Really unfair

I am a subscriber of Moneylife magazine since long. The newsletter is also good; I never miss reading them. I appreciate the efforts of Moneylife Foundation to throw light on many investors’ issues and other issues. I would like to share my experience with TataSky which may also be the case of many other DTH subscribers.

 
Please note that though the amount involved is meagre, the tactics with which the customers are looted are really unfair.
 
I am a TataSky subscriber with Subscription ID 1025932649. From 15 October 2012 to 29 October 2012, I wanted to opt for a 15-day voluntary suspension of service offered by TataSky, once in a year. However, during the process of the above request, the customer care department also activated the ‘Fun Learning Pack’, without my consent, or knowledge, from 15th October. An amount of Rs48.84 was deducted from my balance during October and November 2012 and the nominal available balance was fully exhausted.
 
My annual subscription is usually, due for renewal at the end of December. However since my account showed NIL balance, I started receiving messages from the beginning of December that all services will be discontinued, if not recharged in time. 
 
While checking the due dates and status of subscription of channel packs, I came to know that an unwanted service of Fun Learning Pack was activated earlier from 15 October 2012, without my knowledge, and I was also charged for it. I found it difficult even to deactivate that unwanted extra service which I never used. It was hard to convince them that in no case, a person would also request for a service on the same day on which he requests for a temporary suspension (since I was going on a vacation) and, hence, activation of unwanted service is quite unfair. 
 
I also told them that I am not going to recharge for any amount and my service must continue up to the regular renewal date. After many long calls for a couple of days Rs9/- was re-credited to my A/c on 21st December (so that my services could last up to my usual renewal date of 27th December). Also, during the past one year, on various occasions of renewal of other channel packs, the same service was offered to me as free, for one month and chargeable thereafter, if not deactivated by subscriber and I could get rid of it with great difficulty.     
 
The reason, why I want to share this incident with Moneylife readers is that similar unfair practices are also used by mobile service-providers offering some download service or caller tune, etc, free for one month, and chargeable thereafter, if you do not discontinue it. It is not possible to track it; if one does not want the service or does not want to pay for it, one needs to initiate deactivation of the service after the free-look period. The services are offered continuously and the customer comes to know only when the amount is billed or deducted from his balance.
 
Mobile service-providers also send ‘Flash Messages’, offering some download, etc. The service is activated just with a click on the flash message. It is even thrust upon customers who use simple low-range handsets that do not even support such service.
 
I am sure Moneylife is a proper forum that can address similar unfair practices with DTH and mobile service-providers as well as the regulator.
Viral Gandhi, Valsad, by email
 
Patronising cooperative banks
Moneylife (27 December 2012) carried a news item under ‘Your Money’: two-thirds of all bank deposits do not have insurance cover. Deposit insurance cover was introduced under the Deposit Insurance and Credit Guarantee Corporation (DIGC) Act 1961, covering all deposits in the name of an individual currently, up to a limit of Rs1 lakh. Further, it said that the balance of DIGC’s deposit insurance fund had Rs30,000 crore, annual inflow of Rs5,300 crore against a demand of only Rs287 crore. 
 
It is 51 years since this scheme began. Given the rate of inflation and the resultant value of the rupee, surely, the coverage of up to Rs1 lakh (decided in 1993) is a pittance! Today, even a chaprasi in any government office, or bank, or even in the private sector, would be earning Rs10,000 per month after 30 years of service. On retirement, therefore, he could certainly cobble up anywhere between Rs7 lakh to Rs10 lakh, inclusive of his PF (provident fund), gratuity, leave salary, savings, etc. If he has to live on the income of this corpus, surely, his deposits need protection. This is required especially since many of them patronise cooperative banks, as they give a marginally higher interest rate on deposits, but are vulnerable to failures.
 
Besides, with senior citizens constantly managing a challenging environment of having to live within the income from their frozen corpus, protection of a significant part of their retirement corpus in banks would help prevent a financial calamity, given the precarious state of many of the financial institutions. 
 
The Reserve Bank of India should, therefore, take immediate steps to enhance this cover limit to Rs10 lakh. I would urge Moneylife to send a petition on behalf of all senior citizens and bank deposit-holders in this regard.
SA Narayan, by email
 
Price discrepancy
I have recently subscribed to Moneylife and I find it really informative, educational and up-to-date. Still, I am a bit confused with the data provided in Street Beat and Stockgrader sections due to which it is difficult to track the performance and ensure necessary action.
 
In the PDF version of Moneylife (27 December 2012) in Street Beat, you have mentioned that Atul Auto has given 19% return while Venus Remedies has given 11% results. Both the stocks have entered in your list on 29th November. However, if I take the data from moneycontrol, on the date of entry and date of issue, you have following data:
29th November to 14th December (when digital version of the magazine was received) —% return:
Atul Auto moved up from Rs161.65 to Rs170.80 with a return of 5%.
Venus Remedies moved up from Rs279.75 to Rs283.30 with a return of 4%.
I am sure if we use any other resource, the data will be more or less same. Hence, my suggestion is that while mentioning the stock price, Moneylife should mention the date of entry; while mentioning the returns, Moneylife should mention the date up to which returns have been calculated. This will give better clarity and also ensure that the data matches the results actually received by the investor.
 
I hope that I will be able to see this incorporated in the near future in Moneylife.
Vivek Agarwal, by email 
 
The price to be taken for checking the performance of a particular stock is either the price mentioned in the issue, or the price prevailing on the last trading day of the week, when the issue hits the stand. The issue dated 29 November 2012 hit the news stand on 15 November 2012. Hence, we took the closing price of 16 November 2012 as the ‘enter at’ price. – Editor
 
Customers are made to run
This with regard to “Banking services is a right of every individual: FM. Will RBI enforce this right for the benefit of the banking public?” by Gurpur. I had an account with Axis Bank, Ghatkopar (Mumbai). I moved to Bengaluru and requested a change of address in their systems. I closed the account in November 2012 and the balance of Rs121 in my account (thankfully, I withdrew the remaining amount using my ATM card) was sent to me after multiple reminders and calls to them. The Bank sent me a local cheque of Mumbai to Bengaluru. Now, I have to incur a collection charge to encash this cheque. A simple check by the Bank and issuing a DD (demand draft) would have saved my time, effort and money. I am sure this is the case with all the banks and the customers are made to run from pillar to post unnecessarily.
M Sudheer
 
Collection costs
This is with regard to “NBFCs allowed to migrate to new standard cheques till March 2013.” What if the borrower refuses? The NBFC (non-banking finance company) is stuck. Collection costs will go up.
R Balakrishnan
 
‘Misuse of the scheme’
This is with regard to “Rajiv Gandhi Jeevandayee Arogya Yojana – How the hospitals and insurance company may profit” by Raj Pradhan. Most hospitals, which are empanelled, are from the private sector. There is allegedly ‘a lot of misuse of this scheme’ by these hospitals, with unnecessary operations being carried out.
Thomas Kuruvilla
 
Eyes wide open
This is with regard to “Credibility of primary markets at stake: SEBI chief.” That is the nature of the beast. Those who apply in IPOs need to do so with their eyes wide open. Nobody questions the credentials of a third-grade company if the price keeps going up after listing. The odds of making money, on listing, are not very different from the odds of making money in a casino.
Nilesh Kamerkar

User

Retirement planning: Why you should avoid the New Pension System

A retirement product should be less volatile, small on charges, big on tax benefits and flexible after retirement. What does the NPS score on these parameters?

The New Pension System (NPS) was compulsorily thrust upon government employees in 2004. It has also been thrown open for subscription to the public four years back, with some incentives from the Government of India. All subscribers registered in FY2010-11 were eligible for getting a contribution of Rs1,000 per year from the government for four years beginning the same year. The NPS is being pushed as an ideal retirement planning product. Is it?
 

Volatile returns not acceptable for a pension planning product

Moneylife had earlier written on how returns from NPS are hugely volatile, even from bond schemes. An analysis of the performance of pension fund managers in the New Pension System (NPS) shows huge volatility in the returns of various schemes and this could put off many savers.

Over the period 2009-11, returns of the schemes for the unorganised sector have varied from 23.51% to -3.15%. This surprising volatility in the returns of NPS, when the investments are supposed to be strait-jacketed, has scared away savers, who simply cannot associate volatility with a pension plan. This factor alone has ensured that NPS for the voluntary sector has remained a non-starter. What ultimately happens would be known only after 30-odd years.
 

While it is true that NPS returns are market-determined and therefore bound to be volatile, Indian savers, who largely shun equities and mutual funds, would not want to be part of something like this, for a very long time.
 

High charges for small investors kill the investable chunk

The next issue is the bigger proportional costs for smaller investor. Other than the asset servicing charges and the Investment management fee which are calculated on a percentage basis, all other charges are fixed per transaction. This would take away a large chunk of money from small time investors.
 

The table of charges given in the original draft offer document shows that if an investor invests Rs6,000 annually in a single investment, a total of Rs311.50 would be charged, which is over 5.1% of the amount to be invested in the first year. This is the most conservative estimate of per transaction charges. It would increase the overall charges, if the number of transactions made is more than one.
 

Arbitrarily increased charges fuel instability

After the initial euphoria of charges being low enough, the Pension Fund Regulatory & Development Authority (PFRDA) increased the Investment Management fee from 0.0009% to 0.25% of the investment made. This makes it a total of Rs326, as charges for investing the same Rs6,000 in the first year, that is, 5.4% of the amount to be invested, most conservatively. Besides that, PFRDA also permitted the fund managers to revise Investment Management Fee once a year, each year. To bring the charges down to 1% of the amount to be invested, you will have to invest a minimum if Rs31,000 in the first year (most conservatively, to save on costs per transaction). Anything below that would be costly in comparison with comparable products.
 

Annuity ties down post retirement income
 

The next worrisome point? NPS does not let you withdraw all your earnings—ever. According to the offer document of the NPS, “On attaining the age of 60 years, you will be required to compulsorily annuitize at least 40% of your pension wealth and the remaining 60% can be withdrawn as a lump sum or in a phased manner; in case, you opt for a phased withdrawal and if you withdraw any time before 60 years of age, you will have to compulsorily annuitize 80% of your accumulated pension wealth. The remaining 20% can be withdrawn as a lump sum.”  When you retire, would you want to invest compulsorily in the annuity product that gives you a taxable return of 7% at an average?
 

Taxable withdrawal reduces money when it is required the most
 

At present, the tax treatment for contribution made in Tier I account is EET, “Exempted-Exempted-Taxed” i.e. the amount contributed is entitled for deduction from gross total income upto Rs1 lakh under Sec 80C. The appreciation accrued on the contribution and the amount used by the subscriber to buy the annuity is not taxable, only the amount withdrawn by the subscriber after the age of 60 years is taxable. NPS is proposed to be included under EEE category.
 

More than three years ago, we were excited by the NPS. But continuous tinkering and no PFRDA Act have changed the scenario. Unless the government addresses all the issues we have detailed, stay away from NPS.

User

COMMENTS

jaideep shirali

4 years ago

One correction in my earlier comment, is "As a tax payer, I am not agreeable to pay fixed returns to babus, when inefficiency and corruption is what I am rewarded with."

jaideep shirali

4 years ago

To me, global trends indicate that in growing economies like India, inflation will move downwards. Interest rates would follow, I have seen fixed deposit rates move from 18% to around 9% now. I firmly believe in the NPS, as pure debt schemes will yield even less going forward, as rates drop. Secondly, the precarious finances of USA & Euro countries show that increasing govt expenditure, including pension bills,can ruin an economy. As a tax payer, I am not agreeable to pay fixed returns to babus, when efficiency and corruption is what I am rewarded with. Equities offer better long term returns and NPS has different options in this regard. If NPS has defects, they must and will be rectified. We moved from physical to e-banking, but not overnight, is'nt it ? Many opinions I have read seem grounded in the past, rather than looking at the future.

D A Bhatt

4 years ago

I am of a personal opinion that all ULFPs( Unit Link Financial Products)should be banned in our country. They are rotten seeds of US/WESTERN economy wrongly implanted in our economy due to non honest liberal views of our financial authorities.In fact they are designed for idle and non growing and non-inflating economies. They are designed for less than net saving bank account return by actuaries. ULFPs procedures and practices flourishes and protects launders and jugglers at cost of Innocent and ignorant middle class clients. As a pension product they are totally misfit.

R Nandy

4 years ago

I agree with what the PFRDA officer had to say regarding NPS.

I will add some other important points:

(1)The CRA charge or Rs 225 should not be seen from the first year perspective.It should rather be seen from a long term perspective.The charge based on the corpus an average middle class person will accumulate is minuscule.There is NPS lite for low earners.

(2)0.25% expense ratio cap for the AUM is a welcome change as the PoP or Fund Managers were not interested in popularizing the product.There might be more interest in the product now.

(3)The debt part is tax free in accumulation stage which is not true
for MF.

(4)Annuity as a product is not clearly understood in India.Annuity
can't be compared with a debt or a equity product nor can the returns
be compared. It is more of a debt product with insurance inbuilt for
guaranteed returns till death(in one variant).So,it is but natural that the annuity return and Tax treatment is akin to a debt product. If EEE comes,well and good.If not,there is nothing to grudge.

Essentially,NPS is a product India was waiting for.Accumulate for
working years with some REAL rate of return and buy an annuity after
retirement.No headache of managing money or rebalancing.

REPLY

Debashis Basu

In Reply to R Nandy 4 years ago

You are singing praises of annuity which you yourself say is like a debt product. And as a debt product how well does it compare with the returns from bank FDs -- at a time when you need the income, that is, at an old age?

Pankaj Gera CFA CFP

4 years ago

No doubt the recent in charges, compulsory annuity at maturity, EET status has taken some sheen out of NPS. However evaluation needs to be person specific. Retirement plan consis of two phases Accumulation Phase & Distribution phase. Strategy for both phase needs to be different. Strategy for distribution phase should be decided 1-2 years before retirement. What other options are available during Accumulation phase? Average of MF folio is 3 years and hence MF have so far not been effective as long term investment alternative. PPF/PF have longer life but their return hardly beats inflation. There are no right or wrong answer.. Thanks Pankaj Gera, CFA (ICFAI), CFP - Gera Wealth Creators

REPLY

Chandanbir

In Reply to Pankaj Gera CFA CFP 4 years ago

Very right Mr Gera. NPS neither lets the investor decide his future in the accumulation phase, nor in the distribution phase. Throughout the accumulation phase, the portfolio remains opaque and investors have limited choice of only three schemes. In the distribution phase, investors will not be paid out their full earnings-their 'right', and over and above that, NPS authorities require purchasing annuities from among service providers of their choice. even if PPF/PF gives lower returns, i would atleast be sure of what amount i would get at retirement, and would now what to do next to beat inflation....in NPS, I would be left in deep sea, surely not what i expect when I am old.

Naveen Fernandes

4 years ago

There was neither good faith, nor honest thinking in the NPS. A compulsory DP at NSDL for NPS is dishonest (any existing DP account would have sufficed). Compulsory 4 deposits a year, without electronic transfer (now rectified) suggested the authorities are from the stone ages. Unilateral hiking of charges, without an exit option is illegal and immoral. Clarity in the portfolio is lacking. I have not seen credit of the Rs. 1,000 promised in the budget. The scheme and its management stinks.

REPLY

D A Bhatt

In Reply to Naveen Fernandes 4 years ago

I am of opinion that Mr. N. Fernandes is totally correct. NPS authorities and PFRDA should clarify their stand and reasons for increasing levies without taking subscriber's consent and without providing options. Also why they have not credited government subsidy of Rs. 1000/- P.A. every year to every private subscribers who are deprived of EPF, EPS and CPF schemes.

Debashis Basu

In Reply to D A Bhatt 4 years ago

NPS is a sarkari financial product. You know what that means. It will be messily constructed, mindlessly implemented and highighhandedly tinkered with by all-knowing babus who have no truck with the reality faced by the savers

D A Bhatt

4 years ago

In spite of my reminder, your honour has not uploaded my reply to Ms Mamta Rohit's article. This is a matter of regret.

REPLY

Sucheta Dalal

In Reply to D A Bhatt 4 years ago

the reply can be uploaded on your own without intervention from Moneylife

MDT

In Reply to D A Bhatt 4 years ago

Sir,
You can click on the reply link below the comment to post your views. All comments, replies are posted automatically on this site.
Thanks,
Moneylife Team

D A Bhatt

4 years ago

Reply to a particular comment may also be uploaded as it is ment for readers information and education.

D A Bhatt

4 years ago

I am surprised to learn that even after 8 years; NPS is a heterogeneous scheme and a unit linked financial product has been termed as a pension scheme. Even annuity they are going to offer at the age of 60 years is going to be much lower than senior citizen's legal entitlements.

Sunil Kolte

4 years ago

Many many thanks Ms Mamta for restoring my shaken confidence. I have been regularly investing in NPS since inception with a big chunk of my savings. Articles like these should be really researched before making public. Also previous comment by Mr Joshi is based on lots of assumptions. Sunil Kolte

Mamta Rohit

4 years ago

1. The article, without the authors by-line appears to have been based on a complete misunderstanding or lack of appreciation of the fundamentals of NPS, as borne out by the attributions of availability of the government subsidy of Rs 1000/- to all the NPS subscribers, whereas it is only applicable to Swavalamban Scheme of the economically deprived. NPS subscribers do not get any subsidy – only marker related returns.

2. The returns of the last one year ending 30th Sept 2012 have outperformed the market as is evident from the following:-

Scheme Average Returns by Pension Fund Managers
Equity (E) 14.52%
Corporate Debt (C) 14.17%
Government Debt (G) 10.82%

3. Unfortunately the author has not done complete home-work on charges as well which have been since reduced. The latest CRA charges applicable to NPS subscribers are Rs 225/- reduced from Rs 280/-

4. Even after taking the upper ceiling of AUM fee of 0.25% p.a. and including all other opening, handling and administrative charges, the overall charges are below 0.50% p.a. This is way below the charges of other financial products not only in the Indian market but also when compared to international pension market making NPS one of the lowest cost pension product in the market. The author (unknown) has talked of “high” NPS charges without comparing the charges to financial products like banking deposits (charges by way of NIM exceeding 3% p.a.), mutual funds (charges between 2-3.5% p.a.) and life insurance company products averaging 8% p.a over life of the product. The overall charges of less than 0.50% p.a in NPS is one of the reasons for the returns of NPS outperforming the market.

5. Annuitisation only helps the retired person tide over his insecurities in later part of life. The return on annuity is not fixed and would depend on the type of annuity provided by Annuity Service Providers (ASPs) and the subscriber will have a choice of selecting the annuity service providers from the IRDA regulated empanelled ASPs with PFRDA.

6. Under DTC the tax treatment for NPS is proposed under EEE and it compares well with any best financial product in the market.

7. No mention has been made for the unique tax treatment for NPS contributions – the employer contribution upto 10% of salary (Basic+DA) being exempt u/s 80 CCD(ii) outside the One Lakh limit of u/s 80C, a treatment enjoyed exclusively for NPS and no other financial product.

8. No mention has also been mentioned of technology driven NPS where the subscriber can view his PRAN account online 24X7, as also complete portability across employers and geographies.

9. We would strongly urge the author (unknown) to get his/her facts right before embarking on passing judgements over the most superior savings product available in the country today

Ms Mamta Rohit (PFRDA)

REPLY

Debashis Basu

In Reply to Mamta Rohit 4 years ago

1. We know very well that the silly scheme of Swabalamban was meant for the weaker sections. We mentioned it ourselves several times. (Please see http://tinyurl.com/adkjtqm ). It was an error to mention that all subscribers were entitled to it.
2. You have not contradicted the fact that returns from NPS is volatile; returns are much volatile in comparison to the tradition pension scheme. Besides, everybody know that one year return and that too on a point to point basis is completely misleading. Please do some reading on how to calculate returns more fairly.
3. The information on charges has been taken from the offer document provided on the PFRDA website as well as on the Central Record Keeping Agency for National Pension System. On both official and publicly available documents, charges they still show as Rs 280.
PFRDA has a habit of focusing on the irrelevant things and not one of the most important aspects - an attractive easily navigable and UPDATED website. You have a right to point out other people's mistakes only when you communicate accurately to the world -- which, given your designation, seems to be part of your job.
4. The article talks about the characteristic arbitrariness that has been introduced into the product by the regulator, by allowing fund managers to revise Investment Management Fees every year, if they ‘wish’ to. This is a scandal. That is the reason the article contains calculations for both-the upper limit of 0.25% and the lower limit, 0.0009%. Besides that, the article clearly conveys that the charges are ‘high’ for those who invest small amounts in the product. You seem to conveniently ignore the context.
5.Your defence of NPS is understandable because you are being paid to do so. But please do not lecture us about the merits of annuities. If you want to educate yourself about how terrible Indian annuity products are, please read Moneylife regularly. The fact is after singing praises of NPS vis-a-vis insurance, you are delivering a lifelong saver of NPS into the jaws of an insurance company! Why would a retired individual want to purchase annuity if he/she wants non-cumulative fixed deposits and earn a fixed, decent interest rate? Or else, if he/she desires a higher return, why would he/she not want to buy bonds instead? A substantial part of the gains of NPS will be lost in the losses of annuities for someone living till 80. Please do some calculations.
6. The tax treatment information has been taken from the PFRDA website.It mentions “NPS is covered under the Income Tax Act, 1961 for tax benefits. Currently NPS has ‘Exempt Exempt-Taxation’ (EET) status where
• Investment up to 1 Lakh in Tier I account is exempted u/s 80C of IT Act
• Withdrawal are subject to tax
However, as per the Proposed Direct Tax Code (DTC), NPS will have Exempt-Exempt-Exempt (EEE) status, which means that there would be no tax at the time of withdrawal.”
The worst part…..? ”Investment made under Tier II account does not entitle ANY exemption on tax.”
The last time we checked, the Direct Tax Code was proposed in 2010 and is still not implemented.
7. No mention has been made of CCD (ii) because it is an option for the employer, not for the employee. By the way how many employers are offering 80 CCD (ii)?
8. Technology is an essential component of EPFO/MF/Insurance... every financial product. Your claim of technology is akin to banks boasting of the use of computers. We are well past that stage. Although we can say for sure that PFRDA is 10 years behind in the Internet Age, given the quality of your website and the speed with which data is updated.
9. We would strongly urge you to set your own house in order first.

Now that we know you exist, we will be happy to send you a set of questions on the functioning of NPS and we do hope you will try to reply honestly. Look forward to interacting with you.

vivek sharma

In Reply to Mamta Rohit 4 years ago

Hi Ms.Mamta Rohit,

I feel that more than the author, you are trying to mislead the readers. Let me state some facts for you.

1) You write that in equity, the NPS has given 14.53% return for the year ending 30th Sep,2012. Please note that from 30-Sep-2011 to 30-Sep-2012, Sensex itself had generated mote than 14% return so a passive investor would also have generated more than 14% return. What is so great about NPS return? (Please refer Sensex return on bseindia.com)

2) DTC is still a dream. How can you say that EEE will continue to be there to NPS.Aren't you speculating?

3)I will prefer to compare charge of NPS to a PPF or a VPF contribution which is more suitable example of retirement corpus creation. Why are you comparing NPS to a mutual fund or insurance?

4)An investor should be allowed to handle his retirement corpus that he has created. Why to tie him upto restricted annuity service providers.NPS is restricting the scope of return for investors?

5) What a big deal in viewing a statement online. Today people live their life online.

6) The article may have some factual errors, but your response is definitely more misleading than the article.

Please ensure that you write the facts and not try to pitch a product just because you represent an organisation.

vivek sharma

In Reply to Mamta Rohit 4 years ago

Hi Ms.Mamta Rohit,

I feel that more than the author, you are trying to mislead the readers. Let me state some facts for you.

1) You write that in equity, the NPS has given 14.53% return for the year ending 30th Sep,2012. Please note that from 30-Sep-2011 to 30-Sep-2012, Sensex itself had generated mote than 14% return so a passive investor would also have generated more than 14% return. What is so great about NPS return? (Please refer Sensex return on bseindia.com)

2) DTC is still a dream. How can you say that EEE will continue to be there to NPS.Aren't you speculating?

3)I will prefer to compare charge of NPS to a PPF or a VPF contribution which is more suitable example of retirement corpus creation. Why are you comparing NPS to a mutual fund or insurance?

4)An investor should be allowed to handle his retirement corpus that he has created. Why to tie him upto restricted annuity service providers.NPS is restricting the scope of return for investors?

5) What a big deal in viewing a statement online. Today people live their life online.

6) The article may have some factual errors, but your response is definitely more misleading than the article.

Please ensure that you write the facts and not try to pitch a product just because you represent an organisation.

D A Bhatt

In Reply to Mamta Rohit 4 years ago

NPS authorities and CRA has reduced AMC as per promise in offer document. But it has increased pop-sp charges and also has introduced new levies under the headings of a) Contibution Charges and b)Account Rebalanceing Charges from private subscribers. This is an unfair practise and may be corrected to win faith and confidence of private subscribers.

Kalyan Ghosh

In Reply to Mamta Rohit 4 years ago

I fully agree with this view. The author's views were totally one sided and I had mentioned so in my comments which was not published. Author has no idea what a pension scheme is can be obtained when he opposes annuity.

Mr Prakash Padmakar Joshi

4 years ago

A BRIEF NOTE ON THE ‘RETIREMENT PLANNING’
WITH A CORPUS OF Rs.100.00 Lakhs. {ONE CRORE}
A person retiring at the age of 58 if able to build a ‘Corpus’ of Rs. 100.00 Lakhs by the time s/he attains the age of 62 by adopting the following method, will be able to financially survive satisfactorily, for next 28 years i.e. till s/he attains the age 90 as explained hereunder :----

Stage – I > Initial Building of ‘Corpus’ of Rs. 100.00 Lakhs.

[1] If necessary, even by Sale the ownership properties if you are really not keen in passing on the same to the next generation out of sheer sentiments. [If the said property is not an ancestral one and the siblings are also not dwelling there-in]. In fact you are only changing the nature/form & style of the ‘asset’ as per your convenience.[By the way “Reverse Mortgage” is not a good idea] e.g. Sell the property and invest the entire Capital Gains in three (3) years lock –in-Bonds, carrying a ROI @ 6 % p.a. You may also seriously think and explore the possibility of shifting to a “Gated Community for Sr. Citizens – Retirement Home” as a viable practical option taking in to consideration various long term benefits.

[2] Out of the remaining, put 60% + the Savings / PPF / PF / Gratuity / Leave encashment etc… and other liquid investments made so far in open ended Diversified Equity MFs in ‘Growth’ option. The selection of appropriate Schemes, subject to the annual review is a crucial factor. The remaining 40% should certainly be placed in Bank / Co. FDs / Secured NCDs with an option of getting interest at regular quarterly intervals.

In overall for survival, one should get at least an average return of about 9% p.a. during this intervening period of three years i.e. from the age 59 to 61.

Now (after three years) at the age of 62 one is ready with the total investible Corpus of Rs. 100.00 Lakhs including redeemed investment from Capital Gain Bonds as mentioned above. This Corpus is to be invested by churning and rebalancing total available amount as under: ---

[1] 60% Corpus in the open ended Diversified Equity MFs with ‘Growth’ option only. Assumed average ‘returns’ are anticipated @ 14% p.a. Go for withdrawing profits (cream) quarterly, as tax free LTCGs.
[2] Balance 40% Corpus to be placed in Banks’ FDs {breaking FDs of Rs. 4.00 Lakhs X 10 = Rs. 40.00 Lakhs} with average interest @ 9% p.a. on quarterly rests.

This combination will give overall average return @ 12% p.a. Further, the long term profits \ gains made out of MF investments are non taxable under the new DTC and the total ‘interest’ income of Rs. 3.60 Lakhs which is to be smartly divided between the husband and wife at the beginning itself so that their (individual) annual incomes will be below taxable limits.

This way as discussed above, the total income of Rs. 12.00 Lakhs for the first year is totally tax free. In all the subsequent years this 60:40 ratio giving stipulated returns is required to be maintained by properly rebalancing the total Corpus available at the beginning of the each subsequent year so as to ensure that on an “average” a tax free yield (income) is achieved @ 12% p.a. for the year after year regularly.

Stage – II > Living peaceful Life smartly!!!

Now assuming that one is required to spend a total amount of about Rs. 5.00 Lakhs (for both, husband and wife) in the first year (i.e. Rs. 41,667/- p.m.) which gradually increases (every year, by year) up to Rs. 65.55 Lakhs in the 28th year (i.e. about Rs. 5,46,250/- p.m.) by assuming an average inflation rate @ 10% p.a .on YOY basis by the time one reaches at the age of 90. The remaining amount Rs. 22.67 Lakhs at this stage will take care of the funeral and last rites. Now, while spending one should preferably exhaust the fixed income first [presumed @ 9%] and only shortfall be spend from the variable income [presumed @ 14%].Thus if you live such long, you may be living a reasonably comfortable life but, eventually NOT leave any thing (remaining) to your heirs / siblings.

By adopting the above method the original ‘Corpus’ of Rs. 100.00 Lakhs gets increased up to Rs. 237.06 Lakhs at the end of 19th year and then it certainly lasts up the end of 28th year i.e. by the time one reaches the age 90. However, the severe and unavoidable impact of run-away inflation really starts taking its toll after 19th year (i.e. from 20th year and onwards) hence the yearly generated total income by itself starts proving ‘insufficient’ to meet both ends and hence for each and every subsequent year after 19th year, one will have to resort to compulsorily draw from the ‘Corpus’ which starts depleting fast and almost gets exhausted by the end of the 28th year merely to the tune of Rs. 22.67 Lakhs as shown in the excel table.

Beat the inflation with smart moves and reasonably tolerable risk. You can’t beat the inflation if you don’t take ‘adequate’ exposure in EQUITY and simply try to overcautiously put all the money in Bank/Co. FD / Secured NCDs, Post Office SS, as the ‘returns’ available from later are highly ‘insufficient’ to take care of the ever rising inflation. If you will remain too conservative all the corpus money will be exhausted by 19th year end itself and you will be left with nothing if, living any further more.

To achieve the above you will need a good (intelligent), trustworthy & friendly advisor / consultant
for your financial planning. Please see the attached excel file for detailed arithmetical calculations.

Khub jiyo retired zindagi khushi aur shaanse!!!

FROM:--- [email protected]

REPLY

Param

In Reply to Mr Prakash Padmakar Joshi 4 years ago

is this a response to this NPS article or a sales pitch?

jaideep shirali

4 years ago

I have a few observations to make on NPS. Firstly, NPS must be compulsory on govt employees at all levels. As tax payers, why should we be funding an assured return pension scheme, which increases due to Pay Commissions and DA hikes regularly ? In return, we do not get even an unemployment benefit! Secondly, NPS returns would stabilise in a few years and going by the experience of good debt and equity funds, one should see good and steady returns in the long run. Remember that most investors would be invested for atleast 10 yrs. Thirdly, NPS expenses are much lower than ULIPs or even mutual funds on the whole. NPS has an asset allocation Auto Choice, which decreases equity allocation with increasing age. This helps the prudent investor. The annuity and EET policies may be modified with the Pension Bill. I feel that many positives have been glossed over in this analysis and NPS deserves investment.

Param

4 years ago

i knew something was messed up when such a ridiculous expense ratio was mentioned... even vanguard charges 0.1% on index fund at the cheapest level, and the asset base is in 100B$.
i'm surprised pfrda did not question the longevity of such a low expense ratio - at least it should have added a clause restricting the quantum of increase...

DB DESAI

4 years ago

Retirement Planning should not be construed as buying any one plan from insurance company, mutual fund or NPS but it should be only an idea to accumulate money as much is required from different ways and means during the working life and also it should be invested when regular income is required from investments only considering the best suitable options at that time. Approch must be very flexible and a combination of short, medium and long term investment ideas. It should use all asset classes, all opportunities. End of the day the only thing which matters is the money is your hand.

RTI Judgement Series: When the Western Ghats ecology status report was made public

Disclosure of the WGEEP report would enable citizens to debate in an informed manner and provide useful feedback to government. The law requires suo moto disclosure by the public authority while formulating important policies and not after formulating them, ruled the CIC. This is the 25th in a series of important judgements given by Shailesh Gandhi, former CIC, that can be used or quoted in an RTI application


The Central Information Commission (CIC), while rejecting the contention of the Public Information Officer (PIO) of the ministry of environment and forests (MoEF), ordered that all reports of panels, experts, committees and commissions set up by government with public funds must be displayed suo moto as per the mandate of Section 4 (1) (c) & (d) read with 4 (2) of the Right to Information (RTI) Act. While giving this important judgement, Shailesh Gandhi, former Central Information Commissioner, said, “The Commission does not find any merit in his (PIO's) contention that disclosure (of the report) would impact the economic interests of the nation.”

 

“The Commission directs that the ministry of environment and forests should publish all reports of commissions, special committees or panels within 30 days of receiving them, unless it feels that any part of such report is exempt under the provisions of Section 8 (1) or 9 of the RTI Act. If it concludes that any part is exempt, the reasons for claiming exemptions should be recorded and the report displayed on the website within 45 days of receipt, after severing the parts claimed to be exempt. There should be a declaration on the website about the parts that have been severed, and the reasons for claiming exemptions as per the provisions of the RTI Act,” the CIC said in its order issued on 9 April 2012.

 

Kerala-based G Krishnan, on 22 November 2011, sought information about the Madhav Gadgil panel report. He sought following information...

 

Summary of the report submitted to the ministry of environment and forests (MoEF) by the Western Ghats Ecology Expert Panel (WGEEP) under the chairmanship of Prof Madhav Gadgil and the report on the Athirappilly HEP, Kerala.

 

The PIO, while denying the information, stated that “(the) MoEF is still in the process of examining the report of WGEEP in consultation with six state governments of the Western Ghats region. The report is not final and a draft under consideration of MoEF and thus not complete/ready for disclosure under the RTI Act. The appellant was requested to file his RTI application again at a later date after completion of the process.”

 

Not satisfied with the reply, G Krishnan then filed application with the First Appellate Authority (FAA). The FAA mentioned that the information sought may not be disclosed under Section 8 of the RTI Act.

 

G Krishnan then filed a second appeal before the Commission. During the hearing on 23 March 2012, the Commission noted that the PIO did not give any reasons for denying the information; however, he mentioned that the FAA has held that the information may not be disclosed under Section 8 of the RTI Act.

 

The PIO accepted that the sovereignty and integrity, security or strategic interests of the State would not be affected. He argued that “scientific or economic interests of the State” would be prejudicially affected on disclosure of the information at this stage. The PIO further stated that views from 11 ministries, the Planning Commission and six states were sought. Therefore, disclosure of information at this stage would lead to various proposals as per the recommendations of the report which had not been finally accepted.

 

The Commission then reserved its order.

 

In an order issued on 9 April 2012, Mr Gandhi noted that the PIO denied the information contending that the report was being finalised and hence not ready to be furnished under the RTI Act. “It must be noted that since the report has already been submitted by the panel to MoEF, it cannot be called a ‘draft’ report. Moreover, there is no provision in the RTI Act which exempts from disclosure a report that has not been finalised or accepted by a public authority,” the Commission noted.

 

During the first hearing on 23rd March, the PIO claimed that the information was protected from disclosure under Section 8 (1) (a) of the RTI Act, which exempts ‘information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence’.

 

The WGEEP was set up in 2010 by the MoEF under the chairmanship of Prof Madhav Gadgil. It was designated certain functions which included an assessment of the ecological status of the Western Ghats region, demarcation of areas within the said region required to be notified as ecologically sensitive, and recommendations for conservation, protection and rejuvenation of the Western Ghats region. The panel was also given the task of examining the Athirappilly hydroelectric project (HEP).

 

On receipt of the report, the MOEF recognised that the recommendations contained therein had far-reaching consequences on conservation and development of the Western Ghats region, and centre-state relations. Therefore, wide ranging consultations from the concerned states and central ministries were instituted.

 

Mr Gandhi said that the RTI Act recognises that a democracy requires an informed citizenry and transparency of information, and there is a need for transparency of information to contain corruption and to hold the government and its intermediaries accountable to the citizens.

 

Section 3 of the RTI Act lays down that all citizens can exercise their fundamental right to information from all public authorities, without having to give any purpose or reasons. A PIO must provide the information within 30 days unless it falls under the ten exemptions of Section 8 (1) or Section 9.

 

“...a claim that a final decision has not been taken, hence information will not be provided, is not a tenable reason for refusal. Thus, all denial of information would have to be justified by the provisions of the RTI Act,” the Commission said.

 

Even if the information is exempted, it would have to be provided, if a larger public interest can be proved in disclosure as per the provision of Section 8 (2). After 20 years have elapsed, only three of the exemptions of Section 8 (1) would apply. Thus, Parliament clearly intended that most of the information should be available to the citizens and denial of information should be the exception and disclosure the rule. Section 4 of the Act was a statutory direction to all public authorities “to provide as much information suo moto to the public at regular intervals through various means of communications, including internet, so that the public have minimum resort to the use of this Act to obtain information”, Mr Gandhi noted in his order.

 

The Western Ghats have been internationally accepted as a region of topographical and ecological significance. It is recognised as a biodiversity hotspot on account of a substantial number of species facing the threat of extinction. From the broad mandate of the WGEEP, it is clear that its report would have extensive ramifications on the biodiversity of an ecologically-sensitive region as the Western Ghats. Moreover, as submitted by the PIO, the areas covered by WGEEP in its report and the recommendations given therein would influence many important sectors such as agriculture, land use, mining, industry, tourism, water resources, power, roads and railways.

 

The PIO argued that premature release of the report (containing the methodology for demarcation) into the public domain without adequate consultations with the state governments/central ministries to refine the boundaries of eco-sensitive areas may lead to a situation wherein there would be an influx of proposals for declaration of eco-sensitive zones in the Western Ghats by individuals/ groups/ organisations. His contention was that this would impact economic progress and interests. The PIO did not, however, advance any argument to show how the scientific interests of the nation would be affected.

 

Mr Gandhi observed that, “Disclosing a report or information does not mean that the government has to follow it. It may perhaps have to explain the reasons to the public for disagreeing with a report based on logic and coherent reasons. This cannot be considered as prejudicially affecting the scientific and economic interests of the State.”

 

“Even if the government decides not to accept the findings or recommendations, their significance as an important input for policy making and taking decisions cannot be disregarded arbitrarily. If such reports are put in public domain, citizens' views and concerns can be articulated in a scientific and reasonable manner. If the government has reasons to ignore the reports, these should logically be put before people,” he said.

 

The RTI Act recognises the above mandate and in Section 4 contains a statutory direction to all public authorities “to provide as much information suo moto to the public at regular intervals through various means of communications, including internet, so that the public have minimum resort to the use of this Act to obtain information”. More specifically, Section 4 (1) (c) of the RTI Act mandates that all public authorities shall “publish all relevant facts while formulating important policies or announcing the decisions which affect public”. It follows from the above that citizens have a right to know about the WGEEP report, which has been prepared with public money, and has wide ramifications on the environment. Disclosure of the WGEEP report would enable citizens to debate in an informed manner and provide useful feedback to the government, which may be taken into account before finalizing the same, the Commission noted.

 

The PIO has not been able to give any reason how the disclosure would affect the scientific interests of the State. The PIO’s claim for exemption is solely based on Section 8 (1) (a) of the RTI Act. The Commission has examined this claim and does not find any merit in his contention that the disclosure would impact the economic interests of the Nation. The Commission, therefore, rejects the PIO’s contention that the information sought by the appellant is exempt under Section 8 (1) (a) of the RTI Act, Mr Gandhi said.

 

While allowing the appeal, the Commission directed the PIO to an attested photocopy of the summary of the WGEEP report and the report on the Athirappilly HEP, Kerala to the appellant before 5 May 2012. Furthermore, it asked the PIO to ensure that the complete WGEEP report is placed on the ministry of environment and forest’s website before 10 May 2012.

 

The Commission directed the MoEF to publish all reports of commissions, special committees or panels within 30 days of receiving them, unless it feels that any part of such report is exempt under the provisions of Section 8(1) or 9 of the RTI Act. “If it (MoEF) concludes that any part is exempt, the reasons for claiming exemptions should be recorded and the report displayed on the website within 45 days of receipt, after severing the parts claimed to be exempt. There should be a declaration on the website about the parts that have been severed, and the reasons for claiming exemptions as per the provisions of the RTI Act. This direction is being given by the Commission under Section 19(1)(b)(iii) of the Act to the Secretary, MoEF,” the Commission said in its order.

 

 

CENTRAL INFORMATION COMMISSION

 

Decision No. CIC/SG/A/2012/000374/18316

http://www.rti.india.gov.in/cic_decisions/CIC_SG_A_2012_000374_18316_M_79964.pdf

Appeal No. CIC/SG/A/2012/000374

 

 

Appellant                                            : G Krishnan,

                                                            Kerala-683582

 

Respondent                                                 : Dr Amit Love,

                                                            CPIO & Deputy Director,

                                                            Ministry of Environment and Forests,

                                                            Room No. 539, Paryavaran Bhavan,

                                                            CGO Complex, Lodhi Road

                                                            New Delhi-110003

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