[GST] How it affects our Life Insurance policy? (March 2015)

Everyone cannot runaway from Goods and Services Tax (GST) which is going to be implemented starting 1st April 2015. How about our life insurance policy? How is it going to affects our policy then? All types of coverage also subject to GST?

Unfortunately, most of our life insurance policy coverage also will be subject to GST charges. It depends on what type of life insurance policy you mention. It could be pure life, endowment, child education, medical and health, personal accident or annuity plans.

In summary, below table shows you what type of coverage is subject to GST:

Actually, how to calculate the additional GST charges?

The GST charges will imposed on those insurance charges and all other policy fees as mentioned above. Example, for standalone medical card, if the annual premium is RM1,000, then the revised premium including GST would be RM1,060 (RM1,000 + RM60 GST).

But, it's not so straight-forward for investment-linked plan (ILP) which having other non-life riders attached also. If the monthly premium is RM100, many people think that the revised premium would be RM106. Is it correct? NO. The RM100 is the premium you're paying, but the insurance costs is forms a portion of it only. For ILP, you have to determine how much is the insurance cost for each type of coverage, then only you can calculate how much is GST being charge.

Are there any changes to my insurance premium payment?

If your coverage is subject to GST, it definitely will charge you for it. But, whether should you pay more or not, it depends on what type of policy are you having. If it was a standalone medical card or non-investment link policy, you are required to pay more each time you pay your premium. Please ensure the correct premium amount first before paying. If the premium is insufficient, your policy may lapsed or being terminated. Please take note.

What if my policy is an investment-linked policy (ILP)?

If this is the case, GST won't affect your premium, provided that there is sufficient funds for this additional deduction. Meaning, instead of paying extra premium, the additional GST charges will actually eat into your investment funds value. Anyway, insurance company will advise you to top-up on the investment portion of your ILP, should you need to do so.

Minimum Guaranteed Returns for Investment-Linked Policy? Good or Bad?

Published on newspaper recently, it was reported that sources said NAMLIFA had highlighted the need to have a minimum guaranteed sum to protect policy holders of ILPs. Is it work-able? If yes, how to work it out?

Everyone knows what is Investment-Linked Plan (ILP)?

Basically, an ILP have both protection and investment element inside one plan. It gives the flexibility to policy holders to adjust the benefits and investment part. Unlike traditional life policies, how much policy value in an ILPs depends on the performance of the underlying funds being chosen. Since policy holder is the one who shoulder the risk, the ILPs premium tends to be cheaper. The key disadvantage of ILPs was the return was not guaranteed.

How about a Minimum Guaranteed Returns?

To eliminate the investment risk associated of an ILP, NAMLIFA has proposed to the central bank to have such minimum guaranteed return. And, the minimum guaranteed return they're looking at is between current fixed deposit and EPF rate (3% - 6%).

How to guaranteed the return?

After figuring out, maybe there is two ways:

1. The ILP funds adjust their asset allocation to match the minimum guaranteed returns. Just like EPF who guaranteed a minimum of 2.5% annual return, EPF is placing 50-60% of its funds into very safe instruments such as MGS and Government bonds.
   
   
2. Charge higher premium to compensate the insurer. This is because it's a liability to the insurers to guaranteed certain return. In the market, some insurers are currently imposing a "guaranteed charge" on policies which have guaranteed return.

Good or Bad?

Given the two possible ways shown above to guaranteed certain return, we should realized that everything come at a cost. The question is who is going to bear the cost of guaranteed. The intention behind is good, but the outcome may not be good. Currently, policy holder chose traditional policies if they want some guaranteed return. Otherwise, they can choose ILPs because of its flexibility and cheaper premium.

That's why, it's advisable to consult a financial planner before buying a plan. Thanks.

Budget 2014: Property Sector Hit Hard by RPGT and DIBS ruling

As widely expected, property sector would be one of the hardest hit sector in view of the proposed cooling measures to be imposed. Out of the 3 tightening rules forecast by Finance Malaysia, 2 already Bingo! (Read our previous articles regarding property sector "3 Tighter Rules for Property Sector?" and "3 Critical Factors to watch out by Year End")

These cooling measures announced highlighting that government will not hesitate to curb property speculations and to ensure a affordable property prices. Of course, property developers will be the one screaming painfully.

The 3 Key Measures:

1. Higher Real Property Gains Tax (RPGT)
   This was the 3rd consecutive year government raised RPGT. Even said so, it was just reinstated back to its original rates since 2007. The different this time compared to previous rounds was different set of rates to be imposed on different categories of buyers as shown below:
   
   
   
   
   
   
   
2. Banning DIBS
   As predicted by us previously, DIBS was deemed to be one of the key motivating factor for speculators, thus pushing up property prices to current level. By banning DIBS, it will effectively diminished the speculative interest as the cost of investment increase with interest payment during construction period. It's good to genuine and first-time house buyers.
   
   
3. Higher minimum Purchased Price for Foreigners
   To minimized influx of hot money shoring up local property prices, government raised the minimum purchased price to above RM1mil from RM500k per unit. However, this doesn't impact the market much because most properties purchased by foreigners are above RM1mil. Nevertheless, foreigners' favorite investment hotspot, such as Iskandar or KLCC or Mont Kiara area would be affected.

Would this be the end of property up-cycle?

3 Tighter Rules for Property Sector? (Sept 2013)

Prior to Budget 2014 (to be tabled next month), speculation has rift up on a few proposal to tighten the rules, especially on property sector. Following the outcry from public stating the alarming high property prices, measure should be taken to tackle the issue before bubble was formed.

The Bubbling Biz...

Among the measures being proposed were:

1. Non-other than Real Property Gain Tax (RPGT)
   
   
   
   
2. Higher Stamp Duty:
   ~ 5% of purchase price for 3rd property
   ~ 7.5% for 4th property
   ~ 10% for 5th property onward
   
   
3. Loan-to-Value ratio reduce to 60% for 3rd property onward
   
   

While the above info need to be ascertained further, some banks already implemented their in-house ruling. What's that? It was to limit the maximum term for refinancing of property to 10 years. Yes. Sooner or later, all of the banks will follow.

* Please note that the above 3 rules need to be ascertained further. Stay tune!

ETP update: 10 Key Achievements (Nov 2012)

Below is the 10 key achievements highlighted by CEO of Pemandu, that demonstrates the positive inroads of the ETP:

1. Projects will be implemented within the 12 focused National Key Economic Areas (NKEA) and also implement 51 Strategic Reform Initiatives (SRI) to ensure competitiveness will flourish.
   
2. Whilst Malaysia's GNI per capita was only US$6,700 in 2009, it grew dramatically by 45% in 2011. (Target is US$15,000 by 2020)
   
   
3. GDP grew by 5.3% year-to-date. This is significant, considering Singapore's growth of only 1.3% while neighboring countries recorded the following GDP growth:
• Thailand 3.0%
• South Korea 1.6%
• Taiwan 1.0%
• Hong Kong 1.3%
  
4. Economy continues to grow to reach new GDP and GNI records in 2011, with Government achieved its highest revenue in history with RM185 billion in 2011, allowing the Government to implement many programmes, including those under GTP such as BRIM1 and BRIM2.
   
5. Private investment continues to achieve robust growth. As of Sept 2012, private investment grew by 25.5% yoy, reaching a new record of RM112.2 billion.
   
   
   
6. Domestic private consumption continues healthy growth of 8.2% year to date, an evidence of growing disposable income by Malaysians.
   
7. FTSE Bursa Malaysia KLCI market capitalization scaled new historic high on 1st Nov of 1,675.69 points, with market capital Rm1.46 trillion.
   
   
   
8. Consistent delivery of fiscal deficit reduction from 6.6% of GDP in 2009, 5.6% in 2010, 4.8% in 2011 and further reductions are planned in 2013 and beyond. Debt ceiling was capped at 55% of GDP.
   
   
   
9. Recognition of Malaysia's tremendous progress by external parties such as World Bank (ranking in Doing Business), AT Kearney's FDI confidence index, IMD World Competitiveness Yearbook, WEF Global Competitiveness and CNN ranked KL as 4th best shopping cities.
   
10. Achievements against the KPI were at 123% in 2011 and 94% this year

Source: etp.pemandu.gov.my (summarized by Finance Malaysia blog for ease of reading)

What is US "Fiscal Cliff" actually?

When everyone thought that US and the world will be better if Obama won his presidential re-election again, world equities markets today declines with US being the most serious market by dropping more than 2%. What's the reason? Answer: Fiscal Cliff ?

Hmmm... Then, what is fiscal cliff actually which many of us on the street do not even heard about this new term before. No worry, Finance Malaysia blog did his homework over here. Share this out if you like.

Understanding Fiscal Cliff...

The US fiscal cliff refers to the effect of a series of enacted legislation which, if unchanged, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit. With Obama retaining the presidency, it sends the signal that it's US government policies will pretty much stay the same as previous 4 years. Ben Bernanke will stay as Fed chairman, which also meaning that the open-ended liquidity and bond buying programs will continue, fueling risk taking appetite of equity and fixed income markets for the foreseeable future.

Budget deficits, projected through 2022. The "CBO Baseline" shows the effects of the fiscal cliff under current law. The "Alternative Scenario" represents what would happen if Congress extends the Bush tax cuts and repeals the Budget Control Act-mandated spending reductions beyond the end of 2012.

However, Obama has to resume his duties in a very likely divided congress, with Republicans controlling the House and Democrats controlling the Senate. With this political deadlock and the looming "Fiscal Cliff", that's the reason why US market sink this morning.

Good or Bad?

If you understand it, the so called "Fiscal Cliff" is not something bad, in which its purpose is to reduce budget deficit of US. What investors worried was the measures being taken will slow the already slow growth rate of US economy, subsequently the world economies including Asia. But, without the intention of reducing budget deficit of US, would you be more confident? Of course NOT, because US would never able to not walk out from the brushes. Right?

By now, you should be able to understand the term. Meanwhile, some analysts have argued that "fiscal slope" or "fiscal hill" would be more appropriate because while the cumulative economic effect over all would be substantial, it would not be felt immediately but rather gradually as the weeks and months went by. Hahaha...

Can Malaysia Trust 'Mat Rempit'?

First of all, Happy Merdeka to all Malaysians. Yup, we love peace and prosperity as mentioned by our beloved prime minister. 55th years of independence would not come true without unity of people from various races. No doubt, we Malaysians are from various background. Yet, we have come together, good or bad, to shape our nation until what we already achieve today. Anyway, Finance Malaysia hopes our nation can transform itself by realizing the 2020 vision "Developed Nation".

Just when everyone was celebrating today, I came across one news titled "Mat Rempit to help fight crime" and my writing instinct once again being activated. Fighting crime by collaborating with Mat Rempit? This is the first reaction I believed many readers would asked!!!

Don't we know that Mat Rempit were those who rides their motorcycle dangerously?

Don't we know that Mat Rempit were those riders that endangered the life of other road users?

And, I really don't know how and why our government came out this "think-out-of-the-box" idea!!!

Two Immediate Side Effects

Okay. We try to be neutral now. Maybe Mat Rempit really can help us to fight crime, and maybe they got "lubang" to detect crime, we have come out with these few immediate side effects once launched.

1. Privileged. They got these special privilege to join police personnel. How about other "gang"? Are we accepting them in our society as a good rempit?
2. Pride. Exactly, don't you think that being a Mat Rempit in Malaysia was so "cool"? This was like a statement to recruit more people to join them rempits everywhere. I'm not sure how effective they can in fighting crime, but what i'm sure of is this would attract more youngsters to rempit.

If they are really good, why in the first place become a rempit? Why don't they join our police personnel to formally fight crime? And the last point was this idea was first mooted by one political party to engage with mat rempits. And now this was mooted by Home ministry, in other words Malaysia Government. Hey dude, how did foreigners look at Malaysia on this matter? Positively or negatively? I think majority of Malaysians have the unpleasant answer...

Previously

Nowadays

What's wrong with Malaysia in terms of GDP per Capita? (2012)

Addressing the issue, which Finance Malaysia thinks was critical at a time of globalization heats up, Malaysia needs to formulate and take action immediately without much hesitation. But, before we jump into action, we need to know the root of the problem. Right?

Exactly, we must find out the reason why we left behind other countries in terms of GDP per capita, which refers to the country's gross domestic products at purchasing power parity (PPP) per capita. According to Wikipedia, it was the value of all final goods and services produced within a country in a given year divided by the average population for the same year.

Why not using nominal GDP to measure national wealth?

Comparison of national wealth are also frequently made on the basis of nominal GDP, which does not reflect differences in the cost of living. Using a PPP basis is arguably more useful when comparing generalized differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of the countries, rather than using just exchange rates which may distort the real differences in income.

Singapore is now the richest country in the world.
Where is Malaysia?

According to sources, some of the factors contributing to Singapore's forecast performance are its 'human capital' -- a skilled and educated labour force, the dynamic business environment, openness to trade, capital mobility and foreign direct investment. Also, it is worth noting that there is a global eastwards shift in economic activity -- Singapore is perfectly positioned to take advantage of this.

However, everything is not going well for Malaysia, although we are Singapore's closest neighbour. In terms of GDP, we moving nowhere for past few years amid competitive global environment. But, in terms of population, we believe we accelerated for past one year after government legalized some 1.6million foreign unskilled labourers. Please noted that they are non-taxpayers who consume all the benefits funded by us Tax payers.

On the other side, our brightest and brilliant are forced to mass migrate to other countries. This is a fact which is dampening the future of our country. It's sad because Malaysia supposedly was high on the list in terms of GDP per capita, given the plenty of natural resources that we had and strategic position we located in. Why?

The main reason lies within us, Malaysians. Don't blame the government. Don't blame other countries. Don't blame the statistic. Just blame ourself, Malaysians. A government was formed by its own people, and elected by us. All the while, we have this wrong mentality that we are blessed with valuable resources which can last us for a long long time. Does that mean that we do not need to compete?

Facebooking is a new norm in workplace now.

If you were to ask, Finance Malaysia would take the blame on our mindset, especially youngsters nowadays. Most of them didn't bother about the country and their future. These people go to work for the sake of working only. They follow instructions, without reinventing the way we work. How are we going to excel? Don't even think about competing. It's about time to change for a better tomorrow.