Enforcement Directorate conducts raids on Hasan Ali’s Pune residence

Pune: Enforcement Directorate officials today conducted raids at the Koregaon Park house of stud farm owner Hasan Ali Khan, who has been accused of money laundering and tax evasion, a day before the Supreme Court's 8th March deadline to the government to inform it about how it is tackling black money hoarders.

Two teams of the Enforcement Directorate (ED) from Mumbai that came here this morning searched the residence of Mr Khan, who lives at Valentine Society in the posh Koregaon area. Khan, also a real estate consultant, is under the scanner for suspected money laundering and for allegedly transferring cash and valuable assets outside the country by unlawful means and with the help of some foreign nationals, PTI reports.

It has been estimated that he had stashed away over $8 billion in Swiss banks. However, no offence has been registered against Mr Khan by Pune police. Mr Khan has been summoned by the ED to appear in person on 10th March, under the Prevention of Money Laundering Act. It has been reported that be is undergoing medical treatment in Mumbai.

Meanwhile, a report from Kolkata, quoted the Enforcement Directorate as saying that it had conducted raids on the residence of businessman Kashinath Taparia, allegedly an aide of tax evader Hasan Ali Khan. Mr Taparia is the brother of late Priyamvada Birla. His wife is also said to be a party to hawala operations.

Mr Khan appeared before income-tax authorities in Mumbai on 18th February, apparently in connection with notices issued to him on 31 December 2008, for alleged tax evasion on undisclosed funds in several foreign bank accounts, including $8 billion in an account in the Zurich branch of UBS. However, UBS denied any business relationship with him.

Previously, the income-tax department had searched Khan's Koregaon residence in January 2007.

Tax enforcement agencies are trying to locate properties that Mr Khan may have abroad which could be attached or auctioned to extract from him the huge tax liability amounting to about Rs 40,000 crore.

On Thursday, the Supreme Court criticised the central government for not having the "will power" to act against black money hoarders and asked why Mr Khan and others were not subjected to custodial interrogation, despite investigating agencies having sufficient material. "What the hell is going on in this country," the judge asked, and observed that the alleged offenders were a "pampered lot".

Expressing its displeasure over the manner in which Mr Khan and other alleged offenders were given repeated opportunities through adjournments by the ED, the judge said the authorities were "hoodwinking" everybody and wondered whether the same leniency would have been extended to petty offenders.

The Court also indicated that if the government failed to act, it would be compelled to appoint a special officer to supervise the probe against the offenders. The court granted the Centre time till 8th March to declare its position in the matter, failing which it would be constrained to pass appropriate orders.

On Friday, the ED also issued a 'look-out' notice to all airports for Mr Khan, to try and ensure that he does not leave the country.

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Birla Sun Life Foresight ULIP: Is this the start of a new concept in the market?

Birla Sun Life has launched an innovative ULIP. It is a combination of the highest NAV concept along with entry at lowest NAV of that year. How long will it be before other insurers copy it? Will investors really benefit with this unique approach?  

Birla Sun Life Foresight is a new concept that combines an offer of highest NAV (net asset value) approach along with an offer of entry at the lowest NAV of that year to attract the conservative investor. It surely is a unique approach, but investors need to understand the concept before jumping to buy the policy. The concept is applicable only when premiums are paid for five years and the policy remains in force for the policy term of 10 years. It is not going to perform any worse than a 'regular' highest NAV ULIP (unit-linked insurance plan), but the gains will also be limited due to high exposure to debt just like in a highest NAV ULIP. The highest NAV plan is not for those interested in good returns from their insurance.

The highest NAV part is the same as other products wherein the policyholder gets the highest NAV recorded on any day in seven years (say, the 1st calculation). The lowest NAV concept is a separate calculation made for five years wherein the premiums are invested with the lowest NAV of that year. This is to give policyholders the cheapest entry point of the year for their premium. The highest NAV in five years is used to calculate gains with respect to lowest NAV entry of each year for the premium paid (say 2nd calculation). We cannot assume that this 2nd calculation will yield more money than the 1st calculation. This is simply because the duration for the 2nd calculation is five years and 1st calculation is seven years. An investment that is mostly in debt funds will increase its NAV over time. The maturity value at the end of policy term of 10 years is greater of the above two calculations (1st calculation and 2nd calculation) or fund value at the end of the policy.  

On 25th February, Moneylife received an email from a reader who explained her interaction with a Birla Sunlife agent regarding this plan. We assume agents had already started sales even though the official launch of this product was only on 3rd March. The reader mentioned about the highest NAV in seven years combined with the lowest NAV for entry in that year. This is how mis-selling may happen. It is not seven, but five years.

Moneylife explained the highest NAV concept in a cover story, "What is the right life insurance" (22 April 2010) and why these policies are not the best options. (What is the Right Life Insurance?).

The most important point to understand is that insurance companies are guaranteeing NAVs and not returns! Are the two different? Yes. The NAV is a number at a point in time, whereas returns happen over a period of time. For instance, your 10-year plan may have hit an NAV of Rs14 after five years. At that point, it is the highest NAV. This Rs14 is guaranteed for the next five years. What if the NAV remains at Rs14 for the next four years, or goes down to Rs13? You would still get this NAV of Rs14. But Rs14 happens to be just 4% over 10 years!

Birla Sun Life Foresight plan has self-managed and guaranteed options (concept explained above). In the self-managed option, the policyholder has 10 options of varying debt/equity ratio to choose from. The maximum equity exposure is 80% to 100%. The policyholder can switch between different options. Consistent with other highest NAV plans, the insurer reserves the right to have investments in different instruments (debt, equity) in proportion of 0% to 100% for the guaranteed option.

The policyholder can switch from guaranteed option to self-managed option, but not vice-versa. In that case the policyholder loses the guaranteed benefit.

The minimum premium for the Foresight plan is a hefty Rs2lakh for a single premium or Rs1 lakh for regular premium of 5-pay. The policy term is 10 years.

The premium allocation charge (PAC) is 5% of the premium. There is no policy administration charge. There is a fund management charge of 1% to 1.35% p.a. of the fund value and an investment guarantee charge of 0.25% p.a. (single premium) or 0.40% p.a. (regular 5-pay). The overall charges are in line with the average charges for other new ULIPs. The mortality charges vary with the age and given in the tables, seem to be on higher side.

On the unfortunate demise of the life insured prior to maturity, the insurer shall pay to the nominee the basic sum assured plus the fund value as of the date of intimation of death.

The minimum sum assured under the regular 5-pay policies for age (at entry) below 45 years is 10 times the annualised premium, while it is 7 times the annualised premium for others. In case of single-premium policies, for age (at entry) below 45 years, the minimum sum assured is 1.25 times the single premium, while it is 1.10 times the single premium for others.

Read our recent insurance articles:

Insurance: Entering by the back door

Life insurance business nose-dives in crucial month of January

LIC Samridhi Plus offers highest NAV-a new plan based on an old idea

Bajaj Allianz Cash Rich: A traditional plan can never make you cash rich

IDBI Federal Retiresurance - Aims to revive dwindling pension market

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COMMENTS

Veeravendhan

5 years ago

I have a very bad experience with Brila sun life service ULIP. It' s too bad then LIC, I will never recommend any of my friends. After surrendering to get the money it took a month still I have not received, after contacting with customer care its too slow to process.
Any new customer don't go to Brila Sunlifer ULIP.

Manoja

6 years ago

The entire focus of various articles which have come up in Money Life has been one on the returns generated by these ULIPs, the admin costs involved and the commission paid out to the agents. When do these people realise that ULIPs are not mere money making machines for the investors?

Take for instance this very article.

No information on how much is the maximum insurance cover that is available to people in various age brackets.

No information on how much would be the probable mortality charges for people in different age groups for the maximum and minimum life cover allowed under this plan. A general indicative table would have been good.

Excessive focus on returns alone is not good while discussing the pros and cons of ULIP. There are several other factors which needs to be brought into picture for really understanding any plan under ULIP.

REPLY

Keshav B Bhat

In Reply to Manoja 6 years ago

Dear Sir,

What r u expecting the insurance co will bear all expances and te customer will get everything?
In any insurance product all the money invested are maintained in the concerned fund and the Insurance company is managing the fund and takes all the charges require to manage it.
If u see as our Govt, insurance companies also make the product publications in such a way the misssellers will enough loopholes to propogate as they want or as the customer want to hear it. so it is alwayas customer who has to understand or misunderstand the product and make his/her decission to buy or not to buy. Every one makes makes tall claims saying this product is best that product is bad, but the fact remains the same if some body wants to buy any product n he or she has to decide it only focussing hes/her needsn goals and affordability and not it is good for someone else.

Naina

In Reply to Manoja 6 years ago

Of late Raj Pradhan has become very arrogant.His comments to you on your excellent article on ULIPs was in bad taste.I hope Sucheta and Debashish will take note of this.While reviewing new plans we expect decoding, demystification and thought provoking analysis from this site.

Naina

6 years ago

In this entire discussion we are only taking about so-called RETURNS/HIGHEST NAV. This product has HIGHEST mortality charges for no reason.I am at loss to understand when these type of products have tenure of ONLY 10 years the mortality charges should be LOWEST especially because in short duration term plans the premium is low compared to long duration term plan for the same sum assured.
These type of plans can simply be termed as "ORGANISED LOOT".
If these plans are indeed viable then Mutual funds should launch CLOSE-ENDED schemes as IRDA does not have sufficient experience as far as TRANSPARENCY of funds collected by life insurance companies are concerned.

REPLY

Lakshay

In Reply to Naina 6 years ago

I agree with you about your view on mortality charges and about mutual funds. I am certified by SEBI and had given exam of Mutual Fund one of the toughest exam of financial products as it is now taken by NISM. It is really shame full that ULIP's were sold as investing in mutual fund I am also against ULIP's and also they had put a black sign on insurance industry. I had studied this foreseight plan and in the beginning I was thinking that this is too going to be another ULIP which will give nothing out of it, after the study my mind was completely change about this plan, as this plan is giving the guaranteed benefit of return in the downward market, if the calculations are understand properly which is not hard to understand but remember not from the insurance agent. Although there is a mortality charges which are high as compared with normal term plan but the fund allocation charges are not as traditional ULIP, but this plan is one of its kind which will give you a guaranteed win win situation......

Raj Pradhan

In Reply to Naina 6 years ago

I agree. The mortality charges in this plan are hefty. We mentioned about it in the article. Customers do not compare mortality charges across plans to know if they are taken for a ride. Regular customer does not even know how much part of premium is going for insurance and how much is actually going to be invested.

Hari

In Reply to Raj Pradhan 4 years ago

I talked to a sales guy about the high mortality charges, and apparently, since it is only charged for the first 5 years, but effective over 10 years, it equates to only half of what is charged. I looked at the quote for 3L/yr for a 39yr old and it is Rs.13,620. Right now Aviva i-Life quote is Rs.6,756, which means, the premium is pretty comparable, though not the cheapest. However, I would have preferred an option which had no bundled term life, since I can plan for a 30yr policy independently and lock in the rate.

BTW, I was also told by the sales guy that if you exit the fund early, then you would get back the excess premium you prepaid. E.g., if you leave after the 6th year, you will get back 40% of the premium, since you already paid for the full 10yr.

Naina

In Reply to Raj Pradhan 6 years ago

The mortality charges are higher than premium of their own HNI plan[Online line term plans offered by other Insurers are much cheaper] I am reminded of comments made by Supreme Court recently"WHAT THE HELL IS GOING ON". Some companies have recently launched single premium plans as financial year is coming to and end where is very less insurance cover.If such plans are cleared than let devil gets its due[Bhave was right in banning some life insurance companies from selling ULIPs]

Deepak Khemani

6 years ago

Kudos to BSL Insurance for introducing a product which even a very few educated advisors can understand let alone the poor unsuspecting Investor who will sign on the dotted line without even bothering to ask questions from his advisor, who may promise him something but get a totally different product altogether. IRDA instead of printing ads about ULIPS should NOT allow the introduction of such complicated products which instead of making financial products simpler for the common man makes it all the more difficult to understand Insurance products in general and ULIPS in particular.

REPLY

Raj Pradhan

In Reply to Deepak Khemani 6 years ago

I agree, the benefit calculation is not easy for regular investor to understand. The same is applicable to so many products including traditional and ulip products for benefits and charges calculations.

Melvin Joseph

6 years ago

How many of our customers can buy this product after understanding this product? How many of the advisors/managers can understand and explain this concept? Are we complicating things in a market, where financial liiteracy is very poor. Or the idea is to confuse the customer and sell.
whaever said and done,everybody has to understand the diffence between guaranteed NAV and guaranteed returns!

REPLY

XYxs

In Reply to Melvin Joseph 6 years ago

People, please call an advisor, try an understand the product, its not as complicated, its easy to understand and beneficial in most negative situations. charges are there. but this is the most beneficial product for the most idiot person also who has no idea about any thing and blabbers a lot like you. so please get a reality check and do not try to get unnecessary attention.

KESHAV B BHAT

6 years ago

I wonder how the lowest NAV for the year can be given to any investor?
while investing even the fund manager also can not say on what NAV the units will be given as the NAV is calculated after taking in to all inflows and outflows(assets and liablities) for the day the inflow of fund will not be taken in to account aaaaaaaafter cut off time. and inflow can not be backdated. so how come this is allowed is it not a fraud? where are the protectors of investors gone?

REPLY

Raj Pradhan

In Reply to KESHAV B BHAT 6 years ago

It will not back date it. It will just make calculation with respect to the lowest NAV in the year premium paid + highest NAV in 5 years. The policy duration is 10 years. The calculation for The other calculation is highest NAV for 7 years. The highest of the three calculations will be taken. As explained in article, it is not necessary that lowest + highest NAV of 5 years will yield highest value. UNDERSTAND THE DIFFERENT DURATIONS IN THE THREE CALCULATIONS.

Keshav B Bhat

In Reply to Raj Pradhan 6 years ago

Dear Sir,
But can u explain, how u can do it as if the day u invesed say the NAV is RS 14 and the years Lowest NAV is Rs 13 and the Rs 13 nav is applied is it not cheating the other investors who have the investment in the fund?. Further can u explain how two navs can be applicabe for the same day? how this accouting can be transperant?

Raj Pradhan

In Reply to Keshav B Bhat 6 years ago

The concept of lowest NAV entry + highest NAV is applicable for all policyholders of this plan. i.e. those who want guaranteed option under this plan. There is no overlap with other plans. No question of cheating anyone.

Your question on transparency is valid. The lowest NAV can happen before your investment date in the year or later. It will have to be separate calculation (similar to 'What if' situation) for five premium payments and highest NAV in five years to get the returns and compare it with other 2 calculations (highest NAV of 7 years or fund value at end of 10 years).

Deepak Khemani

6 years ago

Will somebody please explain the concept of Lowest NAV. Does this mean that if a premium is paid on 1st DEC and the lowest NAV recorded that year was on 1st JUNE then will units be allotted retrospectively that is on 1st June price?
Does this not go against the basic logic of market where we are told that you can never time the market, that you can never catch the low and the high in the market!

REPLY

Raj Pradhan

In Reply to Deepak Khemani 6 years ago

Yes, as per the product brochure. Remember, the policy duration is 10 years. The calculation for lowest + highest NAV is only for 5 years. The other calculation is highest NAV for 7 years. The highest of the three calculations will be taken. As explained in article, it is not necessary that lowest + highest NAV of 5 years will yield highest value. UNDERSTAND THE DIFFERENT DURATIONS IN THE THREE CALCULATIONS.

Keshav B Bhat

In Reply to Raj Pradhan 6 years ago

Dear Sir,
Returns and yeilds depends on funds performance which every one understands. The funds are run on behalf of the investors in the fund and u can not give differant NAV for differant individuals on the same day and if given i feel it amounts cheating. As all know years lowest or highest NAV can be given only after the complition of the year, so u mean the mony will be kept idle till the year end as the units can not be allocated? Or r u going to run new fund for each instalment of premium paid?

Raj Pradhan

In Reply to Keshav B Bhat 6 years ago

Where is the question of different NAV for different individuals? No question of keeping money idle till the year too.

Units will be allocated based on NAV on that date. I explained that the calculation of entry at lowest NAV will have to be separate calculation if policyholders pays five premiums and stays for 10 years in the policy. At end of policy term (10 years), the (what if?) calculation will have to be made to recalculate the units for each year (5 years) and calculate returns with respect to highest NAV in 5 years.

Kotak Gold Fund, a me-too product

After Reliance launched its innovative gold savings fund, Kotak has launched an identical product

The Kotak Gold Fund launch comes within days of the launch of Reliance Gold Savings Fund, the first gold fund-of-funds in the industry. (Reliance Gold Savings Fund has a strange target group).
 
Similar to Reliance Gold Savings Fund, this is another fund-of-fund kind of scheme and investors must understand this offer very clearly. It's a gold ETF (exchange traded fund) based fund-of-fund scheme which will invest only in Kotak gold ETFs. The New Fund Offer (NFO) opens on 4th March and closes on 18th March.

Apart from being able to invest without a demat account, these funds help retail investors invest smaller sums. Reliance had a minimum investment limit of Rs100 per month in its gold savings fund. Kotak allows investors to start their investment with Rs1,000 per month through an SIP (systematic investment plan) route. This genre of gold funds generally bears an expense ratio of 1.5%.

Returns from gold exchange traded funds feeder funds do not attract wealth tax, as is the case with physical gold transactions. Not to be left behind, even stockbrokers have begun launching gold fund-of-funds using their portfolio management scheme licences.

Destimoney Securities has launched a structured gold reserve fund, which aims to protect investors from gold price fluctuations.

At a time when gold is making new highs, asset managers and brokers are queuing up to launch gold saving schemes which will enable retail investors to park their money in gold ETFs without demat accounts and through SIPs. Reliance tried to reach a common class of people who did not have demat accounts and were interested in investing in gold. It targeted the medium class which resembles a majority of the population. Obviously the other fund houses cannot lag behind. So Kotak MF started the rally and there will be many more to join.

As pointed out by Moneylife in an article dated 18 February 2011, "The price of gold has gone up six times in the last 10 years. Any asset that has gone up so much for so long a time carries a huge risk of a crash. How will a risk-averse investor react to an asset that can crash suddenly?"

Fund companies and intermediaries don't usually point out these kinds of risks in their offer documents.

User

COMMENTS

Sundaram

6 years ago

Kotak's is a copy-cat version of Reliance Gold FoF. I understand that Quantum has applied to SEBI for approval of such a product and in case they charge a lesser expense ratio than 1.5%, it may make sense to go with them (that is,if one wishes to invest in such a product)

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