One more Single Premium Insurance cum Investment Plan

One more Insurance cum Investment Plan

I have came across one article in business standard which I want share with all of you.

Life Insurance Corporation's (LIC's) 'Jeevan Sugam' is a single-premium endowment product. Since the product gives death benefit (sum assured) that is equal to 10 times the premium paid, it will qualify for tax exemptions under Sections 80C and 10(10D) at entry and exit.

Along with LIC, Star Union Dai-Ichi has a similar product to offer, which is giving a higher guarantee and a better rate of interest than LIC on Rs 1 lakh single premium paid by a policyholder. Both are single premium endowment products. The insurers have launched this products under the endowment umbrella to give guaranteed returns to customers. Additionally, there are enough single premium products available in the market which fall under the ULIP category.

The products are available to people between the age group of eight and 45 years. According to experts, individuals will have to undergo a medical test before buying this product.

Both the products are close-ended and will be available for purchase only till the end of this month. While both the products are giving a death benefit equal to 10 times the premium paid, their maturity benefits will differ. Ten years is the policy tenure.

According to the data available, if a person buys Star Union's 'Dhan Suraksha Platinum II', he or she will get a maturity benefit of Rs 1.81 lakh after 10 years (policy tenure) against Rs 1.77 lakh in LIC's 'Jeevan Sugam'. Reason: The difference in their returns is due to the different mortality tables used by both insurers. Experts say since LIC is deeply rooted into rural areas where risk to life is higher, there are chances their premium rates are higher due to that.

Pankaj Maalde, head-financial planning at Apnapaisa.com says, in the long run, Star's product will return better than LIC's because after 10 years Star Union's product will give an IRR (internal rate of return) of 5.8 per cent, compared to 5.6% returned by LIC.

Hence, one shouldn't buy these products for investment sake because their returns from the guaranteed portion are not attractive. If one is looking at good returns, they can consider investing in a Public Provident Fund (PPF) and bank fixed deposits which guarantee better returns.

While insurance is not for investment, it's still better to weigh your options in case you plan on buying one. Hence, it's better to compare insurance products, their premiums and benefits offered before buying them. Financial planners say it's an investment product and people left with no other tax-saving avenue only should make use of such products. LIC and Star Union are offering an additional benefit of 4.5 and two per cent if your maturity sum assured exceeds Rs 5 lakh. In other words, Star's benefits here is less compared to LIC.

Star Union has clearly mentioned in the product details that the product will give a tax break on the plan benefits received, under Section 10 (10D). Whereas, LIC has not mentioned this on their website.

While R R Dash, zonal manager, LIC confirms the maturity amount from this product is tax-free under Section 10(10D), we have still refrained from mentioning it, in case tax laws were to be changed anytime this year.

In the case of Star Union, the maximum amount of loan that can be availed is 75 per cent as against 60 per cent in the case of LIC. That quantum will be available as the surrender value at the time of taking the loan.

If the policy is surrendered on or before the second year is completed, the insurers will return 90 per cent of the single premium paid. Whereas, in case the LIC policy is surrendered in the first year itself, then the company is returning 70 per cent, compared to 85 per cent in case of Star Union.

While single premium products are expensive compared to pure protection plans, it makes sense not to mix insurance products with investment products. While one has to make regular annual payments in protection plans, it makes sense, as the death benefit offered by life insurers is much more than such investment-based products. If one is looking at such products purely for tax-saving purpose, then he or she can also consider tax-free bonds giving returns in the range of 7 and 7.5 per cent. Additionally, people ready to take some equity exposure can invest in an equity-linked saving scheme.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Colour code for Mutual Fund

We often see the mis-selling of the financial products. Mis selling is a common thing in the financial industry that happens to almost everybody's life. To control mis-selling in mutual fund, SEBI has issued guideline for colour coding of mutual funds. The new guidelines to be effective from July 1, 2013, for all existing and forthcoming mutual fund products. Now onwards, product labels with scheme detail would be disclosed on common application form and advertisements. The labels would also include detail about the nature of schemes such as to create wealth or provide regular income in an indicative time horizon (short/ medium / long term)

There is also colour code for displaying the product risk. A blue colour coded box would indicate low risk, yellow box would indicate a medium risk, while brown box would be represent schemes with high risk. As per the guidelines, mutual funds would also have to include a disclaimer that "investors should consult their financial advisers if they are not clear about the suitability of the product".

These new colour code would provide investors an easy understanding of the kind of product/scheme they are investing in and its suitability to them.

For more detail about any other query related investment, you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Twitter id : @trivedi_arvind

Systematic Withdrawal Plan

SWP (Systematic Withdrawal Plan)

Many of you have must hear about SWP (Systematic Withdrawal Plan). You can implement it in many ways. If you have sizable amount of sum for invest and want to invest in equity capital appreciation for long term but you are not sure about market in short and medium term. You can invest your sum in debt mutual fund and through SWP you can keep SIP in equity mutual fund.

Before understand use of SWP for retirement planning let us first understand about annuity. Annuity schemes are often aggressively promoted by life insurance companies. In annuities plan people receive a fixed sum per month over a period of time against lump-sum investment.

The yield of these annuity plan issued by life insurance companies hardly 7% and post tax it reduces further. You can apply SWP in smarter way in debt mutual fund for your post retirement income. For this you should invest lump-sum amount in debt schemes of mutual funds after consulting qualified certified financial planner. Use SWP facility to get a fix sum every month on specified date. In pre specified date you will get credit pre specified amount in your bank account.

If you compare it with life insurance promoted annuity scheme you will get much better return to apply SWP in mutual fund debt schemes.

For more detail about SWP or if you have any other query related investment you can contact me through my email.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Beware from MLM and fraud comanies with greed of high return

Beware Investor from MLM and fraud companies

I have said many times in past that keep away from MLM ( Multilevel Marketing Companies) or Ponzi Schemes and those companies agent who promise huge return in short period. Today, I have read Indian express newspaper and sharing some fact and figure with you about these companies.

 The government yesterday said it has found 87 companies across the country to have disappeared after raising funds totalling Rs 342 crore through public issues. In these companies most of established in Gujrat state. Besides, 87 other companies are also being probed by the government agencies for duping the general public through illegal Multi-Level Marketing (MLM) or Ponzi schemes and West Bengal tops this list with as many as 73 such entities.

The market regulator Sebi has also detected as many as 669 companies to have duped the investors of Rs 7,435 crore through illegal collective investment schemes, Corporate Affairs Minister Mr Sachin Pilot informed the Lok Sabha.

The entities are classified as 'vanishing companies' if they cease to file their balance sheets and other documents after raising capital and the whereabouts of their offices or directors become untraceable.

In the Ponzi or MLM investments, the companies generally raise the money from general public and ask each investor to lure others into these schemes with a promise of huge returns. However, the operators disappear after some time, leaving the gullible investors in lurch.

In reply to another query on vanishing companies, the Corporate Minister said that the government had initially identified 238 such entities that have raised money through public issues. Out of these, 119 companies were put under a 'watch list', as they began filing their balance sheets and other documents with the Registrar of Companies or stock exchanges. Out of the remaining 119 companies, 32 companies are presently under liquidation, while 87 others have been classified as 'vanishing companies', Pilot said.

As per the state-wise list, 26 companies out of the total 87 such untraceable firms were registered in Gujarat. Gujarat is followed by Andhra Pradesh (13), Tamil Nadu (10), Maharashtra (9), Delhi (5), West Bengal (5), Madhya Pradesh (5), and Uttar Pradesh (4) for such companies. Regions such as Chandigarh, Karnataka have two such firms each, while one company each are from Orissa and Punjab. FIR has been filed against all the 87 companies and prosecutions has been filed against 85 of them.

The state-wise list of the companies indulging illegal Ponzi schemes is topped by West Bengal (73), followed by Delhi and Tamil Nadu with five each such companies. Besides, two such companies were found in Rajasthan and one each in Karnataka and Uttar Pradesh.

"Out of these companies, 75 have been wound up and the money refunded to the investors. 552 companies were prosecuted (and) convictions have been secured in 124 cases," Pilot said.

The Minister further said that various regulatory agencies are also taking steps to sensitise the public against such schemes, while newspaper editors are also sensitised to exercise caution in accepting advertisements pertaining to acceptance of deposits of un-incorporated bodies.

While Sebi is also conducting various investor awareness programs in this regard, the RBI is in process of undertaking a comprehensive campaign aimed at alerting the public against falling prey to Ponzi schemes and other monetary malpractices.

If you have some queries about investment and financial plan please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Some Important Points for Investors

Since last 4-5 year the retail investor has been losing money in equity market as market is not performing well. But not only in equity the so called advisor are fooling the investor from last so many years. I have earlier written so many times in my blog that if you have not much time and knowledge about market or investment please find a well knowledge filled financial planner. Set your financial goal and save before spending. Here I am sharing some basic tips which is very important for every investor before taking investment decision.

The most important thing is to protect your capital first. Take moderate risk for getting decent return. It is said that high risk give high return but before taking high risk assess your age, need and goal.

Never expect unrealistic return. Always try to get the return above average of the particular investment category. You cannot compare a single script return with any type of equity mutual fund. If anyone tell you about extra ordinary return please beware and alert before investing. I want to say only that keep reasonable expectation from any investment avenue.

Try to well diversify your investment portfolio according to your investment horizon and risk appetite. A well diversified portfolio reduces loss in other word say never put all eggs in one basket. Diversify your portfolio among different asset classes.

Keep away from any market rumors or news hype. Give proper time to your investment to grow. The process of investment is like sowing seeds. It need proper time to grow according to investment avenue. There is no rocket science to get multi-times return in short period.

There are other important things regarding investment which you will know in coming blogs. If you have some query about investment or financial planning please contact feel free to me

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

New Guidelines from IRDA for index link and health insurance

New guidelines from IRDA for life insurance and general insurance product

In last few days, The Insurance Regulatory and Development Authority (IRDA) has issued some important guideline to life insurer and non life insurer. According to new guidelines for traditional product, non-linked variable insurance products (index-linked products) to be treated at par with unit-linked products (Ulips). The insurers have been given time till June 30 2013 and September 30, 2013 to re-file their group and individual products respectively.

Guideline for Commissions:

The cap for first year commissions has been put at 15% for the first year for a 5 year term, 30% for 10 years and 35% for 12 years or more. The insurer in industry less than 10 year this cap would be 40%. In the case of polices are procured by direct marketing, there would be no commission allowed. According to new guideline the shareholders will get at 10% of the surplus and the policyholders would be entitled to 90% share of the surplus.

Guideline for surrender value:

The minimum guaranteed surrender value would be 30% of the total premiums paid less any survival benefits paid, if policy is surrendered in the second and third year. If surrendered in the fourth year, it would be 70% of the total premiums paid less any survival benefits already paid. If surrendered during the fifth to the seventh policy year, it would be 90% of total premiums paid, less any survival benefits already paid.

Guideline for death benefit:

According to new guidelines for death benefit Irda said the minimum death benefit at highest of 125% of the single premium or minimum guaranteed sum assured on maturity or any absolute amount to be paid on death, for single premium products. For other products, it will be highest of 10 times the annualised premium or 105% of all premiums paid on date on death, or minimum guaranteed sum assured on maturity or any absolute amount to be paid on death.

Norms for pension product:

For pension products, it said that upon surrender of pension products, one-third can be commuted and balance can be received only as annuity upon superannuation with the same insurer. The same option is available upon vesting with additional option of extension of deferment period if aged less than 55 on vesting.

New norms for health insurance:

IRDA has allowed to general insurance companies to launch 3 year health insurance policies. Now insurer cannot refuse the renewal without any sufficient reason. Longer period health insurance is good for customer as till 3 year renewal done automatic and also get the cheaper premium than current they are paying.

If you have any other query related investment and financial planning feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Eligible Schemes for Rajiv Gandhi Equity Saving Schemes

Some eligible schemes for RGESS

In these days many fund houses are launching their RGESS mutual funds in the point of view tax benefit under section 80CCG. The few schemes has been given below.

S.No.	Fund Name	I Investment Objective	NFO Date
1	SBI RGESS Fund	Actively managed fund that only invests in shares of CNX 100	09 Feb 2013 – 09 Mar 2013
2	IDBI RGESS Fund	Actively managed fund that invests in shares of CNX 100 and shares of public sector enterprises which are categorized as Maharatna, Navratna or Miniratna.	09 Feb 2013 – 09 Mar 2013
3	UTI RGESS Fund	The principal investment objective of the scheme is to invest in stocks of companies comprising S&P CNX Nifty and endeavor to achieve return equivalent to Nifty by “passive” investment. The scheme will be managed by replicating the index in the same weightage as in S&P CNX Nifty – Index with the intention of minimising the performance difference between the scheme and the S&P CNX Nifty – Index in capital terms	09 Feb 2013 – 08 Mar 2013
4	HDFC RGESS Fund	A Close-ended Equity Scheme investing in Eligible Securities as per Rajiv Gandhi Equity Savings Scheme, 2012 as amended from time to time.	18 Feb 2013 – 15 Mar 2013
5	Birla Sun Life RGESS Fund	The investment objective of the Scheme(s) is to generate capital appreciation,from a portfolio that is substantially constituted of equity securities specified as eligible securities for Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS).	25 Feb 2013 – 20 Mar 2013

Feel free to ask any queries  investment related query

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Positive signal for economy in budget 2013-14

Some positive signals to control current account deficit in Union Budget 2013-14

The Union Budget 2013-14 has failed to meet high expectation from the common man and Dalal Street. There is no any announcement for revitalise the investment cycles or attract savings in capital market. The confusion over retrospective changes in Section 90A of Income Tax Act relating to relief to foreign investment is not good. As foreign investment is very important factor to fill in the gap of current account deficit.

There are some positive signals by government also. To control current account deficit and to check the increasing gold demand government has increased the income limit from 10 lakh to 12 lakh for eligibility for Rajiv Gandhi Equity Savings Schemes (RGESS).

The government has reduced the planned expenditure for rural development, agriculture and social sector as against the expected increase in planned expenditure.

For first-time home buyers during 2013-14 availing loan up to Rs 25 lakh and having the cost of property of less than Rs 40 lakh will be eligible for additional deduction of interest of up to Rs 1 lakh. (At present Rs 1.5 lakh tax exemption on interest paid on housing loan under section 24A)

The government is also planning to launch inflation indexed national savings certificates subject to RBI consultation.

In any immovable property sell transaction except agriculture have to deduct TDS of 1% on the value of property where the value of deals exceeds Rs. 50 lakh.

The surcharge has been increased from 5% to 10% for those companies whose revenue above Rs 10 crore. Additional 10 % surcharge has been introduced for those individuals who are above 1 crore income slab.

Dividend Distribution Tax (DDT) increased from 5% to 10%. Custom duty on set top boxes, specific excise duty on cigarettes and excise duty on SUV increased. Import duty on gold increased from 4% to 6%.

The above mentioned step has given positive signal from government side to control current account deficit.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com