| |
| |
 |
| |
The American Central Bank has increased
its federal funds rate by 25 basis points resulting it
to 5.25 per cent. Since June 2004, it is the 17th time;
the U.S. Federal Reserve has pushed up the interest rates,
which is the highest level since March 2001.
The main consequence of this hike in the federal funds
rate would lead to higher interest rates charged by the
banks for the loans given. Also there would be higher
borrowing costs for variable rate mortgages and home equity
loans. Further increase in the interest rates would depend
on the future information about the scenario of growth
and inflation. This hike in U.S. interest rates would
also expand the gap with interest rates in Canada. The
Bank of Canada last raised the interest rates on May 24,
when it increased the overnight rate to 4.25 per cent.
A recent report indicated that the Canadian economy registered
small growth in April while some economists say it did
not add any new support for a rate hike.
The next interest rate announcement from the Bank of Canada
is fixed for July 11.
The main reasons for this hike is the increase in inflation,
sluggish employment growth and the US housing market losing
its intensity. Moreover, the ongoing productivity gains
have kept back the rise in unit labor costs, and inflation
expectations have remained imperfect.
The committee is assuming some inflation risks to persist
despite the moderation in the growth of aggregate demand
that can help to keep the inflation pressures in control.
In any case, the Committee will react to changes positively
for the achieving its objectives. However, the Fed has
indicated the likeliness of the future inflation risks.
The Federal Open Market Committee (FOMC) voted collectively
to lift the benchmark federal funds rate target to 5.25%
|
| Top
| Back |
|
 |
| |
The state insurer, Life Insurance Corporation
of India (LIC) announced the launch of its two unit linked
plans. For the first time it took the plunge in unit linked
group insurance plan called Gratuity plus.
For Gratuity Plus, the corporation has fixed lower charges.
The expenses are as low as 0.8% for equity schemes and
Rs. 10 is the administrative charge. The corporation is
aiming at earning Rs. 1000 crore as its premium income
from its new unit linked product. Besides this, the gratuity
fund will not have any entry and exit loads. It is likely
that LIC's debut in the group unit linked business will
trim down the industry charges for managing the funds.
After withdrawing its two individual unit linked plans-Jeevan
Plus and Future Plus, LIC launched a new unit linked plan
–Market Plus.
' Market Plus’ is a unit linked deferred pension
plan. This plan is in compliance with the revised Insurance
Regulatory and Development Authority (IRDA) norms, which
was announced a few months ago. As per the plan, the policyholder
will be able to choose from single or regular premium
and also with or without risk cover. The allocated premiums
will be applied to buy units for the fund type chosen.
The minimum premium is Rs. 5000 for regular premium while
for single premium it is Rs. 10,000. The minimum and maximum
age limits are 18 years and 65 years respectively and
the vesting ages are 40 and 75 years respectively.
In case of death of the policyholder within the policy
term where life cover is opted for and is in force, the
nominee is eligible to get the sum assured under the basic
plan. The investor has the option to choose any one of
the four funds- bond, secured, balanced, and growth fund.
This policy has a new feature wherein, the policyholder
can surrender the policy after it completes 3 years both
under single and regular premium and the investor will
not have to pay any surrender charge for it. Free switching
between funds four times every year is permitted. Regular
premium can be paid either in yearly or half yearly installments.
The policyholder can also opt for top-ups in multiples
of Rs.1,000/- without any limit at anytime during the
term of the policy.
Following, the highly liquid nature of ULIPs, the new
norms were introduced by the IRDA. Insurance companies
were given a deadline to either withdraw or modify the
unit linked plans before 30th June 2006. Some of the private
insurers have modified their unit linked plans. For instance,
ICICI Prudential replaced its single premium policy with
Super Lifelink single premium plan. The other insurers
will soon flood the market with the unit-linked plans.
As per the industry sources, there are close to 100 new
ULIPs that will be launched, which of course will be in
the lines of revised IRDA norms.
|
| Top
| Back |
|
 |
| |
There is so much emphasis laid on retirement
planning that you are actually forced to sit back and
think about it. After all why is so much importance given
to it? The answer lies in the question itself, why shouldn’t
you plan for it?
‘Retirement’ is
the non-earning phase of life. You have spent the earning
stage of your life in working and taking care of your
family but what about your own old age. There are many
reasons why one should plan for it. Firstly, as mentioned
earlier there is no income flow. You would have to make
provisions for your own expenses. Moreover, you need to
be prepared with the inflation rate that would prevail
at that time. Say ten years down the line, the amount
that you are paying for a particular commodity may not
be the same. In short, you will have to shell out more
cash for the same product may be twice the amount that
you are paying now. There are many investment vehicles
available that will help you to invest money and reap
the benefits during your retirement age.
As you are quite aware, ‘insurance’, undoubtedly
is a wise option to consider. Apart from this, there is
another option, which is mutual fund that you can explore.
This investment vehicle will help you plan your savings
wisely since with mutual funds you are exposed to a large
variety of options. You can invest in the kind of fund
that suits your risk profile like, growth, debt, balanced,
diversified, ELSS etc.
Below mentioned is a short analysis of Unit Linked Pension
Plans (ULPP) and mutual funds. There are advantages as
well as disadvantages that are associated with both these
tempting offers. Read on to find out.
Investing
in a mutual fund
Similar to a mutual fund scheme, the investor has the
choice of investing in a unit linked pension plan i.e.
through funds. However the investible amount in mutual
funds offers you more flexibility since the individual
can either invest in a lumpsum amount or through Systematic
Investment Planning (SIP) route. However, unlike a one-time
initial charge associated with the ULPP, mutual funds
usually have an entry/exit load on their schemes. Lets
assume, you have invested Rs. 1,00,000 in mutual funds
scheme, the entry load assuming 2.25% would be Rs. 2,250.
So the amount that actually gets invested is Rs. 97,750.
However, the fund management charges (FMC) decreases with
the succession of each year due to which in the long run,
mutual funds spread its costs over a larger corpus and
thus the overall cost of managing the fund gets reduced.
However, it is important to note that the FMC with ULPP
is comparatively less to mutual funds. The FMC on the
ULPP under review is 0.80% throughout the tenure as compared
to the mutual fund FMC, which is in the 1.50%-2.00% range.
The other advantage of investing in a mutual fund scheme
is that in an open open-ended scheme, the individual can
withdraw the entire corpus whenever he wants, which is
not the case with ULPP where only up to one-third of the
maturity proceeds are allowed to be withdrawn. The remaining
two-third amount has to be mandatorily invested in an
annuity from a life insurance company.
Retirement planning is quite essential for your non-earning
phase of life to be filled with peace and tranquility.
So, if you have planned for it just lay back and relax.
Let 'Retire in peace' not just be a slogan. You have the
chance to turn it into reality.
|
| Top
| Back |
|
 |
| |
Have you invested in the stock market
and has the recent downfall of it left you upset? Have
you invested in the funds through unit-linked plans? If
yes, then it’s about time to make use of the ‘switching’
feature, which the plan offers.
However, if you are under the impression that ULIPS have
been badly hit because of the negative performance of
the stock market then you are probably wrong. You might
be surprised to know that such has not been the case with
market-linked plans. ULIP investors are still going strong.
This can be credited to investors’ approach of investing
lower prices in equity, which is meant for long term investing
and not for short-term gains. Many investors have abided
by this fact and it has helped them sail through this
rough storm. Sources point out that individuals who have
invested in equity schemes with short-term goals have
experienced radical fall in their gains. So there is a
lesson to learn in every mistake that is made.
Coming back to the ‘switching’ feature, a
unit linked plan offers you options of four funds, which
are bond, income, balanced and growth fund. Based on the
kind of risk you want to take, select the fund. If you
want to gain higher returns you have to take higher risks
that will come with the equity natured fund i.e. growth
fund. If you are risk averse, you can choose the debt
fund. This fund is least affected during the volatile
performance of the market. The best part of switching
is that many insurers allow upto four switches free of
cost, any additional switching is charged by the insurer.
With the switching option, you can invest in the fund
that best suits the changing situation. Now, if you have
invested in the growth fund, read below to know what is
the best that you can do in such a scenario.
Be prepared in advance for the worst of situation; keep
a check on the performance of your funds at least once
in three months. Consider a switch in the funds if there
is a change in the level of risk you are willing to take
or the performance of the market compels you to do so.
The most effective step that you can do is to keep a tab
your funds, estimate the value in comparisons to other
funds and then take the decision. If the confusion still
persists, consult your insurance advisor, who would be
in a better position to guide you through the rough path.
Further, unlike other financial products, all life insurance
plans come with a 15-day free look feature. This lets
you to return the policy if doesn’t suit your needs
or prospects. So, there’s no better deal that can
come with a market-linked plan.
|
| Top
| Back |
|
 |
 |
| Life v/s Non-Life Insurance |
Mr. Mehra’s storage place
burned down. Meena, his wife, called the insurance
company and said, "We had that storage place
insured for fifty thousand and I want my money."
"Oh! Just a minute, Mrs. Meena, it doesn't
work like that. We will assess the value of the
building and provide you with a new one of comparable
worth." the agent replied.
Mrs. Meena, after a pause, said, "I'd like
to cancel the policy on my husband." |
|
|
Flood insurance
Three guys are fishing in the by the river.
One guy says, "I had a terrible fire; lost everything.
Now the insurance company is paying for everything and
that's why I'm here."
The second guy says, "I had a terrible explosion;
lost everything. Now the insurance company is paying
for everything and that's why I'm here."
The third guy says, "What a coincidence. I had
a terrible flood; lost everything. Now the insurance
company is paying for everything and that's why I'm
here."
The other guys turned to him with confusion and asked,
"Flood? How do you start a flood?" |
| Top
| Back |
|
|
|
|
