Educational Plan Fiasco — Scholarship Plans Philippines, Inc.


Some good friends of ours, who also happen to be neighbors, have a long-time cook/housekeeper that they have employed for some 15+ years. They first hired their cook, C, in Hong Kong, and later they moved to Manila, and C moved with them. C, who grew up in Leyte, has worked abroad for many years, and in the mid-1990’s was convinced enough about the wisdom of purchasing an educational plan for her only child to ensure his college education. Over the next couple of years, C faithfully made her payments and fully paid some PHP30,000+ into the educational plan. She was assured that the college expenses of her young son would be taken care off when he reached the appropriate age (and a simple calculation of a modest 8% annualized return compounded would suggest likely benefits of some PHP100,000 worth after 16 years). The plan that she bought was offered by Scholarship Plan Philippines, Inc. That company has now apparently “closed shop” according to the news reports and it is not at all clear what C can, if anything, recover from her investment. C is an honest, hard-working citizen who has little knowledge of the intricacies of the finance world and certainly limited access to legal advice. She is precisely the type of person that is going to be the most hurt, and in my opinion, the least deserving, of the damage and fall-out that will most likely occur as a result of all the pre-need disasters in our midst at the moment. That there are tens or even hundreds of thousands of C’s out there really upsets me no end. I have heard similar stories throughout the country and from folks working in Europe and North America as well. So here is a post on educational plans, what they were, a very SUMMARIZED version of what has happened, and if you happen to know someone like C, how you should go about filing a complaint. Oh, and in case you don’t read all the way down, if it were up to me, the punishment I would recommend for responsible individuals that have taken people’s hard earned money, making promises nearly impossible to keep, and who fraudulently use and lose those funds, affecting millions of students across the archipelago, I would not hesitate to fry them alive in a specially designed human fry-o-later. Sounds harsh, I know, but that’s only me, or is it?

Background (Hyper truncated version)

Educational plans are essentially savings/investment accounts where you put money in, the money is invested in financial and other securities within government guidelines, and your money is supposed to grow over the years and eventually gets paid out to cover a beneficiaries school tuition and expenses. Many decades ago, companies sold them confidently believing that they could meet their future obligations, because for the most part, they were in some cases (dumbly) counting on a law that limited tuition increases at schools to say 10% per annum. That law, not surprisingly, was eventually removed, I gather, and as such, tuition expenses at many schools started to skyrocket to cover increasing costs. So the whole “payout” side of the plans suddenly got a lot more expensive than the companies had planned when they sold them. One can say a major assumption of the scheme gave way, but I would say it was PLAIN STUPID to assume that tuition increases could remain “controlled” for so long…

On the other hand, companies also claim that the money that was paid in and invested yielded far lower returns than they had projected, so the double whammy of increased tuition costs, and lower returns, meant they couldn’t meet their promises. This is a very simplified explanation, but the essence of the issue at hand. Forget that many companies paid out huge commissions to agents, or to cover administrative expenses, etc. so that in some cases out of PHP30,000 that a customer paid in, maybe only PHP15,000-20,000 actually went into the “trust fund” that had to grow to pay off the future tuition fees. And I will state now that NOT ALL educational plan companies have failed, many have managed to survive, but there are also many less reputable (now) companies that have or will collapse or claim bankruptcy and tens of thousands of folks will be affected. And don’t get me started on companies that set up dummy companies, related banks, odd money schemes etc. that clearly were NOT being totally on the up and up about their dealings financially. At the simplest take, there isn’t enough funds to meet the promised obligations. My own assistant/driver bought CAP 12+ years ago for his newborn daughter against my counsel, as he was convinced that a large company couldn’t go bad. He is now facing a 98% loss, having been refunded just 2% so far. And the opportunity lost over those dozen years! In that timeframe, a properly run educational fund invested in what I would call “low-risk” investments, has yielded me some 8-9% per annum on average, or nearly treble his initial investment by now… I also have peers who bought CAP plans to the tune of millions, only to see it evaporate into thin air in recent years…

So who is to blame?

Certainly not the simple customer who didn’t really completely understand what they were getting into. They gave money, they expected to receive tuition payments at a later date. They weren’t watching the performance of stock markets, treasury bills, government securities, currencies, or tuition laws. The blame must FALL SQUARELY on the folks who set up these pre-need companies and took people’s money without sufficient capital to support their businesses, who relied on untenable financial assumptions, laws, etc. AND who conducted their business FRAUDULENTLY and were unable to pull the plug and conserve their clients assets so that they are able to reimburse plan holders to the maximum possible level. I have to agree with a lot of the press and editorial opinion that the APPROPRIATE REGULATORY AGENCIES that were supposed to oversee these companies are also partially to blame. I know you don’t like to hear the “I told you so” comment, but I and many others were already wary of pre-need companies more than 10 years ago, so it isn’t unreasonable to think that the regulatory agencies should have had their chance to nip this in the bud… And as a pre-cursor to doom, when CAP went into trouble several years ago, don’t you think SERIOUS SCRUTINY should have been applied to all other companies engaged in a similar businesses??? And this doesn’t just affect educational plans, but retirement or pension plans, and get this… DEATH PLANS. If I had a death plan gone bad, how would I bury a deceased planholder?

So now what?

Are we as individual citizens, and collectively as a nation, so NUMB to all of this crap going on in our midst? Forget individual scandals, what I mean is the simple difference between RIGHT and WRONG. And of holding people accountable for their actions? Good grief, if we CANNOT isolate the guilty parties, prove that they did WRONG and SUFFER CONSEQUENCES, then what is to stop this from happening again and again and again until we have not an ounce of trust and pride in our citizens and nation as a whole? THIS IS SO WRONG. And I felt this way about the PIPC Scam which affected more well-to-do people as well (and my opinions/views on that SCAM turned out to be pretty darn accurate). And I feel even more strongly about protecting and recovering the funds of folks with more modest means. So C was at our doorstep last week, near tears, and of course I asked her to gather the necessary documentation and I consulted a lawyer to seek some advice. At the time C approached me, there weren’t the Senate hearings and lots of coverage we have experienced in the past week. There was an Inquirer article that said, and I quote, “The SEC urged planholders of these bankrupt companies to file on or before March 31 this year their sworn complaint with the non-traditional securities and instruments department of the commission.”

Don’t let these folks get away with this. If you are a planholder or know of someone in the same boat as C, please go out of your way to file a complaint with the SEC. I know a lot of you think nothing will happen and that it is all hopeless, but if you are apathetic about this, unable to stand up for your rights or help others do so, then you will be victims again and again of schemes such as these. DO NOT LET THEM OFF THE HOOK SO EASILY. A complaint is just the first step of letting the SEC know that you are one of the folks who have paid in funds and who are expecting to get as much of it back as possible. Thankfully, a lawyer friend drafted out the two page complaint that has now been notarized and hopefully filed by C at the SEC. It is a relatively simple document so there is no reason to feel shame or embarrassment (unlike the PIPC investors, 90%+ of whom never filed a complaint and licked their wounds quietly) about executing a complaint and getting it to the SEC by the end of March. If you know of someone or are yourself a victim of specifically Scholarship Plan Philippines, Inc., and want to file a complaint, leave a comment here and perhaps I can clean up the complaint (removing names) so you have a draft template to use… but check with a lawyer first to be sure. Press reports suggest there are still some funds in the accounts of SPP, Inc., so hopefully, planholders will be able to recover even a fraction of their investments. I certainly hope they do. I actually understand why folks were burned at the stake at some point in human history. :(


91 Responses

  1. The owner of one of the companies being investigated said on TV that the only difference between a ponzi scheme and a bank is that banks have a license to operate!!!! He should have been thrown in jail right then and there. No wonder his companies failed, if that is the way he thinks. Crooked, crooked, crooked.

  2. Very well said MarketMan!=)

    Filipinos whose hard-earned money had been invested in such pre-need companies must be AGRESSIVE in getting back their money. If not for that, then to put an end to it. We, as a nation, tend to let this kind of thing pass, having a lot of excuses. You are right, if people who are victimized by this kind of problem would not do something… this would not end.=(

    I have been comtemplating on getting a health/retirement insurance when I hit my 30’s, married or not. But with the way things are with pre-need companies I probably would just put money in a time deposit and invest wisely on mutual funds or stocks. And of course time to study how the whole financial thing works.

    I have already opened a bank account and is putting money in it to hopefully invest in a long term mutual fund by the year ends. I know some will view it as a dangerous thing nowadays but I still have the right to risk hehehe! I learned a few things the last time you gave your opinion when I asked you about these things in your post about owning a house.=)

  3. Oh well, the current Malacanang landlord and her immediate predecessor are from a famous and well-respected local university. Even a ‘good’ education is not a guarantee of scruples in a man nowadays.

  4. Is it incorrect to say that insurance plans are just as risky? I’ve spoken to lawyers who work for banks and insurance companies and they say that the insurance plans issued by international corporations are safer, because they are required by the govt to monetize their holdings at a certain level and that means they won’t be able to simply fold up like the preneed companies. However, let’s look at what’s happening to companies like AIG in the US and it makes me wonder if the only safe place is to stick the cash in the mattress. It may not grow but it also won’t disappear because some trader decided to bank on futures or real estate mortgages.
    Slightly off topic, will you be updating the stock buys you started last year anytime soon? The local stockmarket has been hit badly, so I’m glad I sold my shares when the values were much better.

  5. Right there MM, I totally agree. These people who have been victimizing poor folks ought to be burned at the stake or hanged. Just looking at that person on tv during the senate hearings makes me seething mad just looking at his face. He has obtained respectability and amassed great wealth at the expense of people’s hard earned money!!!!! Imprisonment is such a simple and easy indemnification for damages caused because as I see it there is no way people can fully recover what they invested. I wish there was something more harsh than that as punishment!

  6. Homebuddy, in many ways, I think of this as financial rape. Mila, yes, I continue to track my imaginary stock portfolio and will post an update in the weeks ahead, too many things on the stove at the moment… Noel, thank you for that link. And the link has useful telephone numbers and contact persons as well!

  7. Dear MM, I would really appreciate receiving your template of the complaint. Will send you a private email soon. Thank you for being there.

  8. All ’twas said,
    For education’s need.

    Then came deception,
    I’ll double your fortune.

    Put wealth here,
    I’ll guarrantee it there.

    In country bank aware,
    Inheritance, birthright beware.

    Angelic scheme,
    All the same.

    There was Charles, Bernard,
    And et,al.

  9. The owners and principal officers of these pre-need companies should be made answerable for these scams. Greed I think is the reason once again. On a positive note, 19 years ago, my mother bought my eldest son an educational plan from Eternal Life Plan. It was a relatively small company compared to CAP and so I didn’t think it will still be around by the time my son is in College. My mother bought the plan from somebody who she couldn’t say “no” to. But lo and behold, it’s strong and has been honoring my child’s tuition and other fees. I think this is the best investment ever and the best gift ever. Imagine, my parents bought the plan for I think about P35,000.00, installment for 5 years. My son’s tuition and other fees total between P53 thou to P55 thou per trisemester…so an investment of P35,000.00, we will be getting P486 thou. The Lord is so good and Eternal Life Plan I can say has very good owners and management.

    There are so many children who have to stop schooling or transfer to less expensive schools because of these scams. It’s only proper to file a complaint. Let us not have short memory.

  10. corrrine, glad to hear your plan worked out. And yes, we too should highlight the companies that stood by their commitments, in many cases those linked to larger and presumably more stable insurance companies that have actuarial experience… Bravo to eternal life plan. And yes, if total investment was PHP35000 19 years ago, and they will cover PHP486000 now, that is a rough annualized compounded return of approximately 14.75% per annum, very nice indeed… :)

  11. mm, your estimate that P15,000 to P20,000 of P30,000 placement went to a designated trust fund (handled by a trustee bank and, thus, beyond the reach of the con men) was overly generous. the actual SEC requirement is 10 percent. the rest (less agent’s commission plus administrative expenses) could be invested anywhere and in anything the pre-need company chooses. in many cases, the money was invested in ventures of sister-companies, most of which turned in paltry returns. in cases of outright fraud – ponzi schemes – the promoters simply pocketed the money.

    and talking of ponzis, such schemes mushroomed in the mid-1970s and have been surfacing with regularity since then. after all these years, regulators should by now know how to deal with them. but apparently they haven’t learned, and that’s being charitable to them. talks continue to make the round of pay-offs to supposed watchdogs. to illustrate the failure of regulation and enforcement, if i remember right, only one promoter, a certain blando, ended up in jail among the scores of the 70s ponzi operators.

  12. … to illustrate the failure of regulation and enforcement, if i remember right, only one ponzi promoter, a certain blando, ended up in jail among the scores of 70s operators.

  13. iyoy, OMG, only 10% is required by law in a designated trust fund? Duh, no wonder there are problems. And duh again, they shouldn’t be allowed to even think of investing in related companies… that is SO A CONFLICT of INTEREST.

  14. It actually is much riskier to leave a person’s money underneath their mattress, considering that the government has to print more money to replace the ones that are underneath said mattress, thereby devaluing said monetary unit, since they have to print twice the amount they ought to, look at what the $ 700 trillion is doing to the dollar right now. Now that I’ve said that…it looks like, the safest place to really put your money is underneath your mattress, at the moment… stuck between a rock and a hard place. I too have my money underneath my mattress, staring at me!

  15. I apologize this early if this is quite long but just have to share this with you.

    Reading your post brought back those emotions I experienced when I first found out I was victimized by Pacific Plans – the disbelief, shock,anger and other violent reactions. I went to their ofc on a FRI to get the 4th yr HS tuition refund (I always pay the tuition first then get a partial refund) but the staff said to return on MON to get the cheque. That evening,I heard about the collapse of the educ plan on the evening news! I went to their ofc on a MON,demanded for an explanation, solution to the mess, but specifically why the deceipt when they still processed my refund and asked me to return on a Monday knowing the educ plan had collapsed( a “tuition-help” document was later issued and I was able to get a cheque for 1/4 of the initial refund amount,a few weeks later).When the staff couldn’t make sense of what to do with us and the growing number of parents who according to the news numbered 300 plus that first morning, they shut their doors on us and allowed only 10 people at a time. So I called some people if the Makati Police can forcibly open the doors. Later, PP ofc opened their doors before the police came, and attempted some semblance of system.

    I took out high school and college educational plans with this company and was only able to avail of up to 3rd yr HS. My kid is finishing college soon.Since this fiasco happened, I have consulted a lawyer, joined a group, checked with SEC, have been calling/writing the company for the latest news,made paper trails,read extensively on the receivership status/ agreement by the Makati Regional Trial Court,etc. Before the company was sold, I was getting different versions of what I should get by 2010-first,a range of PHp 250,000 then Oct08 a letter saying disregard the first, now refund pegged to a fixed US dollar exch rate equivalent to PHP 130,000. I chose this company because of the reputation of the owner, company image etc.never expecting to be a victim of a massive fraud and scam. On that morning we were allowed in, there seemed to be different faces on the counters and it was obvious the staff had been briefed well on how to handle customer complaints.PP must have spent a fortune asking a customer service consultant to train the staff weeks ahead.I may have mellowed a bit,now carefully choosing my battles, but this PP thing is still a priority for me.I am lucky I could still send my kid to school but how about the many lives this company destroyed because the parents were just depending on their educ plans to send their children to school? Yes, victims should be aggressive and do what must be done. The case against the Company and owners must prosper.

  16. iya, be sure the beneficiaries/buyers of plans check the actual state of the company finances, the buyers might just payout a smaller sum, and end up with the rest… I understand there are some funds there, but they should use up all the funds to repay planholders to the maximum amount…

  17. I happen to agree with your views MM. And woe to people like C. That includes me and my family. What you shared iya is much appreciated.

  18. MM, I agree and have asked lawyer to check these things for me. Wish us all good luck and thanks for allowing the comments.

  19. I have elementary and college plans for my kids and have not used it yet. I honestly don’t know what to do especially with the sale to the new owners. like what iya said, in the past, we received advice that in 2010 we will get face value of our plan plus interest. now with the new owners, i wonder what will happen next.

  20. i have a modest pension plan with phil-am life.

    i know despite its parent company’s woes (aig) phil-am is still doing pretty ok – for now.

    but i cant help but wonder these days if the money will be there when i actually need it or am i going to end up like “c” when i’m in my 60s?

  21. Allow me to share with you the following: Preneed companies EXIST only in the Phil.(none anywhere else) and is regulated by the SEC. Insurance companies are regulated by the very strict INSURANCE COMMISSION. Banks close but insurance companies are always bought by other companies because of their assets (paying clients).Please note that INSURANCE COMPANIES have FACE AMOUNT educational and retirement policies. The problems of CAP was brought about by selling TRADITIONAL PLANS where tution fees soared later due to tution deregulation. When CAP closed,the SEC should have stepped in and put a stop to this.Sadly,this was not done and others were even allowed open.

  22. hate to say this, but planholders in legacy would be lucky to get 5 centavos for every peso in placement (P350M in trust fund against P14 billion liabilities). PP planholders are much better off if it is true the company is committed to return all placements plus interest.

    how do i know this? my three kids are covered by CAP plans. the eldest left the university for a culinary school. the second is in her 4th year in engineering. not a single term of the schooling of the two was paid for by CAP and i’ve grown tired of asking the company when i could realistically see the color of its money. the third is in third year high school and i’m already resigned to paying for his tuition.

    and don’t get me to start talking about the unpaid matured pension plans in my wife’s and my name.

    if a lynching party is being contemplated, count me in.

  23. The current problems were brought about by poor regulation and lack of proper monitoring by the SEC (of the preneed companies).
    When placing your investments,check the financial stability of the company. Only one insurance company in the Phil. currently has market capitalization of One Trillion. The second has market capitalization of 475 billion.Both are Canadian companies.
    The stability and prudence of a company will spell the big difference in how funds are handled.
    The Lehman Brothers problem was brought about by greed. Financial institutions took on even unsecured loans etc etc. This caused even big institutions like AIG to falter.
    Four of my five children were lucky to finish thru CAP and Pacific.Being a believer,my fifth child had high school,college and even retirement plans–all of which now are useless (CAP,TPG–both closed). I too have 14 retirement plans now useless. I was not aware of the difference of INSURANCE COMPANIES and PRENEED COMPANIES.
    Now that I am,I invest in stable companies. I also know that in life,nothing is certain so I just do due predence and continue to have faith in financial institutions. I continue working to be able to set up a retirement fund ( sadly not given utmost attention in the Philippines by majority of the populace).
    I truly “feel” for those who have lost hard earned money (myself included). We sadly have a government unable to do its role. Yes MM! We need to stand up so this insanity of “lack of regulation” is never allowed to prosper.

  24. It is very sad and frustrating indeed. Those who knowingly defrauded honest, hard-working people should be lined up and shot. My helper bought college plans for her nephews and nieces with CAP and we know how that turned out. No, let’s not shoot them. Let’s tie them to a mango tree with large red ants where they will have prolonged suffering.

  25. very sorry to hear about what happened to C. I used to work for R & M and C had always been very pleasant in my dealings with her. Hope she recovers whatever she invested

  26. I have an educational plan for my son with Loyola and their still paying their dues up to now and hopefully until the end. To CAP, Pacific Plans and the likes – they should be hanged upside down and their gums electrocuted so as to make this a lesson for others not to rob people of their hard-earned money!

  27. Last December, I went to Prudential Life Insurance and Educational Plan to inquire about getting educational plan for my 3 year old son. I was given a computation for college fund worth 1.3 million that I can use when my kid goes to college payable in 5 years time. I’m not happy with it knowing that I could invest my 1.3 million to something that will generate more money than what they are offering. I’d rather invest my money in some other countries like Hongkong, Singapore or USA.

    Our SEC is playing safe all the time instead of confronting negligent companies and correcting the error prior to its failure. Look at the case of Legacy, SEC is covering it up by blaming the justice system for its failure.

    My God this country is so corrupt that even the judicial system is corrupt too. Look at how they treat PDEA like a joke and now the Alabang Boys are being treated like celebrities and not the drugs and bribery case.

    How about the World Bank report on E de Luna and other construction firms? Can you imagine the government oficials are questioning World Bank decision to ban those construction companies. Helloooo!!!

    I also don’t agree about PDIC 250 thousand limit than an individual can receive if a bank goes bankcrupt. Its not fair!! What if I have 5 to 10 million deposit in a bank and it goes bankcrupt? I will only receive 250 thousand? Our intention to put money in the bank is for safekeeping and generate interest. The banks use our money for investment therefore they should return to us all the money we deposited plus interest. Banks are covered by insurance companies and therefore the banks and insurance companies should return all our investments in case of bankcrupcy.

    Did you see how meek looking Ms. Barin of SEC on teevee? My God she cannot even explain herself. You know its not all about higher education and experiences but common sense. Treat people fairly. We investors are the reason why banks, preneed and insurance companies are flourishing. They are using our money. Its not our fault if they goes bankcrupt.

    We are the “Goose that lays golden eggs in the nest with a big hole (they are the nests with the big hole) We sit comfortably laying eggs not knowing that our nests are with big hole. SEC and the government should be the safety net!!

  28. Marisse walang kaparis, please let me know the names of those two Canadian insurance companies. I will check their company record and might invest with them.

  29. hmmm… Remember the televised firing squad shooting of a convicted Drug Lord? They should do the same NOW starting with the corrupt-crooked politicians. That’s the only way your country will improve. But it will never happen so the country will NEVER get better. Sorry to say this but it is true. Greed and corruption is in most if not all of politician’s blood. Get rid of them, then less likely crooked businessman will sprout;(no more blatant bribery).

  30. Ye, Ms. Walangkaparis is absolutely right. I am in North America and was fortunate to have grown up here practically and avail of the opportunities. We have a regulatory body of anything that exists on the planet…Insurance commission, POlice Commisssion, and such. We even have critics say for instance Justice critics in the Parliament…that in effect is the GOVERNMENT that really is for the people….if even the slightest impropriety is made known, you can be asssured that the matter is dealt with in a blink of an eye… Educational plans…safe bet for us is through banks. If say, the financial institution goes under, the CDIC goes into Plan B or Plan C.

    My heart reaches out to those who were taken advantage of… there is such a thing as Karma!…never mind being fried or tied or dunked in a vat of patis…just don’t do unto others what you wouldn’t want them done unto you!

  31. marissewalangkaparis — we live in Plano, Texas and we purchased pre-need funds for both our boys. it is called the Texas Tomorrow Fund…Our eldest is a fifth year senior and it is paying off…we still have to pay another three years for our youngest being 15, — so they do exist elsewhere –

  32. betty q — even with all the regulations we have in the US we still have —Enron, TYCO, and currently Bernie F’ing Madoff — crooks are crooks and they are everywhere…

  33. Roland,yes those plans do exist.Here and in other parts of the world. Do check,the plan is managed by an Insurance company. The insurance industry in the United States is highly sophisticated (compared to here) and is even required or used for practically everything.(malpractice,actresses legs etc).
    We have retirement and educational plans managed by BOTH INSURANCE COMPANIES and PRENEED COMPANIES HERE IN THE PHILIPPINES. If you have to invest,do so with a REPUTABLE and STABLE Insurance company. The preneed industry came about because of the Filipino’s penchant for “Hulugan”. It is overseen by the SECURITIES AND EXCHANGE COMMISSION.(sic).
    Donney,in the interest of delicadeza,please look for the two companies. They are the only publicly listed (Phil. Stock Exchange) Insurance companies in the Philippines. Their market capitalization is even higher than most of our big companies in the country. Both companies have been in the country for more than one hundred years. The less known company has the Trillion market capitalization than its Canadian cousin.Due to the AIG problem,it is now number one in Canada and ranks number four in the world (among ALL insurance companies).
    Roland hope that answers your question. A local Insurance company has a similar name for the FUND that you invested in. I agree with you Roland,everywhere crooks abound. Despite these things,we continue to have faith in the financial insitutions…and we stand up to be heard when things like these happen (very poor regulation or lack of it). I agree with MM–it may seem futile,but we have to make our stand and be heard!!…Gosh,I’m being too serious…bettyq…to the kitchen. I baked empanada and I tried the dough for your came out well but I really have to improve on shapes. I tried the crescent and the rectangle-shaped…enough of this pre need (stress) for me,I too am a victim…to the kitchen bettq. Thank you for this site MM..our FUN SITE!!!

  34. Yes, they just go jump from one place to another like FLEAS, Roland, but I do believe that the system works for sooner or later, they get caught…just like the infamous….BEHIND BARS and serving his time! Some may fall under the cracks but no such thing as COLD CASE I’ve been taught!

    OK… You have I guess PINCHING ISSUES for the empanadas ..Ok..crescent shape…seal with eggwhite lightly brush the sides..not too much or it will just ooze through. easier to shape like overlapping pinch if the sides are thinner than the center .., like the disc itself, the edges are thinner than the center…easier to seal and pinch. Can you picture it?…try that!

  35. i agree..behind bars is where they all belong, for a long, long time. i saw the president of the firm from which we got our sons’ failed educational plans – he was going around with a phalanx of huge SUVs and bodyguards in a city up north, and locals say he lives like a king. i do not know how they can sleep, much less flash the luxury.

    i have a friend with eight kids – she and the hubby slaved for a long time to pay off the educational plans for all eight kids, only for the company to fail them. three kids have had to stop schooling for a while. very sad.

  36. MM,

    Nice rant. Let me just point out that none of the pre-need companies are viable. NONE. The business model is flawed. Even Philamplans (even without the spectre of an AIG collapse) needed a capital call to the tune of 700 million back in the early 2000s. Philamplans has never sold a single plan that has an unlimited promise. It only sold fixed benefit plans. While not as bad as the older type of plans, fixed values are still subject to a good number of risks.

    Allow me to enumerate the failings of the industry:

    1. Much like insurance companies and banks, pre-need companies have an asset-liability business component. However, the typical set-up is focused on the marketing/distribution side. The asset management side is outsourced to trust banks (as required by law) and internal expertise is poor. Companies who meddled with their trust funds (with complicit trustees under threat of losing the trust account) made poor (and in certain cases, self-serving) investment choices. The liability side is also outsourced as well. There are only 80 actuarial fellows in the Philippines and most of them are employed by insurance companies. Pre-need companies use actuaries on a consultation basis – the product feasibility studies need to be signed. The problem with most actuaries – especially the older ones – is that their knowledge are theoretical and outdated. No dynamic analysis was done on the products. Most of them also lack an understanding of the investment side leading to poor product design.

    2. As you have already mentioned, pre-need contracts have a high distribution cost. The agents make the most money. This paradigm was difficult to change as any change in the payout strucure would push agents to go to insurance distribution. My estimate is that about 20% of total collections go to agent commissions. First year payments of 5 year installment programs allot about 70% of collection to agents.

    3. Selling a pre-need product is like selling a bottle of wine some time in the future and getting the payment today. If cost variances ramp up, the seller is dead. This is the same predicament of government pension funds and some corporate pension schemes, which are essentially the same structure. Assumptions are simply assumptions and will inevitably change. The actuaries who invented these concepts and thought that they would be viable had no sense of risk management. Pension fund deficits are a global reality and will never be fixed. Ramping up current contributions to fund past deficits or using future business to pay past obligations is a Ponzi scheme.

    There is only one pre-need company that is selling pension plans that are contractually similar to insurance annuities (it’s one of the foreign-owned ones). Like insurance annuities, there is a protection clause that states that benefits will be adjusted if assumptions are not met. While unfair, this is the only arrangement that will work. Paradigm-wise, if you already own whole-life insurance, you are already used to this scheme. Ever wonder why the estimated 10 years of premium payments sometimes go up to 13 or 14 years? Of course, insurance is not an investment but a risk management cost.

    While nothing can be done to the current holders, a lesson can be learned here. For those who have yet to be sucked in, realize that your child’s future is of great importance. Understanding basic investment concepts, looking for safe investment alternatives and/or discussing choices with competent financial professionals are worthwhile activities to ensure your child’s education. Don’t talk to salespeople. Talk to real financial planners who will explain the risks and recommend an appropiate portfolio for you and your family. As simple as learning the IRR function of your MS Excel will do wonders. Quick runs will show a sub-par return on pre-need plans relative to say retail treasury bonds, fixed income mutual funds or Unit Investment Trusts. While these products do not have guaranteed returns, the investor has the liquidity option. Entry sizes are even smaller.

  37. Maybe C can go to Sen Mar Roxas. As his radio ads say, he will provide the services of a lawyer for victims of pre-need scams. “Magbabayad ang dapat magbayad.” Totoo kaya ito?

  38. Marketfan, actually, I would think this is an easy class action type suit, in other words, lots of people with the same case suing as a group…so Senator Roxas is smart to suggest this kind of help. As for C, we have done everything that can be done to now, thanks to a lawyer friend who wrote the complaint for her.

  39. MM, I’ve mentioned before how useless I am when it comes to finance. In the hopes of learning a little bit about it, I read through all the comments above, but I’m afraid I often got lost. Tups’s long lecture, which I’m sure is knowledgeable, kind of made me go into color-bars mode. ;-) I had always thought that pre-need plans were wise investments for the future, provided one got them from big, stable companies. I thought that CAP failed only because the people in charge squandered the money illegally, not because the system itself is flawed. But do you mean that ALL education/retirement/insurance plans are unsafe? So, for someone like me, who just doesn’t have the brain ability for money matters, and therefore, wouldn’t know the first thing about investments and wouldn’t dare to try playing the stock market, what is the best option to plan for the future, especially for retirement? A savings account is hardly enough.

  40. marissewalangkaparis, is market capitalization really a good indicator of stability? After all, the US companies in trouble now that availed of government bailouts all had huge market capitalization. Isn’t it just an indicator of the public’s perceived value of a company? And this is an honest question, I do not mean to contradict. I am not well versed in economics…

  41. As one of CAP’s educational plan ex beneficiaries, I really have a bad distate for this. I consider myself to be lucky because when i got my last CAP check for my last semester in college, I knew it was like snatching my life from the jaws of death. That was when the time CAP was really going down, and believe me, the other people who were there to claim/refund/ensure their investments were really heartbreaking. The whole Makati bldg was a big ball of gloom. Back when I was a kid, I really thought educational plans were a neat idea, and obviously I didn’t know any better. Now we finally see a practical need to teach Finance or Personal Finance as a subject as early as high school don’t you think?

  42. I took it upon myself to educate myself on managing my money by availing of the resources out there ages ago. I watched and gained knowledge I needed through this lady, Suzie Orman. I remember distinctly a statement she made on TV a looooon time ago telling us that financial planners are nothing but salesmen. I went by my gut instinct (maternal instinct? that hasn’t failed me yet!) and decided to invest a good chunk of my money in GIC though he [financial planner] urged me to invest in something else. Another advice I took from Ms.Orman…IF IT SEEMS TOO GOOD TO BE TRUE, it is a red flag!

  43. With news such as these, i can’t help but be depressed for our country, i feel that “palala ng palala” ang situation natin. We really need to pray for our country, A LOT!!!

    Btw Mr. MM, how about the companies that offer health/medical insurance plans, are they reliable?

  44. Insurance companies are different from pre-need companies. Aside from having different regulators, they actually have a bigger equity requirement by law. The industry also has a “re-insurance” paradigm. Meaning the exposure/liability (or simply put, potential obligation) of a company is shared by many insurance companies.

    However, health/medical insurance plans are still subject to the same product frailties of pre-need in that they are based on pre-established events (certain number of people getting sick). In terms of risk, they are much lower given that they are “term” insurance. Meaning these policies typically last only one year (albeit renewable). Hence, the insurance company has the opportunity to re-price (if it is a question of a bad hit i.e., more people getting sick than aticipated) or re-strategize (if the losses are due to the fact that critical sales mass was not hit). Also, never view insurance as an investment. It really is not unless you buy an annuity plan sold by an insurance company – this product approximates a mutual fund or a UITF. It is a cost to protect yourself from certain events (i.e., sickness).

    The bigger is better adage applies more to these companies as the proposition is essentially short term and barring a global catastrophe, these companies will not fold-up in a span of a year.

  45. Betty Q, not all financial planners are salesmen. There are profesionals who are licensed and are subject to a strict code of ethics. It is actually easy to ferret the good from the bad. 1. The focus should be on you. They should be assessing your risk tolerances and liquidity preferences.; 2. Every product that they “push” should be appropriate to you and should be clearly explained (all risks and relevant regulation). Now, people who come up to you and say “I have this great opportunity” without asking or even trying to assess what you like or need, that’s a clear red flag right there.

  46. Yes, I agree in general that large, well-capitalized insurance companies are probably more reliable in general. The AIG fiasco was heavily driven by the fact that it insured a lot of the FINANCIAL instruments of wall street that went sour, along with the underlying homes and mortgages. But the local AIG unit was doing brilliantly separate from its parent unit. I think most insurance companies with good actuaries and well spread risk are far less iffy than all of these pre-need firms with questionable practices. odie, I totally understand the desire to pray, but I would also hope that people simply apply clearer standard of right and wrong. Chad, yes, they should teach basic finance to high schoolers. Parents should also take every opportunity to explain money matters as well. chrisb, capital adequacy or proportion of capital to assets, is generally a good measure of stability, except where companies take bizarrely big risks with their capital. Katrina, not all of these plans and companies are bad, I think. But in the Philippines, the failure rates are disturbingly high. For the long long term, ou might want to try your hand in a stock mutual fund for some of your retirement funds. Then maybe a government securities fund and both from reputable providers… But really I think most people should bone up on these matters rather than leaving them up to others… Ant tups, thank you for such detailed and helpful comments…

  47. SPPI was supposed to pay for my college tuition but my parents ended up as the ones who shelled out money for it. SPPI reimbursed the tuition fee but not the miscellaneous fee. Unfortunately for my parents (again), they can’t reimburse anything from SPPI for the college tuition of my other sister. My parents thought that they’d be able to get some money from SPPI and not deal with the nightmare that was Pacific Plans when my sister was finishing high school.

    I’ll pass your entry to my mother and maybe she’ll have more consolation than the fact that she was able to milk my older sisters and my education plans for all of its worth.

  48. Ye, Tups…not all of them…but if you read my comment, it was a statement made by Ms. Orman on an Oprah show a long time ago. She was just trying to help women from this stereotype …and fully understand the necessity of how to better handle their finances esp. the divorced, single women who are left to be on their own without having a clue whatsoever on nhow to deal with them esp. if the husband took care of the finances and investments. Women were given by the Creator such a thing called INSTINCT… maternal instinct to be exact…some people refer it to GUT instinct. I am one of the few lucky ones who were not affected by the economic problems here. My hubby was impressed because I did this on my own without his help or financial aadvice. Some of our friends’ investments went kaput!

  49. Just my 2cents,,,I never liked the insurance plans, they charge too much for administrative fees and commissions, before they even invest your money. I’d rather invest my money in Mutual funds, where you can choose a riskier (100% stocks) or safer (50%bonds, 50% money market). Mutual funds are better than CD/Time deposits, due to the fact that the earnings are taxable if they are tied to your Retirement plans. While CD earnings get taxed the year they are earned. When looking for Mutual finds, try to get the indexed funds, that way the investment is more diversified.

    I’ve been investing for about 20yrs now (401K, roth) and even though all of my investments went down by at least 20% this year. I’m still about 10% up lifetime based on my contributions…I also follow the adage, you buy when the market is down and sell when its up.

    And please never put your money under your mattress, it’s even riskier doing that (burglars, fire, relatives). You’re better off depositing it in a bank, just make sure you scatter the money around and don’t deposit more than what the FDIC/PDIC guarantees.

  50. Correction…Mutual funds are better than CD/Time deposits, due to the fact that the earnings are TAX DEFERRED if they are tied to your Retirement plans..

  51. The only insurace plan i have is TERM LIFE insurance and not WHOLE life insurace, and even for that i plan accordingly, never get insured for more than you think your family will need.

  52. People like C are the most likely victims of this scam. They believe everything represented to them even it came from the mouth of a horse. In short, they lack basic knowledge of inflation wherein one year down the road One Philippine Peso will only be worth Seventy-Five Cents buying power. They miscalculated inflation and forgot to connect the dots even with stringy government guidelines, the pre-need plan administrator and our local elected government officials will do a smoke and mirror investigation with full media coverage and at the end they are holding hands and singing Kumbaya together! It is the same garbage as the high yield investment return wherein I know a lot of my relatives lost money. They are all conceived with a notion to run with the investor’s money!

  53. Betty Q, I did read your comment thoroughly, reacted appropriately and re-reading what I wrote, objectively. You cited a comment made by someone else leading me to believe that you espouse it. I simply put in a response that clarified the general statement made. No malice intended.

    Btw, let me clarify that the passing opinions that I posted regarding investment instruments are from a Philippines point of view – so as to prevent any confusion as tax treatments and investment shelters (currently none, hopefully we will have a 401k equivalent with the passage of the PERA Bill) here are different.

  54. Marketman, THANK YOU VERY MUCH for doing these things.

    About Sen. Roxas… I’m sorry, but when CAP parents were in BIG trouble, he went on the air at the Saksi radio program and announced that he would help. He even gave 2 cell. nos. so we could contact him. However, we did not receive any answer. We even called, but no one answered. Maybe now he will help? Para poging pogi?

    My heart bled when I asked parents to give 5.00 (FIVE PESOS) so we could photocopy their documents which were needed to file the necessary complaint against CAP. I realized… NAPAKALAKI pala ng 5.00 sa ibang tao and yet, nakayanan nilang tiising magbayad sa CAP hoping that in doing so, CAP would fulfill its promise and as a result, they would have secured their dreams of sending their children to school.

  55. I have a fully paid CAP Educational Plan for my daughter who’s presently on her 2nd year HS. Please tell me if there’s still a chance to avail of the scholarship when she’ll be going to enroll in college 2-yrs from now. I am an OFW and do not know the true status of CAP right now…Pls give advise!!! Thank!

  56. I have an SPPI Plan, as much as I want to file a complaint at SEC, I couldn’t do that because I’m in the U.S. How will I go about it?

  57. i was also a plan holder of the said company, they were saying that they would release the money before enrollment of this first semester, months had past still they didn’t release the amount we expected to receive. again they told my mother to claim it on december, december had past again and yet there were still no actions that were done. as much as i want to file my complaint toe SEC i couldn’t do it because i’m in the middle of my studies, now, can i still get the money that my father invested with that company?

  58. i was absolutely shocked. i thought this plan is tough enough compare to other educational plan companies. This is really awesome. My educational plan for my son was just approved recently and just got the certificate of full payment last sept 22, 2007. It is the only plan left for my children. my three children also lost their educational plan at The Professional Group, Inc or the so-called (The Group of Unprofessional)which was also a fiasco. I think all plan holders should file a class suit. Pls let us help each other. let us not allow these culprits to get off the hook. its time for us to make move otherwise we will get nothing even a single centavo. Remember, all of us are victims. We should do something NOW!

  59. Where to go to file for claims if we live abroad?
    This should be a big government issue, where is the government intervension here?

    Where is the lawfirm to go to? Is there any lawyer interested in this case? March 31st is the deadline for filing complain at SEC? Why March 31st, why the deadline so quick. I found this site just now, this CAP and its like have been frauding the victims so long. Has there been information with regards to this deadline on TVs or radios or newspapers or mails extended or sent to the victims?

    Government, what is going on? Isn’t this part of your job, as we victims are paying you salary to make sure that our rights are protected? Damn, who is not corrupt?!. Hard to find nowadays.

  60. I am one of the SPPI victims, I want to file a complaint at SEC but couldn’t do it because of my work. I would during saturdays or sundays but offices are close. How could I possibly file another mean of filing my complaint.

  61. Thanks for enlightening us. My husband just called me up from Isabela where he is working and told me about his SPPI plan. He asked me to go to SEC to inquire which presumably was what his former agent told him. I am at a lost of what to do once i am there. Its a good thing you mentioned about that draft which surely will help us alot. I will appreciate it very much if you can sent it to me ASAP for my time is running out.

  62. Can you please email the template to me? My sister enrolled three of her children into SPPI and has fully paid for these since two years back. We need to beat the March 31 deadline to file complaints with the SEC. SALAMUCH po!

  63. Actually, im not the victim of this legacy SPPI, but im just concern coz i’m the one who make follow up of the educational plan of my niece. Before what i know only, is one niece, a victim now, they are two victims of this legacy. for the first one, i got some, for this 2nd one even a single centavo i was not able to get it. Bago ka makakuha ng pera. katakot takot na pera muna ang gastosin mo papunta office. may mga naaabutan ko pa sa office na halos d mo masikmura ng mga words. Na kahit anong mura gawin ng mga tao sa office, mga manhid na cla.
    I do understand the feelings of these person. because they hope they can get some. but hopefully, we can get too.

  64. hi, i am of the subscriber of scholarship plan philippines inc. and a concerned friend told me about its closure just now. i want to file a complaint but don’t know any lawyer who could help me draft a complaint. do you happen to have a draft of complaint that i can use and just have it notarized since the deadline is already on monday, March 30, 2009. your help will be greatly appreciated. :}

  65. Hi! The problems of educational plans in the country makes me think and wonder why the government still allow the perpetrators to roam free and still experiencing amass wealth inspite of the tremendous complaints nationwide. At present, my family felt uneasy and worried too because my sister took & invest also Two(2) “Educational Plans” for her children and “Time Plan” for herself as well. I believe that she already finished the payment of her policies but I heard she is experiencing problems right now regarding the documents. She took this policies from “LOYOLA PLANS CONSOLIDATED, INC.”..Do you have a lists of the pre-need industry in the Philippines who are considered to be in the “watch-List” for closure,bankruptcy, scams etc? Is “LOYOLA PLANS CONSOLIDATED, INC.” on the verge of a problem or to watch for too? Please enlighten me, and reply through my email. Thank you.

  66. Hi MM. I am one the subscriber of SPPI but happen to read this just now. Do you think I can still file my complaint despite the deadline given by SEC? Can you help me about this. You great help will be highly appreciated. Thank you.

  67. Hello Ms. Anne. I am Rose, an employee of Loyola Plans Consolidated, Inc. Please be informed that LPCI is not included in those companies with suspension order from SEC. In fact, SGV has just concluded its audit and we are in good financial condition. At present, the company has no capital impairment and trust fund deficiency. I am happy to announce too that we started releasing our Education Plan benefits 2 months ahead of schedule, last April 15,2009 and this is nationwide. For further inquiries, please contact us anytime at the LPCI Head Office – (02) 8926061 to 65 or 8170000

  68. Hi Ms. Anne, How are u? It is very sad to hear the news, only this moment that we discovered coz I am looking for a contact number to reach up the office.We live in Laoag city, and the SPPI offices here was closed. My mom,one of the subscriber of SPPI, for our kids their are 4, and all of them are fully paid. and now it suppose to be this school year the fist kid will use the scholarship. Is she able to file her complaint? And Where to sent it? Please help us.

    Respectfully yours ,


  69. Hi Ms. Anne I am one of the plan holder of SPPI educ plan , it so happen that i just read it now . Can I still file a complaint even the SEC given the deadline last April 25 and please give details how to file on line .

    Thank you very much,

    Maria Elena

  70. hi, almost all of my family members got scum by educational and pension plan, to be particular is the scholarship plan phils, inc and PET plans. my sister got 14k reimburstment from the PET plans. i was trying to locate the office of acholarship plan phils inc in mandaluyong but nowhere to locate, it doesnt exist. can we also get a reimburstment fm scholarship plans phils inc like what my sister received from PET plans?

  71. when CAP went down, a friend from high school was severely damaged. her parents were of working stock, I think they’re vegetable farmers, and were depending so much on the college plan they worked so hard for over the last 10++ years. when they learned that their money is gone and their daughter cannot go to college, they had to tell her to hold her plans for college for a couple of years. the “couple of years” ended up to be 5 years before she was able to attend college.

    in high school she was one of the better students in my class, but because of the five year gap, and maybe her discouragement and frustration over not being able to go to college in time and graduate college with us, she did not do so well in school. she became TOTALLY different from the girl we all knew from high school. talk about shattered dreams destroying her spirit. she just gave up after one sem, saying that she “already lost her touch and her taste for school.” andaming nasirang buhay ng mga educational plans na yan…

  72. Our son ADZHAREE A. BLAH is a plan holder of SPPI, INC (optimax plus) with policy no. F-03-000513. He has a certificate of full payment issued on Aug. 25, 1999 and he will be graduating for high school this coming March 2010. We filed a complain to the office of the SEC in Edsa, Madaluyong through mail (WWW Express affiliated with DHL)with OR no. 024359 dated April 14, 2009; up to now we are still expecting for any comment or reply from the commission. Pls help us how to recover our payments because we are victims here in Cotabato City. We are looking forward for favorable action on this matter. Thank you.

  73. We are a plan holder of S.P.P.I and we have finished paying for the said plan last october 1999, and we had just found out that there is a an ongoing scam or to be said a fiasco over the dealing of this plan, i would like to take this opportunity to ask anybody who has an information regarding this matter, my daughter is also graduating this march 2010 and the only thing that we have for to go college is this plan that we invested in good faith that could help her in the near future and now this come to its close reality that she will go college this year and this thing is the only thing we have for her and now its a big big question to real existence of this company and we are in likely to be victims of fraudulent action of people who are victimizing on the welfare of others who are working very hard for the welfare of their family……if you have any information pls. email us to this address,,,

  74. May I know the status of CAP. And whats going on . If they could return our money. Even our investment I will be happy . I hope I could here some latest news about it.

  75. i would like to know the real status of this cap educational plan. like others, i want my money back. the main office in manila requested me to continue follow up the paper in batangas as it is near in lucena, but i didn’t hear any word from them. i am in necu c, fully paid long time ago but til now, nothing. thank u.

  76. Right now when it is the right time for me to enjoy the hard earned money me and my husband invested for the future of our eldest son I found out that we are a VICTIM of Scholarship Plans, Inc……. By June is the start of the school year but up to this time we haven’t have even a centavo to enroll our son because I still had the hopes and dreams that the certificate and passbook i have with me is an assurance that my son will received his diploma out of this plan…….

    I could still remember that way back year 1990’s i bought this plan in cash from a plan owner who, according to the agent will permanently satay in Canada for good……. I pay this paid plan and transferred in my name and my son’s name for 45,000……. i could just imagined that this amount was so big during those years…… on the other hand this 45K was borrowed from a lending company and i could still remember that this was paid for a couple of six months only to save high interest rates…….. my husband was working in a country so risky in Saudi Arabia….. he even told me he experienced abused from Arab people while on his way, a tire was roll over to him……. imagine this experience? he suffered this for the future of our eldest son.

    Year 2006 when this plan can be used already or on it’s maturity I was supposed to sell this to someone who can used this…… I can still remember that somebody or the agent told me that there’s someone interested to buy for 69,000….. I consulted this matter to my husband but my husband told me not to sell this because this is only our savings and for the future assurance of our child……. now i could have just imagined…….

    When i heard about CAP and Philam life i called up the office of Scholarship Plans Inc asking an assurance of how secured we are to enjoy our claim……. somebody told me they could not say so……. so i told her what if i will withdraw my money how much will I get……. she told me 15,0000….. i told her why that amount only when in fact i bought this for 45,0000???? her answer was……. that’s the only value……..

    Now, that it’s time for me to claim I was shocked my the agent told me that this time we colud not claim anything because SPPI was closed…….

    I just hope and pray that upon filing with SEC our money will be returned to us……..

  77. Will anybody give us some update regarding SPPI EDUCATIONAL PLANS, if in any terms could we possibly claim the benefits my son,WINCHESTER A.DE GUZMAN should have been enjoying now for his college education! Hope MR ROXAS continues his support for the unjustifiable victims LIKE US! the money be returned could assist some needs of my other four children… MR REGINALD DE GUZMAN,8290780.

  78. how to claim my CAP pension plan as this plan was failed!i invest 200thousand i am hoping to get my money back.Is CAP office in Manila is still open for claiming? let me hear from your good office.
    thank you

  79. In my last year of college, i lost my CAP scholarship or rather CAP has made it down the drain. I have finished my degree, FINALLY! Its been 5 years since i finished it, and im thinking of claiming for the amount which was invested and supposedly i can claim.

    Has anyone here received their check/cheque?
    What was the process? Coz i was searching online and i could not find a single instruction on how to go about the procedure.

    Please help! Thank you

  80. I want to know if there is an update regarding rehabilitation plan of Pacific Plans Inc?
    Also the earnings of the trust fund due last July 2010 in dollars but until now we did not received any notice on how we can get our money. I hope you can help me. Thank you and God Bless

  81. Where is the straight (clean?) road we are expecting from PNoy? Does he care for us who are still hoping for the miracle?

  82. Hi, I am an SPPI planholder. I have a certificate of full payment and I am supposed to receive my maturity benefits next year. However, I just learned about the problems of the SPPI. Worse, I also learned the deadline in filing for complaints was March 2009. Is there something I can still do?

  83. hi! i’ve found out just now about what happened to SPPI and the fact that the deadline for the complaints was last year added to my anguish. I have no idea what to do next. Can i still do something about this? please help..

    my email address:



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