM throughout the year. They must obtain a cumulative grade point average of at least 3.0 before they can be considered for selection. This is an opportunity for students who are interested in a career at BNM and for those who are still below the qualifying requirements of 3.0, they can start improving their grades from now - they still have two semesters of coursework to improve their grades.
BNM is a very good employer and has excellent facilities for their staff. Their requirements for graduates in actuarial science and risk management could be met by ASRM students from USIM.
At the end of the visit students were treated to a nice tea and cakes at the executive cafeteria.
BNM is a very good employer and has excellent facilities for their staff. Their requirements for graduates in actuarial science and risk management could be met by ASRM students from USIM.
At the end of the visit students were treated to a nice tea and cakes at the executive cafeteria.
Thursday, December 11, 2008
Research in Islamic Finance
This is an area for USIM to show its capabilities. The Actuarial Science and Risk Management Program combined with the Financial Mathematics program can develop substantial research expertise. USIM also has within its campus the World Fatwa Management and Research Institute (INFAD) and the Faculty of Economics and Muamalat that can help strengthen research in Islamic Finance.
KFH Research bags Islamic finance award
KFH Research Ltd, a wholly owned subsidiary of Kuwait Finance House (KFH), won the recognition as the "New Provider for Islamic Finance Research" from an Islamic finance conference organisers. It received the award from Dow Jones Islamic Market Indexes (DHM), International Institute of Islamic Finance (IIIF) and the Kuala Lumpur Islamic Finance Forum (KLIFF) 2008. Second Finance Minister Tan Sri Nor Mohamed Yakcop presented the award in conjunction with the 5th KLIFF. The team's research coverage includes economics and financial analysis in the GCC, Asia and US/Europe, currency strategies, GCC sectoral coverage and research advisory in Islamic finance, KFH Research said in a statement. KFH Research is led by Baljeet Kaur Grewal (picture) who is its managing director and vice chairman.
KFH Research bags Islamic finance award
KFH Research Ltd, a wholly owned subsidiary of Kuwait Finance House (KFH), won the recognition as the "New Provider for Islamic Finance Research" from an Islamic finance conference organisers. It received the award from Dow Jones Islamic Market Indexes (DHM), International Institute of Islamic Finance (IIIF) and the Kuala Lumpur Islamic Finance Forum (KLIFF) 2008. Second Finance Minister Tan Sri Nor Mohamed Yakcop presented the award in conjunction with the 5th KLIFF. The team's research coverage includes economics and financial analysis in the GCC, Asia and US/Europe, currency strategies, GCC sectoral coverage and research advisory in Islamic finance, KFH Research said in a statement. KFH Research is led by Baljeet Kaur Grewal (picture) who is its managing director and vice chairman.
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