Rich Snail

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It took me a wee bit more time than usual to read the Economist this week. Many reasons to that, some of them being work related, others being personal - those who know me well will understand easily…

This week extract from my Economist reading is the trouble with pensions article. It is on the lengthy side for an Economist article; yet its reading is, as always, a breeze. The subject describes the main pension system we find worldwide. Sometimes defined-benefit schemes will be supported by companies (UK / US), sometimes by government (France). The defined-contribution one is the preferred one for expats as it is seen as more flexible.

The article is on the pessimist side. Its conclusion speaks for itself.

When it comes to pensions, the buck has been passed from employers to employees. But too few workers realise how much they need to contribute to guarantee a decent retirement or feel confident enough about how to invest their funds. This will not lead to the headlines about bankrupt pension funds that marked the decline of the DB scheme. But it will be bad for many workers all the same.

My two cents worth: The only solutions to this problem is financial education. We need to help people realize the impact of their non-choice and lack of expertise in this area, and help them get the right attitude toward finance: pro-active! We need to start teaching our kids about personal finance from a young age, help students in high school and universities to make rational financial decisions (who said credit card?), and help workers and entrepreneurs allocate a slice of their regular income so that they not only pay todays bills, but also prepare for tomorrow’s ones.

There are two things giving me hope:

1. More and more people awakening to these facts - taking actions and planning ahead. Good examples are JD, Trent, and all their followings
2. There definitely is a strong increasing market need for my expertise

It seems like we can get an insurance for everything and anything lately. Some insured their boob implants, some insured their legs, others even insured their dogs… Maybe one day we’ll end up insuring ourselves against Robots !

LOL !

Following on the creation of a dedicated “Protection” Section, I thought it would be interesting to explore the options we expats have regarding Medical insurances abroad. We basically have three choices. The first one is to bet on your health and not apply for an insurance - cross finger nothing happen. The second one is to go for a local insurance - usually cheaper. The last is to go for an international protection, replicating the kind of protection enjoyed in old Europe - England, France, Sweden etc.

The country you are living in / or to which you are moving to can have a bearing on your decision. Some countries enjoy better healthcare than others. However, I personally recommend expats do chose international cover over a local plan for the following reasons:

• They are international (Duh!), which means that you will not have to only rely on the medical facilities in the country you are living in. Many prefer to know they can go home, or to an alternative country,  for treatment should they become sick.
• They will follow you wherever you go. This ensures you don’t have any waiting period when moving to another country Icing on the cake, you don’t have to deal with potential pre-existing exlusions once you are insured.
• They gives you more freedom selecting where and by whom treatment shall be carried out. International provider usually enjoy much larger network of participating hospital.
• They usually are renewable for life. Whereas local plans will usualy only be renewable until age 65.
• Your level of coverage is much higher with an international policy, typically over 1 Million USD. You also enjoy fewer exclusions.
• International policy renewal premium are community rated. This means that your premium shall remain manageable even if you were severely ill over the past few years and had to go regularly to the hospital. To compare, local plans usually are based on previous years claim.
• International plan were set in place to replicate the same level of protection European used to enjoy back home. This means that they are not as cheap as local plans, but provide more peace of mind regarding the level of coverage in place.

At the end of the day, the choice is yours. There is no universal truth.

Following an agreement signed in December 2007, Scottish Provident International Life Assurance (SPILA) business has officially changed ownership to become part of Royal London. This integration certainly reinforce the Royal London Group position as the UK’s largest mutual life and pensions compan, but what does it mean for you, and how does it affect your SPILA Plan?

Nothing changed really. You don’t need to take any actions regarding your plans, as there are no changes to the benefits, features, conditions etc. You even keep your policy number and every other details remain identical - even contacts & addresses.

Should you wish to get more information regarding this, you can either contact me good self, or get in touch with SPILA directly.

As I tend to quote and link to The Economist on a regular basis, I decided to create a specific serie where I would “limit” myself to one article per week. The one I preferred of course. That way you will enjoy a quick extract of my Economist reading and will know when to expect it - I read the Economist during my week-end.

This week article is about Buying stories. I highly recommend it for its clear definition of the differences between two schools of investment principles: value investing and Growth investing.

It also ends on a few very interesting paragraphs demonstrating the value of a good Story Telling .

Plenty of studies find that people are seduced by stories: all shopping will take place over the internet, the world is running out of oil, and so on. They also like to associate with winners. It sounds better to own shares in, say, Google, than in some struggling housebuilder at the moment. So we end up overpaying for success.

The news came in 2 days ago. The government abruptly raised the price of subsidised fuel by 40%. This measure was in the “pipeline” for quite some time and recently became necessary to offset the high oil price cost to the public purse.

This lead to horrible traffic jam that same evening as many Malaysians were trying to fill up their tank to enjoy the last remnant of a 1.92RM / liter gas price. Many lost a few hours in the process to save a few Ringgits. I can understand this reaction from lower-class Malaysians who live on less than RM1,000 per month. But I was surprised to see the kind of reactions in Bangsar and Damansara Heights, with many BMW and Benz lining up. Seeing these reactions I smiled remembering the concept of Homo-Economicus…

The ruckus started the following day. Many (Shall i say all?) are really unhappy about the price increase and the way the government handled this situation.Some will complain about the new price. To those I would remind them that those subsidies are reckoned to cost about as much as defence, education and health care - combined!

If I were to have a say, I would give priority to education and health care over petrol subsidy any time of the day! Let’s hope this increase will benefit those two sectors down the road…

Others took a step back and put things into perspective. They started opening again the pandora’s box of the last elections. Ho wealth has been managed or many will say mismanaged in the country. I think this is the right debate to have !