Full Story can be found at http://www.dnaindia.com/report.asp?newsid=1253551
A layman's guide to the New Pension Scheme
By - Vivek Kaul
On May 1, 2009, the Pension Fund and Regulatory Development Authority (PFRDA) threw open the New Pension Scheme (NPS) to all Indian citizens. Till then, this pension scheme was available only to the central and state government employees.
What is NPS?
NPS is a defined contribution pension scheme open to any Indian citizen between the age of 18 and 55.
What is a defined contribution scheme?
In a defined contribution scheme, the individual invests a certain amount in a pension scheme till he retires. At retirement, he is allowed to either withdraw the money that has accumulated or buy an immediate annuity from an insurance company to generate a regular income, or do both. The option he exercises depends on the way the pension scheme is structured. Buying an immediate annuity assures a regular payment from the insurance company. This payment can be monthly, once every three months, once every six months or once every year.
What do I need to do to start investing in the NPS?
First and foremost, you need to open an account. The form to open an account can be downloaded from http://www.pfrda.org.in/writereaddata/eventimages/Subscriber%20registration%20form%20finalised3969192803.pdf.
This form then needs to be submitted at a point of presence. To find out which is the nearest point of presence for you, check out the following link
http://www.pfrda.org.in/writereaddata/linkimages/POP-%20LOCATION575033432.pdf.
Once the form is submitted and the processing is done, you will be given a permanent retirement account number (PRAM). The PRAM will be the primary means of identifying and operating this retirement account.
How much do I need to invest?
The minimum amount that needs to be invested per contribution is Rs 500. A minimum of four contributions need to be made per year. Other than this, a minimum of Rs 6,000 needs to be invested per year. This means those who plan to invest the minimum amount of Rs 500 need to make 12 contributions per year. There are no upper limits on the amount of money that can be invested as well as the number of contributions that can be made. You need to decide on the frequency of your contributions across the year, at your convenience.
The investments can be made through cash, local cheque or a demand draft at the chosen point of presence.
How will the money be invested?
The money you invest in NPS will be managed by professional fund managers. Currently, you have the choice of picking up one of the following six fund managers: ICICI Prudential Pension Management, IDFC Pension Fund Management, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund, SBI Pension Funds, and UTI Retirement Solutions. It is important to remember that at the point of filling up the form, the choice of one of these six pension fund mangers needs to be indicated. The application will not be accepted if this choice is not made.
Can I switch fund managers if I am not happy with my current fund manager?
Yes, you can switch fund managers. PFRDA, the pension fund regulator, will declare the value of your investment every year in April. At that point of time, if you are not satisfied with the performance of your fund manager, you can switch to another fund manager between May 1 and May 15.
Will the money be invested in debt or equity?
The NPS currently offers three investment funds to choose from:
Asset class E: Investments will be made in thirty stocks that constitute the Bombay Stock Exchange Sensex or the fifty stocks that constitute the National Stock Exchange Nifty. The investments in stocks will be made in the same proportion as the weightage of the stock in the particular index. Reliance Industries currently has around 17% weightage in the Sensex, so if Rs 100 is being invested in Asset Class E, that would mean Rs 17 would be invested in the stocks of Reliance Industries.
Asset class G: Investments will be made in debt securities issued by the central as well as the state governments.
Asset class C: Investments will primarily be made in debt securities issued by entities other than the state and central government, liquid funds of mutual funds, fixed deposits of banks etc
At the time of filling the form, you need to indicate what proportion of your money should be invested in which asset class. You can choose to invest a maximum of 50% in the equity option, i.e. asset class E and a maximum of 100% in the other two options.
What if I do not have enough expertise to exercise a choice?
In case you decide not to exercise any choice regarding the asset allocation, the Lifecycle Fund of NPS kicks in. In this case, your age will decide what fraction of your investment is invested in which asset class and as you come become older, your exposure to the equity class will keep coming down (see table).
In fact, for the risk averse, it might be a good option to choose the Lifecycle option, given that exposure to equity decreases as the age of retirement nears.
But NPS gives me only a maximum of 50% exposure to equity...
Many so-called experts have gone to town criticising this aspect. But anybody who has been through the stock market crash last year will agree that betting all investment on equity isn't a great idea, always, especially when you are saving for retirement. PFRDA has also done a great job by limiting investments only in Sensex and Nifty stocks. This is an extremely passive form of investment and has taken active fund management by fund managers totally out of the equation. What this ensures is that you will get a rate of return that is equal to the broader market. You may not get a rate of return that is better than the overall market, but at the same time you will not get a rate of return that is much worse than the overall market.
What if I default on payment?
For every year of default you will have to pay a penalty of Rs 100. This will have to paid along with the minimum amount (i.e. Rs 500) that would be needed to reactivate the account. Also during the period you do not pay, NPS will keep charging its expenses against your accumulated corpus. If you continue to default, the account will be closed as and when the value of the account falls to zero.
Can I withdraw money from the account?
The NPS offers two accounts: tier I and tier II. Currently only tier I account is available. This is a non-withdrawable account and investments in this keep accumulating till you turn 60. Withdrawal is allowed only in case of death, critical illness or if you are building or buying your first house. In case of death the nominee can get 100% of NPS wealth in a lump sum. He can however continue with the NPS in case he wishes to.
Tier II account, on the other hand, will be a voluntary savings account which will allow you to withdraw money as and when you want to. This option is currently not available.
Will I get a tax deduction for the investment?
Yes, under Section 80CCD of the Income Tax Act investments of up to Rs 1 lakh in the NPS can be claimed as tax deductions. Readers should remember that this Rs 1 lakh limit is not over and above the Rs 1 lakh limit available under Section 80C. In fact, the combined limit of investments made under Section 80C, 80CCD and section 80CCC (for investments made into pension plans of insurance companies) is Rs 1 lakh.
What happens at retirement?
NPS by default sets the retirement age at 60. Once you attain that age, you can use the money that has accumulated to generate a regular pension for yourself. In order to do this, you have to compulsorily buy immediate annuity from a life insurance company with 40% of the money that has accumulated. As explained at the beginning, buying an immediate annuity will assure a regular payment for you.
Since a minimum of 40% needs to be used to buy an immediate annuity, a maximum of 60% of the money accumulated can be withdrawn. However, unlike other tax-saving instruments like Public Provident Fund (PPF) and Employees' Provident Fund (EPF), wherein the amount at maturity is tax-free, in case of NPS this amount is taxable.
This is one negative feature of NPS. However, the PFRDA, which is running the NPS, has approached the government to given NPS a tax treatment similar to that for PPF and EPF. Currently, the only way not to pay tax is to buy immediate annuities using the entire amount at maturity, which is not bad because you were anyway accumulating the corpus to generate a pension.
What if I want to withdraw the accumulated amount before I turn 60?
If you want to withdraw the accumulated amount before you turn 60, you need to compulsorily buy immediate annuity with 80% of the money that has accumulated. This is another negative feature of the scheme.
What are the charges?
This is where NPS wins hands down against all other modes of creating a corpus to generate income after retirement. The fund management charge of NPS is 0.0009% of the value of the investment, every year. In comparison, pension plans of insurance companies charge 0.75-1.75% as fund management charge, which is 800-2000 times higher. The other expenses charged are also very reasonable.
Am I guaranteed a certain rate of return?
No return is guaranteed as it is in case of EPF and PPF. The amount of money you make is dependant on how well the fund managers chosen by you perform. But, the extremely low charges in NPS sure give it an edge over the the pension plans of insurance companies.
Friday, October 2, 2009
Wednesday, May 20, 2009
Are we consciously erring?
Did you know that if you used your PC for five hours a day, you have to pay almost Rs 90 extra in your monthly electricity bill? This might not bother till you realise that it is well over Rs 1,000 a year.
I arrived at this figure by studying the CESC website. I found that the charges are over Rs 5 per unit. This “unit” is called a kilowatt hour (kWh) and is a measure of how much electricity is consumed. A 100-watt (W) light bulb used for 10 hours consumes 1 kWh of power.
You too can find out how much power your appliances consume by going to http://www.cescltd.com/cescyou/powerconsumption/powercosumpnet.php.
Typically most desktop PCs consume around 300W, and that is why your power charges average to around to a little over Rs 5 per unit. Add to this the cost of running your printer, scanner, modem, router and any other accessories you have. Hence it very important to find out the power consumption of the new desktop you are going to buy. Ask your vendor to look at the technical specifications of the PC you want to buy, paying special attention to power consumption.
The table below will give you an idea of how much electricity some PCs consume.
The AMD platform clearly requires more power when idle and the power requirement difference is even larger when it is hard at work. At 210W vs 163.5W, there’s a 28 per cent difference between Intel and AMD. Remember that the results cover all other system components, including motherboards’ voltage regulators and graphic cards and every moveable part.
Clearly, the Mac consumes the least energy although it comes with a very high configuration.
Our PCs, especially the powerful Windows–based PC workstations and ordinary desktops, consume a lot of power even when they are idle (which means the monitor is on screensaver mode and a lot of background work, like indexing, is going on).
Power Management
A little known fact is that a computer draws almost as much power when it is on standby with a screensaver on as it does when in use. By turning off your PC and peripherals when they’re idle, and by employing the little used power management applet, you can cut energy consumption dramatically — 75 per cent or more (if you use your computer six hours a day). And even if you keep your PC on as a server, you’ll save energy by turning off the monitor when you do not need it.
Offices — with over 100 computers — keen on cutting costs, should following the power management scheme and save thousands of rupees in electricity bills.
To get to your computer’s power-management settings in Windows XP, right-click the Desktop and choose Properties—Screensaver. Click the Power button near the Energy Star icon, and select the Power Schemes tab of the Power Options Properties dialog box. For desktop PCs, choose the Home/Office Desk power scheme.
Even if you mean to leave your desk for 5 minutes, I suggest you insert 15 minutes under ‘Turn off monitor’, and for ‘Turn off hard disks’ select 30 minutes. Let’s face it, you will never be back at your desk in 5 minutes!
The Standby and Hibernate options under the Power Schemes tab too are useful for cutting your system’s energy use.
Here are some of my recommendations to save power:
If you use a desktop, use an LCD monitor. They use lot less energy than CRTs.
Turn your computer off when you're done for the day.
Use a Mac. As I mentioned earlier, Macs use much less energy than most Dell or HP or even assembled computers.
Use a power strip, also known as spike buster, so you can easily turn off all your computer accessories at once.
More Power Savers:
More and more builders are shifting to LED (light emitting diode) lamps from regular bulbs and tubelights. Unlike incandescent bulbs or even fluorescent lamps, almost all of the energy used by LEDs is converted to light, rather than heat. LED fixtures still cost more than conventional ones, but the energy savings can help commercial projects pay for themselves in as little as two years.
Even televisions and monitors are shifting to LED displays primarily because of the low power consumption, yet are also giving you the bright lights and vibrant colours you require.
Source: Surit Doss, Business world, may 09 edition
I arrived at this figure by studying the CESC website. I found that the charges are over Rs 5 per unit. This “unit” is called a kilowatt hour (kWh) and is a measure of how much electricity is consumed. A 100-watt (W) light bulb used for 10 hours consumes 1 kWh of power.
You too can find out how much power your appliances consume by going to http://www.cescltd.com/cescyou/powerconsumption/powercosumpnet.php.
Typically most desktop PCs consume around 300W, and that is why your power charges average to around to a little over Rs 5 per unit. Add to this the cost of running your printer, scanner, modem, router and any other accessories you have. Hence it very important to find out the power consumption of the new desktop you are going to buy. Ask your vendor to look at the technical specifications of the PC you want to buy, paying special attention to power consumption.
The table below will give you an idea of how much electricity some PCs consume.
The AMD platform clearly requires more power when idle and the power requirement difference is even larger when it is hard at work. At 210W vs 163.5W, there’s a 28 per cent difference between Intel and AMD. Remember that the results cover all other system components, including motherboards’ voltage regulators and graphic cards and every moveable part.
Clearly, the Mac consumes the least energy although it comes with a very high configuration.
Our PCs, especially the powerful Windows–based PC workstations and ordinary desktops, consume a lot of power even when they are idle (which means the monitor is on screensaver mode and a lot of background work, like indexing, is going on).
Power Management
A little known fact is that a computer draws almost as much power when it is on standby with a screensaver on as it does when in use. By turning off your PC and peripherals when they’re idle, and by employing the little used power management applet, you can cut energy consumption dramatically — 75 per cent or more (if you use your computer six hours a day). And even if you keep your PC on as a server, you’ll save energy by turning off the monitor when you do not need it.
Offices — with over 100 computers — keen on cutting costs, should following the power management scheme and save thousands of rupees in electricity bills.
To get to your computer’s power-management settings in Windows XP, right-click the Desktop and choose Properties—Screensaver. Click the Power button near the Energy Star icon, and select the Power Schemes tab of the Power Options Properties dialog box. For desktop PCs, choose the Home/Office Desk power scheme.
Even if you mean to leave your desk for 5 minutes, I suggest you insert 15 minutes under ‘Turn off monitor’, and for ‘Turn off hard disks’ select 30 minutes. Let’s face it, you will never be back at your desk in 5 minutes!
The Standby and Hibernate options under the Power Schemes tab too are useful for cutting your system’s energy use.
Here are some of my recommendations to save power:
If you use a desktop, use an LCD monitor. They use lot less energy than CRTs.
Turn your computer off when you're done for the day.
Use a Mac. As I mentioned earlier, Macs use much less energy than most Dell or HP or even assembled computers.
Use a power strip, also known as spike buster, so you can easily turn off all your computer accessories at once.
More Power Savers:
More and more builders are shifting to LED (light emitting diode) lamps from regular bulbs and tubelights. Unlike incandescent bulbs or even fluorescent lamps, almost all of the energy used by LEDs is converted to light, rather than heat. LED fixtures still cost more than conventional ones, but the energy savings can help commercial projects pay for themselves in as little as two years.
Even televisions and monitors are shifting to LED displays primarily because of the low power consumption, yet are also giving you the bright lights and vibrant colours you require.
Source: Surit Doss, Business world, may 09 edition
Tuesday, May 12, 2009
Money has no memory.. Experience has.
“You will never know what the total cost of your education was, but for a lifetime you will recall and relive the memories of schools and colleges. Few years from now, you will forget the amount you paid to settle the hospitalization bill, but will ever cherish having saved your mother's life or the life you get to live with the just born. You won't remember the cost of your honeymoon, but to the last breath remember the experiences of the bliss of togetherness.
Money has no memory.. Experience has.
Good times and bad times, times of prosperity and times of poverty, times when the future looked so secure and times when you didn't know from where the tomorrow will come… life has been in one way or the other a roller-coaster ride for everyone. Beyond all that abundance and beyond all that deprivation, what remains is the memory of experiences.
Sometimes the wallet was full… sometimes even the pocket was empty. There was enough and you still had reasons to frown. There wasn't enough and you still had reasons to smile.
Today, you can look back with tears of gratitude for all the times you had laughed together, and also look back with a smile at all the times you cried alone. All in all, life filled you with experiences to create a history of your own self, and you alone can remember them all.
The first time you balanced yourself on your cycle without support…
The first time she said 'yes' and it was two years since you proposed…
The first cry… the first steps… the first word… the first kiss… all of your child…
The first gift you bought for your parents and the first gift your daughter gave you…
The first award… the first public appreciation… the first stage performance…
And the list is endless… Experiences, with timeless memory…
No denying that anything that's material cost money, but the fact remains the cost of the experience will be forgotten, but the experience never.
So, what if it's economic recession? Let it be, but let there not be a recession to the quality of your life. You can still take your parents, if not on a pilgrimage, at least to the local temple. You can still play with your children, if not on an international holiday, at least in the local park. Nice time to train the employees, create leadership availability and be ready for the wonderful times when they arrive. Hey! Aspects like your health, knowledge development and spiritual growth are not economy dependent.
Time will pass… economy will revive… currency will soon be in current… and in all this, we don't want look back and realize we did nothing but stayed in gloom. Recession can make you lose out on money. Let it not make you lose out on experiences…
If you are not happy with what you have, no matter how much more you have, you will still not be happy.
Make a statement with the way you live your life: How I feel has nothing to do with how much I have.”
Money has no memory.. Experience has.
Good times and bad times, times of prosperity and times of poverty, times when the future looked so secure and times when you didn't know from where the tomorrow will come… life has been in one way or the other a roller-coaster ride for everyone. Beyond all that abundance and beyond all that deprivation, what remains is the memory of experiences.
Sometimes the wallet was full… sometimes even the pocket was empty. There was enough and you still had reasons to frown. There wasn't enough and you still had reasons to smile.
Today, you can look back with tears of gratitude for all the times you had laughed together, and also look back with a smile at all the times you cried alone. All in all, life filled you with experiences to create a history of your own self, and you alone can remember them all.
The first time you balanced yourself on your cycle without support…
The first time she said 'yes' and it was two years since you proposed…
The first cry… the first steps… the first word… the first kiss… all of your child…
The first gift you bought for your parents and the first gift your daughter gave you…
The first award… the first public appreciation… the first stage performance…
And the list is endless… Experiences, with timeless memory…
No denying that anything that's material cost money, but the fact remains the cost of the experience will be forgotten, but the experience never.
So, what if it's economic recession? Let it be, but let there not be a recession to the quality of your life. You can still take your parents, if not on a pilgrimage, at least to the local temple. You can still play with your children, if not on an international holiday, at least in the local park. Nice time to train the employees, create leadership availability and be ready for the wonderful times when they arrive. Hey! Aspects like your health, knowledge development and spiritual growth are not economy dependent.
Time will pass… economy will revive… currency will soon be in current… and in all this, we don't want look back and realize we did nothing but stayed in gloom. Recession can make you lose out on money. Let it not make you lose out on experiences…
If you are not happy with what you have, no matter how much more you have, you will still not be happy.
Make a statement with the way you live your life: How I feel has nothing to do with how much I have.”
Monday, May 11, 2009
A layman's guide to the New Pension Scheme
A layman's guide to the New Pension Scheme
By - Vivek Kaul
On May 1, 2009, the Pension Fund and Regulatory Development Authority (PFRDA) threw open the New Pension Scheme (NPS) to all Indian citizens. Till then, this pension scheme was available only to the central and state government employees.
What is NPS?
NPS is a defined contribution pension scheme open to any Indian citizen between the age of 18 and 55.
What is a defined contribution scheme?
In a defined contribution scheme, the individual invests a certain amount in a pension scheme till he retires. At retirement, he is allowed to either withdraw the money that has accumulated or buy an immediate annuity from an insurance company to generate a regular income, or do both. The option he exercises depends on the way the pension scheme is structured. Buying an immediate annuity assures a regular payment from the insurance company. This payment can be monthly, once every three months, once every six months or once every year.
What do I need to do to start investing in the NPS?
First and foremost, you need to open an account. The form to open an account can be downloaded from http://www.pfrda.org.in/writereaddata/eventimages/Subscriber%20registration%20form%20finalised3969192803.pdf.
This form then needs to be submitted at a point of presence. To find out which is the nearest point of presence for you, check out the following link
http://www.pfrda.org.in/writereaddata/linkimages/POP-SP%20LOCATION%206-may9759639400.pdf.
Once the form is submitted and the processing is done, you will be given a permanent retirement account number (PRAM). The PRAM will be the primary means of identifying and operating this retirement account.
How much do I need to invest?
The minimum amount that needs to be invested per contribution is Rs 500. A minimum of four contributions need to be made per year. Other than this, a minimum of Rs 6,000 needs to be invested per year. This means those who plan to invest the minimum amount of Rs 500 need to make 12 contributions per year. There are no upper limits on the amount of money that can be invested as well as the number of contributions that can be made. You need to decide on the frequency of your contributions across the year, at your convenience.
The investments can be made through cash, local cheque or a demand draft at the chosen point of presence.
How will the money be invested?
The money you invest in NPS will be managed by professional fund managers. Currently, you have the choice of picking up one of the following six fund managers: ICICI Prudential Pension Management, IDFC Pension Fund Management, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund, SBI Pension Funds, and UTI Retirement Solutions. It is important to remember that at the point of filling up the form, the choice of one of these six pension fund mangers needs to be indicated. The application will not be accepted if this choice is not made.
Can I switch fund managers if I am not happy with my current fund manager?
Yes, you can switch fund managers. PFRDA, the pension fund regulator, will declare the value of your investment every year in April. At that point of time, if you are not satisfied with the performance of your fund manager, you can switch to another fund manager between May 1 and May 15.
Will the money be invested in debt or equity?
The NPS currently offers three investment funds to choose from:
Asset class E: Investments will be made in thirty stocks that constitute the Bombay Stock Exchange Sensex or the fifty stocks that constitute the National Stock Exchange Nifty. The investments in stocks will be made in the same proportion as the weightage of the stock in the particular index. Reliance Industries currently has around 17% weightage in the Sensex, so if Rs 100 is being invested in Asset Class E, that would mean Rs 17 would be invested in the stocks of Reliance Industries.
Asset class G: Investments will be made in debt securities issued by the central as well as the state governments.
Asset class C: Investments will primarily be made in debt securities issued by entities other than the state and central government, liquid funds of mutual funds, fixed deposits of banks etc
At the time of filling the form, you need to indicate what proportion of your money should be invested in which asset class. You can choose to invest a maximum of 50% in the equity option, i.e. asset class E and a maximum of 100% in the other two options.
What if I do not have enough expertise to exercise a choice?
In case you decide not to exercise any choice regarding the asset allocation, the Lifecycle Fund of NPS kicks in. In this case, your age will decide what fraction of your investment is invested in which asset class and as you come become older, your exposure to the equity class will keep coming down (see table).
In fact, for the risk averse, it might be a good option to choose the Lifecycle option, given that exposure to equity decreases as the age of retirement nears.
But NPS gives me only a maximum of 50% exposure to equity...
Many so-called experts have gone to town criticising this aspect. But anybody who has been through the stock market crash last year will agree that betting all investment on equity isn't a great idea, always, especially when you are saving for retirement. PFRDA has also done a great job by limiting investments only in Sensex and Nifty stocks. This is an extremely passive form of investment and has taken active fund management by fund managers totally out of the equation. What this ensures is that you will get a rate of return that is equal to the broader market. You may not get a rate of return that is better than the overall market, but at the same time you will not get a rate of return that is much worse than the overall market.
What if I default on payment?
For every year of default you will have to pay a penalty of Rs 100. This will have to paid along with the minimum amount (i.e. Rs 500) that would be needed to reactivate the account. Also during the period you do not pay, NPS will keep charging its expenses against your accumulated corpus. If you continue to default, the account will be closed as and when the value of the account falls to zero.
Can I withdraw money from the account?
The NPS offers two accounts: tier I and tier II. Currently only tier I account is available. This is a non-withdrawable account and investments in this keep accumulating till you turn 60. Withdrawal is allowed only in case of death, critical illness or if you are building or buying your first house. In case of death the nominee can get 100% of NPS wealth in a lump sum. He can however continue with the NPS in case he wishes to.
Tier II account, on the other hand, will be a voluntary savings account which will allow you to withdraw money as and when you want to. This option is currently not available.
Will I get a tax deduction for the investment?
Yes, under Section 80CCD of the Income Tax Act investments of up to Rs 1 lakh in the NPS can be claimed as tax deductions. Readers should remember that this Rs 1 lakh limit is not over and above the Rs 1 lakh limit available under Section 80C. In fact, the combined limit of investments made under Section 80C, 80CCD and section 80CCC (for investments made into pension plans of insurance companies) is Rs 1 lakh.
What happens at retirement?
NPS by default sets the retirement age at 60. Once you attain that age, you can use the money that has accumulated to generate a regular pension for yourself. In order to do this, you have to compulsorily buy immediate annuity from a life insurance company with 40% of the money that has accumulated. As explained at the beginning, buying an immediate annuity will assure a regular payment for you.
Since a minimum of 40% needs to be used to buy an immediate annuity, a maximum of 60% of the money accumulated can be withdrawn. However, unlike other tax-saving instruments like Public Provident Fund (PPF) and Employees' Provident Fund (EPF), wherein the amount at maturity is tax-free, in case of NPS this amount is taxable.
This is one negative feature of NPS. However, the PFRDA, which is running the NPS, has approached the government to given NPS a tax treatment similar to that for PPF and EPF. Currently, the only way not to pay tax is to buy immediate annuities using the entire amount at maturity, which is not bad because you were anyway accumulating the corpus to generate a pension.
What if I want to withdraw the accumulated amount before I turn 60?
If you want to withdraw the accumulated amount before you turn 60, you need to compulsorily buy immediate annuity with 80% of the money that has accumulated. This is another negative feature of the scheme.
What are the charges?
This is where NPS wins hands down against all other modes of creating a corpus to generate income after retirement. The fund management charge of NPS is 0.0009% of the value of the investment, every year. In comparison, pension plans of insurance companies charge 0.75-1.75% as fund management charge, which is 800-2000 times higher. The other expenses charged are also very reasonable.
Am I guaranteed a certain rate of return?
No return is guaranteed as it is in case of EPF and PPF. The amount of money you make is dependant on how well the fund managers chosen by you perform. But, the extremely low charges in NPS sure give it an edge over the the pension plans of insurance companies.
By - Vivek Kaul
On May 1, 2009, the Pension Fund and Regulatory Development Authority (PFRDA) threw open the New Pension Scheme (NPS) to all Indian citizens. Till then, this pension scheme was available only to the central and state government employees.
What is NPS?
NPS is a defined contribution pension scheme open to any Indian citizen between the age of 18 and 55.
What is a defined contribution scheme?
In a defined contribution scheme, the individual invests a certain amount in a pension scheme till he retires. At retirement, he is allowed to either withdraw the money that has accumulated or buy an immediate annuity from an insurance company to generate a regular income, or do both. The option he exercises depends on the way the pension scheme is structured. Buying an immediate annuity assures a regular payment from the insurance company. This payment can be monthly, once every three months, once every six months or once every year.
What do I need to do to start investing in the NPS?
First and foremost, you need to open an account. The form to open an account can be downloaded from http://www.pfrda.org.in/writereaddata/eventimages/Subscriber%20registration%20form%20finalised3969192803.pdf.
This form then needs to be submitted at a point of presence. To find out which is the nearest point of presence for you, check out the following link
http://www.pfrda.org.in/writereaddata/linkimages/POP-SP%20LOCATION%206-may9759639400.pdf.
Once the form is submitted and the processing is done, you will be given a permanent retirement account number (PRAM). The PRAM will be the primary means of identifying and operating this retirement account.
How much do I need to invest?
The minimum amount that needs to be invested per contribution is Rs 500. A minimum of four contributions need to be made per year. Other than this, a minimum of Rs 6,000 needs to be invested per year. This means those who plan to invest the minimum amount of Rs 500 need to make 12 contributions per year. There are no upper limits on the amount of money that can be invested as well as the number of contributions that can be made. You need to decide on the frequency of your contributions across the year, at your convenience.
The investments can be made through cash, local cheque or a demand draft at the chosen point of presence.
How will the money be invested?
The money you invest in NPS will be managed by professional fund managers. Currently, you have the choice of picking up one of the following six fund managers: ICICI Prudential Pension Management, IDFC Pension Fund Management, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund, SBI Pension Funds, and UTI Retirement Solutions. It is important to remember that at the point of filling up the form, the choice of one of these six pension fund mangers needs to be indicated. The application will not be accepted if this choice is not made.
Can I switch fund managers if I am not happy with my current fund manager?
Yes, you can switch fund managers. PFRDA, the pension fund regulator, will declare the value of your investment every year in April. At that point of time, if you are not satisfied with the performance of your fund manager, you can switch to another fund manager between May 1 and May 15.
Will the money be invested in debt or equity?
The NPS currently offers three investment funds to choose from:
Asset class E: Investments will be made in thirty stocks that constitute the Bombay Stock Exchange Sensex or the fifty stocks that constitute the National Stock Exchange Nifty. The investments in stocks will be made in the same proportion as the weightage of the stock in the particular index. Reliance Industries currently has around 17% weightage in the Sensex, so if Rs 100 is being invested in Asset Class E, that would mean Rs 17 would be invested in the stocks of Reliance Industries.
Asset class G: Investments will be made in debt securities issued by the central as well as the state governments.
Asset class C: Investments will primarily be made in debt securities issued by entities other than the state and central government, liquid funds of mutual funds, fixed deposits of banks etc
At the time of filling the form, you need to indicate what proportion of your money should be invested in which asset class. You can choose to invest a maximum of 50% in the equity option, i.e. asset class E and a maximum of 100% in the other two options.
What if I do not have enough expertise to exercise a choice?
In case you decide not to exercise any choice regarding the asset allocation, the Lifecycle Fund of NPS kicks in. In this case, your age will decide what fraction of your investment is invested in which asset class and as you come become older, your exposure to the equity class will keep coming down (see table).
In fact, for the risk averse, it might be a good option to choose the Lifecycle option, given that exposure to equity decreases as the age of retirement nears.
But NPS gives me only a maximum of 50% exposure to equity...
Many so-called experts have gone to town criticising this aspect. But anybody who has been through the stock market crash last year will agree that betting all investment on equity isn't a great idea, always, especially when you are saving for retirement. PFRDA has also done a great job by limiting investments only in Sensex and Nifty stocks. This is an extremely passive form of investment and has taken active fund management by fund managers totally out of the equation. What this ensures is that you will get a rate of return that is equal to the broader market. You may not get a rate of return that is better than the overall market, but at the same time you will not get a rate of return that is much worse than the overall market.
What if I default on payment?
For every year of default you will have to pay a penalty of Rs 100. This will have to paid along with the minimum amount (i.e. Rs 500) that would be needed to reactivate the account. Also during the period you do not pay, NPS will keep charging its expenses against your accumulated corpus. If you continue to default, the account will be closed as and when the value of the account falls to zero.
Can I withdraw money from the account?
The NPS offers two accounts: tier I and tier II. Currently only tier I account is available. This is a non-withdrawable account and investments in this keep accumulating till you turn 60. Withdrawal is allowed only in case of death, critical illness or if you are building or buying your first house. In case of death the nominee can get 100% of NPS wealth in a lump sum. He can however continue with the NPS in case he wishes to.
Tier II account, on the other hand, will be a voluntary savings account which will allow you to withdraw money as and when you want to. This option is currently not available.
Will I get a tax deduction for the investment?
Yes, under Section 80CCD of the Income Tax Act investments of up to Rs 1 lakh in the NPS can be claimed as tax deductions. Readers should remember that this Rs 1 lakh limit is not over and above the Rs 1 lakh limit available under Section 80C. In fact, the combined limit of investments made under Section 80C, 80CCD and section 80CCC (for investments made into pension plans of insurance companies) is Rs 1 lakh.
What happens at retirement?
NPS by default sets the retirement age at 60. Once you attain that age, you can use the money that has accumulated to generate a regular pension for yourself. In order to do this, you have to compulsorily buy immediate annuity from a life insurance company with 40% of the money that has accumulated. As explained at the beginning, buying an immediate annuity will assure a regular payment for you.
Since a minimum of 40% needs to be used to buy an immediate annuity, a maximum of 60% of the money accumulated can be withdrawn. However, unlike other tax-saving instruments like Public Provident Fund (PPF) and Employees' Provident Fund (EPF), wherein the amount at maturity is tax-free, in case of NPS this amount is taxable.
This is one negative feature of NPS. However, the PFRDA, which is running the NPS, has approached the government to given NPS a tax treatment similar to that for PPF and EPF. Currently, the only way not to pay tax is to buy immediate annuities using the entire amount at maturity, which is not bad because you were anyway accumulating the corpus to generate a pension.
What if I want to withdraw the accumulated amount before I turn 60?
If you want to withdraw the accumulated amount before you turn 60, you need to compulsorily buy immediate annuity with 80% of the money that has accumulated. This is another negative feature of the scheme.
What are the charges?
This is where NPS wins hands down against all other modes of creating a corpus to generate income after retirement. The fund management charge of NPS is 0.0009% of the value of the investment, every year. In comparison, pension plans of insurance companies charge 0.75-1.75% as fund management charge, which is 800-2000 times higher. The other expenses charged are also very reasonable.
Am I guaranteed a certain rate of return?
No return is guaranteed as it is in case of EPF and PPF. The amount of money you make is dependant on how well the fund managers chosen by you perform. But, the extremely low charges in NPS sure give it an edge over the the pension plans of insurance companies.
New York Times reader comment on India going to the polls, "The world's biggest exercise in democracy"
A MUCH-NEEDED INJECTION OF POSITIVITY.
Sometimes we underestimate ourselves. It takes a foreigner to put into perspective what a great people we really are and our tremendous achievement in the face of what appear to be insurmountable odds. Let us hope we can continue to remain the peaceful and tolerant people we have been through history. When fanaticism and fundamentalism rear their ugly heads in our country we must realize that they are the exception and not the rule. If we stop to compare ourselves with our neighbors and the rising intolerance and xenophobia in even developed nations such as the U.S.A., we should be truly grateful to be living in India.
New York Times reader comment on India going to the polls, "The world's biggest exercise in democracy"
April 15, 2009 It is truly the greatest show on Earth, an ode to a diverse and democratic ethos, where 700 million + of humanity vote, providing their small part in directing their ancient civilization into the future. It is no less impressive when done in a neighborhood which includes de-stabilizing and violent Pakistan, China, and Burma.
Its challenges are immense, more so probably than anywhere else, particularly in development and fending off terrorism -- but considering these challenges and its neighbors, it is even more astounding that the most diverse nation on Earth, with hundreds of languages, all religions and cultures, is not only surviving, but thriving.
The nation where Hinduism, Buddhism, Jainism, and Sikhism were born, which is the second largest Muslim nation on Earth; where Christianity has existed for 2000 years; where the oldest Jewish synagogues and Jewish communities have resided since the Romans burnt their 2nd temple; where the Dalai Lama and the Tibetan government in exile reside; where the Zoroastrians from Persia have thrived since being thrown out of their ancient homeland; where Armenians and Syrians and many others have to come live; where the Paris-based OECD said was the largest economy on Earth 1,500 of the last 2,000 years, including the 2nd largest only 200 years ago; where 3 Muslim Presidents have been elected, where a Sikh is Prime Minister and the head of the ruling party a Catholic Italian woman, where the President is also a woman, succeeding a Muslim President who as a rocket scientist was a hero in the nation; where a booming economy is lifting 40 million out of poverty each year and is expected to have the majority of its population in the middle class, already equal to the entire US population, by 2025; where its optimism and vibrancy is manifested in its movies, arts, economic growth, and voting, despite all the incredible challenges and hardships; where all the great powers are vying for influence, as it itself finds its place in the world.
Where all of this is happening, is India, and as greater than 1/10 of humanity gets ready to vote, it is an inspiration to all the World.
— V Mitchell, New York, NY
Sometimes we underestimate ourselves. It takes a foreigner to put into perspective what a great people we really are and our tremendous achievement in the face of what appear to be insurmountable odds. Let us hope we can continue to remain the peaceful and tolerant people we have been through history. When fanaticism and fundamentalism rear their ugly heads in our country we must realize that they are the exception and not the rule. If we stop to compare ourselves with our neighbors and the rising intolerance and xenophobia in even developed nations such as the U.S.A., we should be truly grateful to be living in India.
New York Times reader comment on India going to the polls, "The world's biggest exercise in democracy"
April 15, 2009 It is truly the greatest show on Earth, an ode to a diverse and democratic ethos, where 700 million + of humanity vote, providing their small part in directing their ancient civilization into the future. It is no less impressive when done in a neighborhood which includes de-stabilizing and violent Pakistan, China, and Burma.
Its challenges are immense, more so probably than anywhere else, particularly in development and fending off terrorism -- but considering these challenges and its neighbors, it is even more astounding that the most diverse nation on Earth, with hundreds of languages, all religions and cultures, is not only surviving, but thriving.
The nation where Hinduism, Buddhism, Jainism, and Sikhism were born, which is the second largest Muslim nation on Earth; where Christianity has existed for 2000 years; where the oldest Jewish synagogues and Jewish communities have resided since the Romans burnt their 2nd temple; where the Dalai Lama and the Tibetan government in exile reside; where the Zoroastrians from Persia have thrived since being thrown out of their ancient homeland; where Armenians and Syrians and many others have to come live; where the Paris-based OECD said was the largest economy on Earth 1,500 of the last 2,000 years, including the 2nd largest only 200 years ago; where 3 Muslim Presidents have been elected, where a Sikh is Prime Minister and the head of the ruling party a Catholic Italian woman, where the President is also a woman, succeeding a Muslim President who as a rocket scientist was a hero in the nation; where a booming economy is lifting 40 million out of poverty each year and is expected to have the majority of its population in the middle class, already equal to the entire US population, by 2025; where its optimism and vibrancy is manifested in its movies, arts, economic growth, and voting, despite all the incredible challenges and hardships; where all the great powers are vying for influence, as it itself finds its place in the world.
Where all of this is happening, is India, and as greater than 1/10 of humanity gets ready to vote, it is an inspiration to all the World.
— V Mitchell, New York, NY
Why Ratan Tata's Name is Not on the Billionares List
Here is a Real Story of Ratan Tata:
So many people around the world want to know that "What is the Net Worth of Ratan Tata"?
TATA Group is running 96 businesses and out of which 28 Companies are publically listed on the various stock exchanges.
Tata Group is world's top 50 Group according to Market capitalization and Reputation.
Have you ever thought why Ratan tata's name is not in the list of billionaire' s club? why Ratan Tata is not a billionaire on the Forbes magazine list of billionaire people of the world?
The reason is that, TATA Group's 96 companies are held by its main Company "TATA Sons" and the main owner of this TATA Sons is not Ratan Tata but various charitable organizations developed and run by TATA Group.
Out of which JRD TATA Trust & Sir Ratan Tata Trust are the main. 65% ownership of TATA Sons which is the key holding company of the other 96 TATA Group Company is held by various charitable organizations.
So this 65% ownership ownership of Tatasons Limited is not reflected on Ratan Tata's personal Financial Statement but on the various charitable organizations. and this is the reason why Ratan Tata is not in the list of Billionaire club.
if we put this 65% ownership of Tata Sons in Ratan TATA's own personal financial statement then Ratan Tata's Net worth can become more than $ 70 billion and that's much more than the Warren Buffet's Current Net Worth of $ 62 billion, the world's richest person according to Forbes magazine 2008.
However, it doesn't mean that Ratan Tata is poor. In one interviews he had told the reporter that, "I have my own Capital". He is the chairman of Tata Group so obviously he earns lots of money every year as a bonus, remuneration and salary. However, Ratan Tata's Net worth is not $ 1 Billion.
He is not a billionaire on paper. but in reality he is the richest person of the world. His net worth in reality is more than Bill Gates and Warren Buffet.
SO the good thing about Tata Group is that, They do Charity out of their Money....
And that is the reason TATA Group has generated so much of Goodwill over last 5 generations.
So many people around the world want to know that "What is the Net Worth of Ratan Tata"?
TATA Group is running 96 businesses and out of which 28 Companies are publically listed on the various stock exchanges.
Tata Group is world's top 50 Group according to Market capitalization and Reputation.
Have you ever thought why Ratan tata's name is not in the list of billionaire' s club? why Ratan Tata is not a billionaire on the Forbes magazine list of billionaire people of the world?
The reason is that, TATA Group's 96 companies are held by its main Company "TATA Sons" and the main owner of this TATA Sons is not Ratan Tata but various charitable organizations developed and run by TATA Group.
Out of which JRD TATA Trust & Sir Ratan Tata Trust are the main. 65% ownership of TATA Sons which is the key holding company of the other 96 TATA Group Company is held by various charitable organizations.
So this 65% ownership ownership of Tatasons Limited is not reflected on Ratan Tata's personal Financial Statement but on the various charitable organizations. and this is the reason why Ratan Tata is not in the list of Billionaire club.
if we put this 65% ownership of Tata Sons in Ratan TATA's own personal financial statement then Ratan Tata's Net worth can become more than $ 70 billion and that's much more than the Warren Buffet's Current Net Worth of $ 62 billion, the world's richest person according to Forbes magazine 2008.
However, it doesn't mean that Ratan Tata is poor. In one interviews he had told the reporter that, "I have my own Capital". He is the chairman of Tata Group so obviously he earns lots of money every year as a bonus, remuneration and salary. However, Ratan Tata's Net worth is not $ 1 Billion.
He is not a billionaire on paper. but in reality he is the richest person of the world. His net worth in reality is more than Bill Gates and Warren Buffet.
SO the good thing about Tata Group is that, They do Charity out of their Money....
And that is the reason TATA Group has generated so much of Goodwill over last 5 generations.
What do women really want?
Young King Arthur was ambushed and imprisoned by the monarch of a neighboring kingdom. The monarch could have killed him but was Moved by Arthur's youth and ideals. So, the monarch offered him his freedom, as long as he could answer a very difficult question. Arthur would have a year to figure out the answer and, If after a year, he still had no answer, he would be put to death.
The question was: "What do women really want?"
Such a question would perplex even the most knowledgeable man, And to young Arthur, it seemed an impossible query. But, since it was better than death, He accepted the monarch's proposition to have an answer by year's end. He returned to his kingdom and began to poll everyone: The princess, the priests, the wise men, and even the court jester.
He spoke with everyone, but no one could give him a satisfactory answer. Many people advised him to consult the old witch, For only she would have the answer.
But the price would be high as the witch was famous through out the kingdom for the exorbitant prices she charged. The last day of the year arrived and Arthur had no choice but to talk to the witch.She agreed to answer the question, but he would have to agree to her price first.The old witch wanted to marry Sir Lancelot, The most noble of the Knights of the Round Table, And Arthur's closest friend!
Young Arthur was horrified.
She was hunch-backed and hideous, had only one tooth,Smelled like sewage, made obscene noises, etc. He had never encountered such a repugnant creature in all his life. He refused to force his friend to marry her and endure such a terrible burden, But Lancelot, having learnt of the proposal, Spoke with Arthur. He said Nothing was too big of a sacrifice compared to Arthur's life. And the preservation of the Round Table. Hence, a wedding was proclaimed and the witch answered. Arthur's question thus: "What a woman really wants?" She said, "Is to be in charge of her own life."
Everyone in the kingdom instantly knew that the witch had uttered a great truth. And that Arthur's life would be spared. And so it was. The neighboring monarch granted Arthur his freedom. And Lancelot and the witch had a wonderful wedding. The honeymoon hour approached and,Lancelot, steeling himself for a horrific experience,entered the bedroom.
But, what a sight awaited him. The most beautiful woman he had ever seen lay before him on the bed. The astounded Lancelot asked what had happened. The beauty replied that since he had been so kind to her when she appeared as a witch, She would henceforth be her horrible and deformed self only half the time. And the beautiful maiden the other half. "Which would you prefer? She asked him.
"Beautiful during the day ... or at night?" Lancelot pondered the predicament.
During the day he could have a beautiful woman to show off to his friends, But at night, in the privacy of his castle, an old witch!
Or,
Would he prefer having a hideous witch during the day? But by night a beautiful woman for him to enjoy wondrous, intimate moments with?
(If you are a man reading this...) What would YOUR choice be?
(If you are a woman reading this) What would YOUR MAN'S choice be?
What Lancelot chose, is given below:
BUT... make YOUR choice before you scroll down below... OKAY?
Noble Lancelot, knowing the answer the witch gave Arthur to his question, He said that he would allow HER to make the choice herself.
Upon hearing this, she announced that she would be beautiful all the time.
Because, he had respected her enough to let her be in charge of her own life.
Now... what is the moral to this story?
The moral is...
1) There is witch in every woman no matter how beautiful she is!
2) If you don't let a woman have her own way, things are going to get ugly.
So, always remember: IT'S EITHER "HER WAY" OR IT'S "NO WAY" !!!
The question was: "What do women really want?"
Such a question would perplex even the most knowledgeable man, And to young Arthur, it seemed an impossible query. But, since it was better than death, He accepted the monarch's proposition to have an answer by year's end. He returned to his kingdom and began to poll everyone: The princess, the priests, the wise men, and even the court jester.
He spoke with everyone, but no one could give him a satisfactory answer. Many people advised him to consult the old witch, For only she would have the answer.
But the price would be high as the witch was famous through out the kingdom for the exorbitant prices she charged. The last day of the year arrived and Arthur had no choice but to talk to the witch.She agreed to answer the question, but he would have to agree to her price first.The old witch wanted to marry Sir Lancelot, The most noble of the Knights of the Round Table, And Arthur's closest friend!
Young Arthur was horrified.
She was hunch-backed and hideous, had only one tooth,Smelled like sewage, made obscene noises, etc. He had never encountered such a repugnant creature in all his life. He refused to force his friend to marry her and endure such a terrible burden, But Lancelot, having learnt of the proposal, Spoke with Arthur. He said Nothing was too big of a sacrifice compared to Arthur's life. And the preservation of the Round Table. Hence, a wedding was proclaimed and the witch answered. Arthur's question thus: "What a woman really wants?" She said, "Is to be in charge of her own life."
Everyone in the kingdom instantly knew that the witch had uttered a great truth. And that Arthur's life would be spared. And so it was. The neighboring monarch granted Arthur his freedom. And Lancelot and the witch had a wonderful wedding. The honeymoon hour approached and,Lancelot, steeling himself for a horrific experience,entered the bedroom.
But, what a sight awaited him. The most beautiful woman he had ever seen lay before him on the bed. The astounded Lancelot asked what had happened. The beauty replied that since he had been so kind to her when she appeared as a witch, She would henceforth be her horrible and deformed self only half the time. And the beautiful maiden the other half. "Which would you prefer? She asked him.
"Beautiful during the day ... or at night?" Lancelot pondered the predicament.
During the day he could have a beautiful woman to show off to his friends, But at night, in the privacy of his castle, an old witch!
Or,
Would he prefer having a hideous witch during the day? But by night a beautiful woman for him to enjoy wondrous, intimate moments with?
(If you are a man reading this...) What would YOUR choice be?
(If you are a woman reading this) What would YOUR MAN'S choice be?
What Lancelot chose, is given below:
BUT... make YOUR choice before you scroll down below... OKAY?
Noble Lancelot, knowing the answer the witch gave Arthur to his question, He said that he would allow HER to make the choice herself.
Upon hearing this, she announced that she would be beautiful all the time.
Because, he had respected her enough to let her be in charge of her own life.
Now... what is the moral to this story?
The moral is...
1) There is witch in every woman no matter how beautiful she is!
2) If you don't let a woman have her own way, things are going to get ugly.
So, always remember: IT'S EITHER "HER WAY" OR IT'S "NO WAY" !!!
NEVER LIGHT CANDLE IN AIR CONDITIONER ROOM
Let it be FAKE, but I thought let's be careful and more cautious about it. After all it can cost a life.
NEVER LIGHT CANDLE IN AIR CONDITIONER ROOM
For those who sleep in the Air Conditioner room ...........
Please read the mail below and be careful.
Heard of a bad news regarding Riya. She passed away last weekend due to carbon monoxide poisoning. It happened when she lighted an aromatheraputic candle for the night in a room with air-conditioning on and all windows closed. Due to lack of oxygen in the room, the burning of the candle cannot fully oxidized & thus forming dangerous carbon monoxide. Carbon monoxide will prevent oxygen exchange in the lungs, resulting the person dozing off to state of unconsciousness & eventually death in less than 1 hour, depending on the room size.
I am sending this e-mail out to all of you so that you will be aware of such danger when lighting aromatheraputic candles in any unventilated rooms.
Please forward this email to all your love ones.
Why the future belongs to India - Gurcharan Das
MEN & IDEAS
Why the future belongs to India
10 May 2009, 0128 hrs IST, Gurcharan Das
In preparing for a much publicized debate in
She had understood that the cost of democracy is the price the poor pay in the delay of their entry into the middle class. She did not elaborate the 'Indian way' but it must include taking a holiday on half a dozen New Year's Days! It is easy to get mesmerized by
In referring to the 'Indian way', my mother meant that a nation must be true to itself. Democracy comes easily to us because India has historically 'accumulated' its diverse groups who retain their distinctiveness while identifying themselves as Indian.
Both
We take freedom for granted in
Because the Indian state is inefficient, millions of entrepreneurs have stepped into the vacuum. When government schools fail, people start private schools in the slums, and the result is millions of 'slumdog millionaires'. You cannot do this in
The writer is speaking in a debate in
Thursday, April 23, 2009
Google SMS
Get cricket scores, Indian Railways train schedules & ticket status, horoscopes, movie showtimes, restaurant information and more ...all through SMS on your phone.
Best of all, you don't pay a premium charge for any of this, just the price of a standard SMS.
Try it out! Simply send your search query by SMS to 9-77-33-00000 and we'll send you results back by SMS immediately.
Of course, don't forget to save 9-77-33-00000 to your phonebook for quick and easy access to Google SMS in the future!
There are no premium charges for this service, only the cost of sending a standard SMS. Incoming messages from Google are not charged.
Best of all, you don't pay a premium charge for any of this, just the price of a standard SMS.
Try it out! Simply send your search query by SMS to 9-77-33-00000 and we'll send you results back by SMS immediately.
Of course, don't forget to save 9-77-33-00000 to your phonebook for quick and easy access to Google SMS in the future!
There are no premium charges for this service, only the cost of sending a standard SMS. Incoming messages from Google are not charged.
Monday, April 20, 2009
Prioritizing All The Things You Have To Do
by Maria Gracia............
We all have many things on our list to do and there doesn't seem to be enough time and energy to get it all done. Prioritizing is a way to solve this frustrating problem. Prioritizing is about making choices. Here are ideas to help you prioritize.
1. To prioritize effectively, you need to be able to recognize what is important. The important (high priority) tasks are based on what you value and those that help you achieve your goals and provide meaningful and rewarding long-term results. As you perform different tasks, think about where they fit on your priority list.
2. Making a list of all the tasks that need to be done is a good way to begin prioritizing. Prioritize the items on the list by using the ABC method to rank your priorities. For example, Priority A: Must Do (crucial tasks and commitments to do today), Priority B: Should Do (important things that do not need to be done today), and Priority C: Nice to Do (least urgent tasks).
3. Do not think of your priorities as just jobs that need to be done. As you remind yourself to direct yourself to the most important tasks first, you will find yourself letting go of tasks that really didn't need to be done at that time. For example, what's more important? Helping your child with homework or getting a load of laundry done?
4. Also take note of the difference between tasks that you NEED to do and those that you WANT to do. Deciding the order in which you prioritize tasks means you start with the needs first and move to the wants afterwards.
5. It has been said before, but learning to say 'no' is important. Try focusing on the important things that will get done because you used that little word to decline a task that was not a part of your priorities. What are some of the things you should say 'no' to?
6. Interruptions are a normal part of life. If you deal with a lot of interruptions in your life, this can put a damper on your priorities. Learn to limit the number of interruptions in your life.
7. Delegating tasks to someone else is a way to free up some of your time for the jobs that are important for you. It may be tempting to take over if the work is not being done quite to your liking. However, you have to learn that done doesn't have to be perfect. Good enough is often just fine--like allowing your child to fold the laundry, even if it's not perfect.
8. Work on overcoming procrastination. Procrastination can waste a lot of valuable time that could have been used for working on your priorities. When you catch yourself procrastinating, be sure to make the effort to take that first step toward completing the task at hand. Taking that first step will help get the ball rolling toward completion.
9. When you prioritize unplanned activities, keep in mind your goals and rely on your instincts. Your effectiveness in prioritizing in these situations depends on the clarity of your goals.
10. When prioritizing, you need to be able to separate the tasks that need doing from the busy work that tends to eat away at your time. Many tasks that fill up your day may not need doing at all or could be done less frequently. Determine what that busy work is in your career and your life.
11. Priorities change as life changes. Revisit and update your priorities on a regular basis.
12. Keep in mind that everything in your life cannot be a priority. There are many important things that will compete for attention over your lifetime and that there are not enough hours in that lifetime to give attention to everything that is good and worthwhile. You have to be selective.
13. Develop systems to help keep things running smoothly. Many times that can be accomplished by using a personal calendar. In family settings, a master calendar is helpful.
14. Keep the option of 'buying time' in mind. If you have an extremely hectic schedule, it may be reasonable to buy time by selecting goods and services that save you from investing time. For example, paying a neighbor to mow your lawn is one way of buying time. What are other ways you can buy some time?
15. Use technology to help you prioritize tasks. Sometimes an important task can be done more quickly with the use of technology. Instead of meeting an appointment in person, can you do it through a conference call or by e-mail?
16. When prioritizing, make sure to include deadlines for each task. It will make tasks easier to prioritize and give you more focus.
17. Last, but certainly not least, you also need to be one of the priorities you set for yourself. It is important to take care of you and make time for yourself.
We all have many things on our list to do and there doesn't seem to be enough time and energy to get it all done. Prioritizing is a way to solve this frustrating problem. Prioritizing is about making choices. Here are ideas to help you prioritize.
1. To prioritize effectively, you need to be able to recognize what is important. The important (high priority) tasks are based on what you value and those that help you achieve your goals and provide meaningful and rewarding long-term results. As you perform different tasks, think about where they fit on your priority list.
2. Making a list of all the tasks that need to be done is a good way to begin prioritizing. Prioritize the items on the list by using the ABC method to rank your priorities. For example, Priority A: Must Do (crucial tasks and commitments to do today), Priority B: Should Do (important things that do not need to be done today), and Priority C: Nice to Do (least urgent tasks).
3. Do not think of your priorities as just jobs that need to be done. As you remind yourself to direct yourself to the most important tasks first, you will find yourself letting go of tasks that really didn't need to be done at that time. For example, what's more important? Helping your child with homework or getting a load of laundry done?
4. Also take note of the difference between tasks that you NEED to do and those that you WANT to do. Deciding the order in which you prioritize tasks means you start with the needs first and move to the wants afterwards.
5. It has been said before, but learning to say 'no' is important. Try focusing on the important things that will get done because you used that little word to decline a task that was not a part of your priorities. What are some of the things you should say 'no' to?
6. Interruptions are a normal part of life. If you deal with a lot of interruptions in your life, this can put a damper on your priorities. Learn to limit the number of interruptions in your life.
7. Delegating tasks to someone else is a way to free up some of your time for the jobs that are important for you. It may be tempting to take over if the work is not being done quite to your liking. However, you have to learn that done doesn't have to be perfect. Good enough is often just fine--like allowing your child to fold the laundry, even if it's not perfect.
8. Work on overcoming procrastination. Procrastination can waste a lot of valuable time that could have been used for working on your priorities. When you catch yourself procrastinating, be sure to make the effort to take that first step toward completing the task at hand. Taking that first step will help get the ball rolling toward completion.
9. When you prioritize unplanned activities, keep in mind your goals and rely on your instincts. Your effectiveness in prioritizing in these situations depends on the clarity of your goals.
10. When prioritizing, you need to be able to separate the tasks that need doing from the busy work that tends to eat away at your time. Many tasks that fill up your day may not need doing at all or could be done less frequently. Determine what that busy work is in your career and your life.
11. Priorities change as life changes. Revisit and update your priorities on a regular basis.
12. Keep in mind that everything in your life cannot be a priority. There are many important things that will compete for attention over your lifetime and that there are not enough hours in that lifetime to give attention to everything that is good and worthwhile. You have to be selective.
13. Develop systems to help keep things running smoothly. Many times that can be accomplished by using a personal calendar. In family settings, a master calendar is helpful.
14. Keep the option of 'buying time' in mind. If you have an extremely hectic schedule, it may be reasonable to buy time by selecting goods and services that save you from investing time. For example, paying a neighbor to mow your lawn is one way of buying time. What are other ways you can buy some time?
15. Use technology to help you prioritize tasks. Sometimes an important task can be done more quickly with the use of technology. Instead of meeting an appointment in person, can you do it through a conference call or by e-mail?
16. When prioritizing, make sure to include deadlines for each task. It will make tasks easier to prioritize and give you more focus.
17. Last, but certainly not least, you also need to be one of the priorities you set for yourself. It is important to take care of you and make time for yourself.
Sunday, April 19, 2009
Everything you want to know about PPF
By - Sandeep Shanbag
Regular readers of this column would know that one of my most favourite investment instruments is the Public Provident Fund (PPF). I strongly believe that every Indian, male or female, salaried or self-employed, married or unmarried, should have a PPF account ticking for him or her.
Leave aside the tax deduction, leave aside the 8% tax-free interest -- this is your social security. Over 16 years, an annual contribution of Rs 70,000 grows to over Rs 21 lakh, which is almost 30 times the annual investment. The capital built over time can serve multiple purposes - catering to children's education, medical emergencies and even retirement.
Apart from the tax deduction under Sec 80C and the 8% tax-free interest, the general framework of a PPF account has several other features and nuances. Based on feedback received from readers, today's article focuses on some of these key but lesser known aspects of PPF.
Withdrawals
Many readers have complained that even bank officials aren't aware of the rules, especially on how much can be withdrawn and when.
It is to be noted that though PPF is a 15-year instrument, it ignores the year of opening the account. Therefore, it actually becomes a 16-year account and the account holder can contribute to it even during the 16th financial year, even on the last day. This creates confusion in case of withdrawals.
Let's take an example. Let's suppose your account was opened in FY 1993-94. Maturity date: Add 15 to the financial year end => 1994 + 15 = 2009. Account matures at the end of the 2008-09 financial year, on April 1, 2009.
First withdrawal date: Add 6 to the financial year end => 1994 + 6 = 2000. It can be effected in 1999-2000.
Amount of first withdrawal: The 4th preceding year will be 2000 - 4 = 1996 (FY 95-96) and preceding year 2000 - 1 = 1999 (FY 98-99). Amount withdrawable in the 7th year, FY 1999-2000 is 50% of the balance to the credit as on March 31, 1996 or March 31, 1999, whichever is lower.
Slightly complicated, but once you go through it a couple of times, it becomes clear.
Reviving dead accounts
Another frequently asked question is to do with forgotten, 'dead' accounts. In a specific case, a reader's father had opened an account for her some seven years back but she had never bothered much about it. Now, seven years on, could she open a new account or could something be done about the old one?
Well, if the investor fails to subscribe even the minimum Rs 500, the account is considered as discontinued. Loans and withdrawals are not available from a discontinued account. At the end of the term, the investor will be paid the balance with accrued interest for the full term.
However, the good news is that it is possible to revive the old account by contributing Rs 500 with a penalty of Rs 50 for each year that the account lay dormant. This fact is not known to many. They feel that very old discontinued accounts cannot be regularised. Note that the penalty does not attract any interest or deduction.
Post-maturity treatment
By far the most commonly asked question is to with post-maturity treatment of PPF. In other words, what happens after the 16 year period is over?
Though some investors start a fresh PPF account, the idea of keeping funds locked in for another 16 years does not appeal to all. Especially to investors of an advanced age who look towards an element of liquidity in their investments.
But did you know that once the initial term of 16 years of PPF is over, you can extend the account for 5 years at a time and that too indefinitely? In other words, instead of 16 years, the same PPF account can be converted into a 5 year scheme and what's more -- with additional liquidity than what it offered during the initial term. If this feature of PPF is used optimally, it can be literally converted into a 5-year deposit that offers the 8% tax-free interest, tax saving under Sec 80C and immense liquidity - and all this for your lifetime.
As already mentioned, at its maturity, the PPF account can be continued for a block period of 5 years. This facility is available for any number of block periods - there is no limit on how many times you can extend the account.
Now, this continuation can be with or without further contributions. The only thing that investors should be careful of is that once an account is continued without contributions for any year, the subscriber cannot change over to with-contributions extension. [Notification F.3(6)-PD/86 dt 20.8.86].
Liquidity
An investor continuing his account with fresh subscriptions can withdraw up to 60% of the balance to his credit at the commencement of each extended period in one or more instalments, but only one per year. For example, say the term of your PPF account is ending on March 31, 2009. The balance at that time in the account is say Rs 15 lakh. Now, you may opt to continue the account for five more years (i.e. till March 31, 2014) and invest regularly as you have been. However, over the period of five years till March 2014, you may withdraw Rs 9 lakh, which is 60% of the balance to your credit as on March 31, 2009.
What if you wish to continue but not invest further? That too is possible. In case the account is extended without contribution, any amount can be withdrawn without restriction. However, only one withdrawal is allowed per year. The balance will continue to earn interest till it is completely withdrawn.
Post-maturity continuation
There are a couple of formalities for declaring your intentions regarding post maturity continuance. Form-H is to be used to declare the intention of continuing the account with subscription for each extended period. It should be filed before the first contribution is made for the first year of extension. In its absence, the account will be treated as without-subscription extension. Fresh contributions made to such accounts will enjoy neither the deduction u/s 80C nor the interest (MoF (DEA) 7/21/88-NS-II dt 10.8.90).
Last point
It is also possible to invest Rs 1 lakh in PPF for those who wish to do so. Remember, Sec 80C doesn't impose any sectoral caps on investments. It is PPF rules that limit the investment to a maximum of Rs 70,000 in the PPF accounts of self and minor child. However, tax deduction is also available under PPF for investments in the name of spouse and children. Consequently, one can invest Rs 70,000 in one's own account and the balance Rs 30,000 in say the spouse's or major child's account and thereby avail of the full deduction of Rs 1 lakh through PPF.
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