EPF Withdrawal For Unit Trust Investment

Its a bit of conflict for myself to invest via my EPF monies. I guess EPF is doing a OK job for our investment money. I wouldn't say it's extremely well but at least every year we get more than 5% return pa. EPF had announced the dividend distribution of 5.8% for the investment of last y ear. Even 5% is already more than the return of fixed deposit standing at 3.7%. Don't forget your EPF monies are in one way or another capital guaranted.

Please don't use your EPF monies to invest into pure bond fund. Basically bond fund only gives you about 5%-8%pa and it's not guaranteed. There are bond funds that can lose up to 30% of it's investment. Don't forget about the sales charge too. Why take the risk to invest into a product that gives a non guaranted return of 8% when you can put it into a safe heaven that consistently give more than 5%?

Starting from year 2008, KWSP has cap the maximum sales charge of unit trust invested by EPF member at 3% only. Meaning investment by cash is charge about 5%-6% commission(sales charge) while by EPF is only charge at maximum 3% commission (sales charge). Then KWSP has gone the extra mile to reduce the minimum criteria for their members to be eligible to invest into unit trust. Don't forget also now we have more money into account 1 (70%) comparing to last time only 60% in account 1.

I guess KWSP is doing all they can to encourage their members to investment into unit trust funds. Wondering if you are eligible to use your EPF money for unit trust investment? Refer to below's table:-

Example: Assuming if you are 25 years old and assuming the minimum investment into unit trust is RM1000. Therefore you need to have at least RM20,000 in your EPF account (1 and 3) in order to qualify for withdrawing your EPF money for unit trust investment.

The calculation method is shown as below:-

P/S: I am so surpise so many people still doesn't know how much is the distribution of their EPF money in the different accounts. Below are copied from KWSP website.

Effective 1 January 2007, the Account is divided into two parts, namely Account I and Account II. Contributions received on your behalf from your employer will be credited into the two accounts according to the following percentages:

Account I - 70% of monthly contribution
Account II - 30% of monthly contribution

These accounts are created for different purposes, and different types of withdrawals are applicable on each accounts:

Account I Savings in this account is meant to be used for your retirement, and it cannot be fully withdrawn before you reach the age of 55, become incapacitated, leave the country or deceased (payment will be made out to your nominee / heir).

You are allowed to invest part of this savings to allow you to add the value of your savings.

Account II Savings in this Account is meant to help you to make early preparations for a comfortable retirement. Withdrawals are allowed for the purposes of:

Attaining the age of 50 years;
Owning a house - the downpayment for your first house;
Settling the balance of your housing loan - first house;
Financing education for you and that of your children's;
Medical expenses for you and that of your children's

The EPF will not consider application for withdrawal from any account for purposes other than those stated in the current law as cited in the EPF Act 1991; EPF Rules and Regulations 1991; and EPF Circular and Procedure.

Maybank Balance Transfer

I am considering this product. I had done some review on it. Actually I had read it many times before, just thinking maybe I can share some knowledge here with you.

I personally prefer the 24months package simply because the monthly rate is the cheapest. But do you know how much is the effective annual rate? After compounding monthly, the effective annual rate is 4.59%

There are plentiful of safe investment instruments out there that can easily make more than 5%pa on your investment. Therefore why not leverage on 4.59% and get back the return of 5%pa.

Below are some of the term and conditions worth to take note:-

1) The cheque payment to the other banks will be effected within 10 business days from the date of approval of your balance transfer.

- If you don't wish to be charged interest on the source credit card (the card to be transfer out), therefore you have to do your timing properly so that Maybank will pay your existing card before the statement date. Don't be surpise to be charged late payment charges if Maybank only pay your source bank (eg bank X) after the due date!

2) The finance charges will be calculated from the date your account is debited for settlement of your credit card account with other issuers.

- This means that interest will be calculated immediately not until end of the statement date. This might make a 20 days different in interest saving days.

3) For 24 and 36 months plans: Upon approval of your Balance Transfer, NO new account will be allocated. The balance transferred will be in your existing Visa/MasterCard/American Express account.

- Incase you are not aware, some bank actually transfer your money to a new account number when you do a balance transfer. This is for the ease of maintenance. Because your account might be might with other purchases of the month which suppose to be charged higher interest compare to the money from balance transfer. Generally the bank will knock off the principle with the highest interest rate before paying for the lower.

4) RM30.00 processing fee will be charged for each Balance Transfer application approved.

- Most banks charges a minimum processing fees which ranges from RM20 to RM50. This fees is a serious consideration. Example if you transfer only RM1000 but charged RM50 for the processing fee, that comes to 5% of charges just in 1 transaction. That is extremely expensive. Therefore I will only transfer bigger amount to the bank with higher processing fees. If you have the balance transfer size of more than RM5000, the effective cost (interest rate and processing fee) is only about 5% pa stil. For me, 5% is consider relatively cheap :)

P/S: Remember use our card for convenience not for credit (unless in special case :)

Am I Taxable? When Should I Start Declaring My Income?

Chinese New Year is always my best opportunities to catch up with my friends especially those from secondary school. Most of us have been in the labour force for 3 years while there are a few whom just graduated. Suddenly “Hi Nova I am just wondering, am I taxable? When should I declare tax?” …. Ooohhh suddenly it hit my mind that this question has been asked many times before. So I decided to include my answer in this blog.

Generally, anyone whom is already working suppose to start declaring your income to Inland Revenue Board (IRB). BUT!!! Its not the first time that I had heard so many complaints from my friend (whom have salary of less than RM2500 per month) that are not “allowed” by the IRB officer to open an account with IRB. Most companies will open a tax account for you with IRB but there are some smaller companies which don’t do that for you.

Basically for those whom already has a tax account, it’s advisable for you to declare you income every year. But for those without, try to open one even if your income is below RM2500 (although sad to say that you might be asked to go home by the IRB officer). Don’t forget althought your basic might be below RM2500, but your annual income might be still more than RM30,000 (RM2,500X12months) due to bonus, allowance, over time claim and other income.

There is a very big chance that you are actually over charged for tax paid during the months which you get higher pay cheque (example during the months that you receive your annual bonus or quarter yearly sales commission). After you declared your income tax and realize that you are actually not taxable or IRB has actually over charged you, IRB will return the excess to you by sending the cheque to your home (It really works because I received it before last year).

I hope this write up comes in just in the write time during this time that most already receive their B form from IRB J. All the best in your tax planning.

Question and Answer

1) Dear Nova, the RM2,500 chargeable income in the schedule above refers to the monthly salary or total annual income? eg if my annual income is RM30,000, for the first RM2500 im not charged..followed by the next 2500 i'm charged at 3%?

First of all you have to differentiate between your annual income and your income taxable.

Income Taxable = Annual Income - Tax Deduction

Example of tax deductions are EPF/insurance, computer, medical expenses, gift to charity and investment in SSPN

Therefore if your annual income is RM30,000 and assume your total tax deduction is RM27,000 therefore your taxable income is RM3,000. Therefore based on the schedule above, the tax payable is (RM2500X0%) + (RM500X1%) which is RM5.

Anyway this is just an illustration. There are still many tax exemption when you fill in the BE form. Therefore if your annual income is RM30,000, most probably you are not taxable. But incase you are taxed some where when you actually have higher income in a particular month due to bonus/special allowance, therefore IRB will have to return the money (which are deducted on that particular month for tax) to you.

Do A Balance Transfer At Cheaper Rate And Free Handphone Worth RM849!

Hi all, you have to be very careful when you do balance transfer. I was earlier kinda keen on this product but when I know the actual T&C, it really pull me off.

I wanted to get the handphone by transfering RM6k to my Ambank card. There is no transaction/administration cost. Wow that's great! More over I will be given a free handphone SE K550i worth RM849! AND interest rate of 8.99% pa ONLY!

Please be aware, this balance transfer is a bit different then the rest. Its based on a installment amount. Eg of normal balance transfer is that if you transfer RM6000 for 2 years, everymonth you only have to pay the minimum 5% and the interest rate. On another hand, this Ambank product converts RM6000 and interest of RM1078.80 (8.99% X RM6000 X 2 years) into 24 installment loans which each month you have to pay RM294.95 ( RM6000+RM1078.80 / 24 Months)as installment. Imagine, if you pay 8.99% interest per annum based on principle of RM6000 but effectively you are only borrowing RM3000 per annum (due to the reason that you have to service your principle amount every month). On net effect you are actually charged 8.99%X2=17.98% (normal interest is actually 18%pa, thus there is almost none different).

Wow, let see..... paying interest of RM1078.80 for a phone worth RM849. Well well if you have debt anyway and haven't done any balance transfer, they why not do this balance transfer and get some free gift. BUT if you have the cash, I rather buy by cash rather than this balance transfer. At least I get to choose more phone rather than SE K550i.

P/S: I do not consider compounding effect in this calculation for easy understanding (I hope I really had made it easier for you). Finally this post doesn't mean to condemn any product in the market, only trying to bring awareness to everyone. Thanks

Questions and Answer

1) Nova, I don't understand how the effective borring becomes RM3k when I actually transfer (borrow) RM6K from the bank, please explain in detail. Thanks.


Please refer to a simple table that I had done below:-
Scenario 1:-
If you borrowed RM6K, but you have to make payment of RM500 every month ( RM6K/12 months), therefore the amount of borrowing every month is lesser. If you take the average of borrowing amount every month (which is lesser each month), effectively you are borrowing only RM3K ((RM3250+RM2750)/2) in a year.

Scenario 2:-
Ok maybe you are lost still... lets compare to a normal situation. Your good friend lend you RM6K as per scenario 2. He said, hey VS I lend you RM6K for one year... please remember to return RM6K to me at the end of the year. Since you are not paying any installment to him along the year. Therefore effectively, you are really borrowing RM6K a year. Because everyday when you wake up from the bed, you are still owing him RM6K until you payback all.

P/S: Sorry if the table above is too small to view. Now you know I am not a good artist. I guess that's what they said the different between people who uses left brain more than right brain. :)

Flexi Mortgage Loan

Basically there are 2 type of flexi mortgage loan.

The first type is the one that combine it with a current account. A few banks that has this package are Alliance, Standard Chartered and Hong Leong. Therefore they house owner will transfer all his current account from other bank to this bank eg Bank A. If the mortgage loan is RM200k, but he has RM20K in the current account, automatic the mortgage loan will be reduced to RM180. Therefore the mortgage loan amount changes according to how much the investor put in or take out from the current account. Please take note, if the money put into saving account or fixed deposit only gives you 2-4% but if put into this current account will saved you about 5% (eg BLR 6.57-1.75%). Remember one dollar saved is actually 1 dollar earned :)

The second type of flexi account means that you has the flexibility to do prepayment (meaning to pay more in order to settle the debt earlier) without having to give notice to the bank. Banks that has this package are Public Bank and OCBC.

You might be confuse when you see the second product coz hey my dad is already paying more everymonth for his installment. Hehehehe please read ur t&c carefully, the older mortgage product do not allow prepayment unless notify or request from the bank. Therefore any dollar you paid earlier is only stand by for the next month's installment and no interest given!

Both product above subject to a 5 years lock in (some 3 years depending on banks).

Good luck and happy investing.

Merdeka Bond, Is It Suitable For My Parents?

Bank Negara Malaysia will issue Bon Simpanan Merdeka 2008 amounting to RM2 billion on 1 April 2008. Is RM2billion a lot? This investment might be as good as ASW2020. I remember many times that the ASW2020 are sold off in just 1 or 2 hours. So better be fast/early if you want to buy this.

The bond, which will be scripless and based on Syariah principles, is an additional savings instrument for senior citizens who are 55 years and above and not employed on a full-time basis.

There is nothing wrong to be a Syariah approved intruments. For the non Islamic investors, don't be so rigid about this. Basically Syariah investing are more stable. Another objective for this product is that it allows the Muslim investors to participate. Frankly, wouldn't investing in ASN better than this Merdeka Bond? Just the question to ponder since I never invest in ASN myself.

Those wishing to subscribe may apply for the bond during the sales period, commencing from 3 to 31 March 2008. The bond, which has a 3-year tenure, offers a return of 5% p.a. and provides flexibility for early redemption before the maturity date. This product will be as good as saving account! Just the flexibility to withdraw anytime and still be given the pro-rated interest and 5% interest per annum.

The minimum investment in the bond is RM1,000 with a maximum of RM50,000 per investor. Its good to have a capping of maximum RM50,000 of investment. Don't be suprise to see people coming in with RM1,000,000 cheque. Thus this provide opportunities for everyone to invest. A minimum of RM1,000 is fair enough. Its the minimum for any other unit trust funds.
Bon Simpanan Merdeka 2008 can be subscribed at all commercial banks, including Islamic banks, Bank Kerjasama Rakyat Malaysia Berhad, Bank Simpanan Nasional and Bank Pertanian Malaysia.

The allocation of the bond is based on first come first serve basis. Successful applicants will be notified by their agent banks????? Why successful applicant? Just a quick guess, maybe they will proceed with some checking to ensure that the applicant meets the criteria to investment (eg golden citizens whom are not on full time employment). Profit payments will be made through the bondholders' accounts with their agent banks. That means the interest cannot be reinvested.

The profit for BSM 2008 is 5% p.a. This means the profit is approximately 1.25% (5% divided by 4), of the investment amount at the end of each quarter. This is another advantage feature of this product. Normal Fixed Deposits only gives you the return at the end of the tenure. Assuming the dividend is reinvested at the same rate, the effective rate (due to the profit paid quarterly instead of yearly) will be 5.1%. Another thing is, the return are not taxable :)

The BSM 2008 is non-negotiable, non-transferable and non-assignable. BSM 2008 can be redeemed at face value on and before the maturity date but after the first profit payment. The profit payment will be apportioned based on the number of days the bond is held. Minimum redemption amount allowed is RM100. Bondholders may redeem their bond holdings in multiples of RM100. This provides liquidity to the golden citizen. Again well done. Its a good product for golden citizens.

Economical Way To Pay PTPTN

Hi there, thanks that my friend brought up this issue to me.Ya it's kinda some cost to pay PTPTN... I mean the transaction cost. Especially for those whom pay monthly, RM2 (most expensive) per transaction can be quite something.

So there are some more convenient ways of paying and cheaper which is internet banking as the table on the right.FYI you can pay yearly or quarterly in order to save the transaction cost. Its allowed by PTPTN to pay yearly or quarterly if you do not have enough funds.

Assume monthly PTPTN payment is RM100 and each time transaction cost is RM2, therefore the trasaction cost is 2% (RM2/RM100). If pay half yearly on the same amount which is paying RM600 (RM100X6months) and transaction cost is RM2, therefore the transaction cost is 0.33% (RM2/RM600). Most important is, think about the convenience? Well you can consider to pay at early of the half year if you have the cash (thus will also save some interest). All the best gals and guys!

Tax Rebate on Computer Purchases (2007) - Does It Benefits The Lower Income?

Thank you very much to you whom are still reading this despite so many write ups which my friends couldn’t understand much. I have to admit that either I have very poor English or bad presentation skill. But still I hope my sharing will enable you to know more and be more aware about your own financial planning.

Since year 2007, the rebate for computer has changed compare to year 2006. Lets start with review of the changes.

Table on the upper right shows the computer rebate for year 2006 and 2007 respectively.

Referring to the computer rebate for year 2007, it doesn’t seems to benefit much for the lower income group. Anyway looking at the flip side of this, it’s more beneficial to us in the long run assuming we will eventually fall among the higher income group. But it’s still a dilemma, I guess a RM500 rebate for a low income fresh graduate means more than a RM1000 rebate for someone whom is earning more than RM250K a year.

Take care my beloved readers, be aware and remember to have proper tax planning. Good luck and Happy Chinese New Year 2008!

Soft Dollar? What Is That?

Maybe might not realise.... the investment managers are making money out of the brokerage that they trades for you.

In case you are noobs in stock investing, all trades that you do in share market will be charged a brokerage fees of 0.60% but since investment managers trade in huge volume, they are only charged eg. 0.30%.

When your unit trust trades in the market, the broker actually billed your fund 0.30%. Its the fund manager's discretionary to decide who is the broker ( in the case of mutual funds ). The question is WHO he will choose to execute the traders for him? On what basis of selection? Fees? Research? Relationship? Recipocal business? Execution?

What ever are the reasons, for 0.30% paid by using the investors money, the fund manager actually receive kicked back or softdollar from the broker.

Some investment managers (IM) doesn't receive soft dollar aka soft commission from the brokers because it's claimed that they get the best brokering fees thus no further kick back.

Some IM recieved the soft dollar but agree will put it back into the unit trust funds because it's investors money.

The tricky one are the IM that keeps the soft dollar for themself. I am not saying that's its not allowed or not ethical. As long as the soft dollar is used for research for the benefit of the investors, then it is perfectly fine.

Thanks to read my bla bla bla again... this is not a huhaaa thing in the market... just hope to bring some realisation or attention to you. The next time you pick up any unit trust prospectus, try to read for their soft dollar policy, you might find something suprising ;) FYI some use the softdollar for company dinner :) - of course this will not be disclosed in the prospectus. It's all ethical issue.

Who Wants To Be A Millionaire?

Hi today my friend met me at "my banking hall", she went "gosh you really want to talk about finance to me?"... I said haha just joking its ok if you don't want to listen. She said ok just joking go ahead... when I wanted to start she said... you really are starting? hahaha I hope my writings really doesn't bored many people.

Well it start with, Nova I am looking for a rich man to marry. Will you be a millionaire? I said why not? Its not too difficult . Come one.... million is the kiddo thing. Now people are talking about multi millionaires or even billionaires.

She will ~!#$%%^&*( me if i disclose her name here... hahaha. Ok just a simple illustration by using your EPF money. If you have a proper planning. You can be a millionaire too. Below are the guidelines

1) You starting salary is RM2K a month.
2) You work for 30 years with 10% annual growth in your annual income for the first 10 years and 5% annual growth in y our annual income for the rest of the years.
3) Your return on asset is 5% pa ( historically, EPF always outperform the benchmark of 5%)
4) Assuming you never withdraw your money. ( I know this sound not logical or just take it as your money is transfered to other asset such as property. So still assume the money is yours)

By the end of 30 years you would have RM973K. That is already very close to 1Mill...

Hahaha ok lar... this is no rocket science and too many assumption. Just a simple calculation to give you more hope and you know that you can be a millionaire too.

I tried to include the calculation table but failed.... I am new blogger... So need some time to learn. Adios....

Citibank Shell Card, Who Is Misleading Who?

I came across a blog that talks about Citibank draning away their cash because of unfair term and conditions for getting rebates in the petrol purchase at Shell and ~!!@#$#$%^&*

GUY! DO your homework and don't simply trust what these freelance blogger says. Do your own research! You can log into citibank.com.my and do your calculation. There is a virtual calculator there which allows you to key in your own balance carry forward and petrol purchase of the month etc.

I have personal sent email to Citibank confirm that YOU DO NOT NEED ANY BALANCE TO ENJOY THE PETROL REBATE.

Below attached a letter from Citibank:-

Dear Mr Nova Lui ,

Thank you for your e-mail dated 12/17/07 regarding credit card.Please be informed that if you have RM 0 carry forward balance, rebate will falls on the lowest tier. For example, you have RM 0 carry forward balance and the purchase for Shell petrol that month is at RM1000. You will get 2.50% or 1.50% rebate according to card type. Then you make full payment for RM1000 before due date, you will not be charged for 18%p.a interest for 20 interest-free period as per the Terms & Conditions.

Rebate earned will only net-off the Shell transaction in the next statement every RM20. If the amount is less than RM20, system will carryforward till your total rebate is at least RM20. This means that if there is no Shell transaction in the following month's stmt, the rebate will be carried forward and will not be credited to the card.We hope the above clarifies.

Thank you for using Citibank Online and have a nice day.

Regards,
Lxxy Axxxxin (Miss)Internet Service SupportCitibank Berhad

Credit Card Balance Transfer?

How much everyone knows about balance transfer? It's not a gimmick really. Basically it's just that banks are willing to charge lower interest rate in order to transfer all your debts from other cards to their own card. Normally bank charge a certain so call service or management fees or processing fees to do it. It can be charged in percentage such as 1.5% or 2% or in certain fixed amount of RM20 to RM50 AGAIN OR which ever higher

So far a few good offers that i seen before as of today 1Feb 2008 is by CIMB/SBB which charges 1.5% service fees for 10 months of 0% balance transfer. Meaning that after the 10th month, the interest will be based on normal rate which is 1.5% per MONTH. Anyway the minimum transfer for this package is RM5K.

Another alternative is you can consider Ambank balance transfer, this package is not in their website... but the rate is quite good... 4.99%pa interest charged but without any service fees AND with minimum transfer of RM1K only! Therefore if you are a small spender like me... you should consider this instead...

If you have big spending amount and intend to go for long term... go for Maybank's balance transfer. It's about effective rate of slightly less than 5%pa with a service fees. I would say it's worth it if you intend to transfer big amount of money.

Remember! Credit card is used for convenient, not credit! But unless you can hedge your position to invest your money somewhere else... or you are really broke.

Do share with me if you find any other more interesting balance transfer. Thanks.