SBI Life ‘Smart Horizon’ ULIP charges are smart for the shorter horizon

The investment methodology is debatable; returns will be average due to shift from equity to debt 

SBI Life has introduced 'Smart Horizon' ULIP with stated objective of providing long-term capital appreciation. "The unique automatic asset allocation (AAA) feature makes Smart Horizon ideal for many evolving Indian investors who do not have the time to make fund allocation decisions on an on-going basis," said MN Rao, managing director, SBI Life.

AAA is an algorithm-based active investment allocation mechanism. This IT-based system, developed through testing over 5,000 potential scenarios in the Indian equity and bond markets, determines the optimal risk-return combination, the company explained in a statement.

The investment will be done in such a manner that initially there will be higher exposure to equities, followed by increasing exposure to debt and money markets as the plan nears maturity. AAA mechanism ensures better returns for investors, while protecting capital, the company said.

We have our reservations about the working of this methodology. The returns, too, will be average due to the shift from equity to debt.

The product also provides the customer flexibility to actively manage his investment. We found the premium allocation charge and policy administration charge to be the lowest among new ULIPs for the first five years and on the lower side for 10 years. The charges beyond 10 years are not on the lower side. The mortality charges for the product are much lesser than other ULIPs we came across. We hope that other insurers will take note.

Premium allocation charge: 2% of annualised premium in the first policy year only.

Policy administration charge: An initial policy administration charge equal to 0.70% of the annualised premium will be deducted at the inception of the policy. A monthly policy administration charge equal to 0.45% of the annualised premium will be deducted throughout the term of the policy.

Age at entry: Seven years to 60 years.

Age at maturity: (Maximum) 70 years.

Plan type: Regular premium.

Policy term: 10 years and any term between 15 years and 30 years, both inclusive.

Premium frequency: Yearly/half-yearly/quarterly/monthly.
Monthly frequency is available only through the electronic clearing system (ECS) or standing instructions (where payment is made either by direct debit of bank account or credit card).

Premium paying term: Same as policy term.

Premium range: Minimum - yearly Rs24,000, half-yearly Rs15,000, quarterly Rs8,000, monthly Rs3,000.
Maximum - yearly Rs74,000, half-yearly Rs37,000, quarterly Rs18,500, monthly Rs6,200.

Minimum sum assured: For age below 45 years - higher of [(10×AP) or (0.50×term×AP)]* and for age 45 and above - higher of [(7×AP) or (0.25×term×AP)]

Maximum sum assured : 20 × AP

(*AP stands for annualised premium)


Inflation situation difficult, but manageable: Chakrabarty

Mumbai: Reserve Bank of India (RBI) deputy governor, KC Chakrabarty today said that inflation is a difficult situation but "manageable".

"Inflation-wise, it is a difficult situation, but then manageable," Mr Chakrabarty told reporters at a banking event here.

Earlier this week, RBI governor D Subbarao had said that the monetary policy management has become difficult because of a surging inflation and the demand for supporting growth.

The central bank is set to announce its monetary policy on 25th January and is expected to hike the rates to arrest high inflation.


FM urges states to remove levies to bring down food prices

New Delhi: Worried over rising food inflation, finance minister Pranab Mukherjee today asked the states to remove local levies like octroi and mandi tax to bridge the gap between farm gate and retail prices, reports PTI.

"I would urge you to review all local levies like mandi tax and octroi duty which add to prices of food articles and impede smooth movement of essential commodities," Mr Mukherjee said in his address to state finance ministers during pre-budget deliberations here.

Asking state governments to play their part in controlling inflation, he said, "There is a need for you to urgently look into supply management of items that are driving the current round of food inflation, in particular local factors that are widening the gap between wholesale and retail prices."

Bottlenecks in supply chain have to be removed. States have to take steps to ensure agriculture grows and create efficient distribution and marketing infrastructure, he said.

There is also a need to cut down on the wastage of foodgrains, he added.

Indeed, Mr Mukherjee said, "There is a strong case to review and reform the Agriculture Produce and Marketing Act (APMC) in states where it has not been addressed so far."

The government regulated markets are not only imposing taxes and facilitating large commission and fees for the middleman, but also preventing retailers to integrate their enterprise directly with the farmers, he said.

This leaves no incentive for the farmers to upgrade and inhibits private investment in the agriculture sector. Farmers and consumer both lose in the process, he added.

Talking about efforts taken by the central government, he said, it has taken measures to facilitate imports and, when required restrict exports to ensure supply of essential commodities.

During the last week of December, food inflation touched as high as 18.3% mainly driven by primary articles like vegetables.

Food inflation has remained high and volatile due to significant increase in the prices of few primary items like fruit and vegetables, milk, meat, poultry, eggs and fish even as the prices of cereals and pulses declined sharply in the current year, Mr Mukherjee said.

He also said that there are some weather induced supply constraints on some of the items currently exhibiting high inflation, as a large part of price rise is due to widening gap between the wholesale and retail prices. The growing demand for these products is due to rising income level, he said.


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