...VOLUNTARY PENSION SCHEME: VIABLE ALTERNATIVE TO PROVIDENT FUND After studying the Chilean model, the Securities and Exchange Commission of Pakistan (SECP) last year took the first step towards pension reform by granting licenses to four private sector asset management companies to act as pension fund managers under the recently promulgated Voluntary Pension System Rules. Pension reforms are essential to ensure that the macroeconomic gains of the last few years are passed on to the masses. While there has been an exponential rise in consumer spending, the saving rate has remained alarmingly low. Moreover, due to inflationary pressures, the real value of money is continuously reducing. Cognizant of this fact, the government introduced the Voluntary Pension Scheme (VPS). Currently both private and public sectors offer occupation savings schemes in the shape of provident funds and gratuity schemes. However, in their truest sense, provident funds and gratuity schemes are not retirement products. Fund withdrawal, job switching and loans against the schemes are a norm. Invariably, individuals are therefore left with depleted savings at the time of retirement. The introduction of VPS, managed by private pension fund managers, will aid mobilisation of savings, which in turn will help individuals become self-reliant in old age, reduce financial liability for government and employers at large and relieve financial obligation for younger generations. The salient features of VPS are...
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...Lesson 13: Investing in Mutual Funds What is a mutual fund? * A mutual fund is a professionally managed pool of money invested in stocks, bonds and other securities. * By purchasing mutual funds, small investors can easily diversify their investments and enjoy the benefits of professional management. * Investors own units or shares in the fund and benefit proportionately from any increase in value and/or income earned by the investments owned by the fund. The Reasons Investors Choose Mutual Funds | Mutual funds have grown in importance in Canada over the last twenty-five years. As of February 2008, there were 2,038 mutual funds with a total worth of nearly $679 billion – up from only $3.5 billion in 1981.The two major reasons investors choose mutual funds are: 1. Professional management - although there is no guarantee that the fund will outperform the market. 2. Diversification - by asset class (i.e. by holding a mix of stocks, bonds and money market investments) or within each asset class (i.e. by holding a variety of securities within each class). The risk of mutual funds arises from the risks associated with the investments they hold. * For example, a bond fund will be subject to interest rate risk – as interest rates rise, the value of the bonds owned by the fund will decline. | Mutual Funds With and Without Loads A load is a sales commission. In a load fund, the investor pays a commission every time he or she buys units (front-end load)...
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...CHAPTER 6 – RRSP & OTHER SAVINGS PLANS Why a limit? * Each individual is only entitled to save a specified amount in a registered retirement savings plan * Through pension adjustment (PA), those who participate in employer sponsored plan are limited in how much they can give to RRSP * Limit is based upon earned income in prior year * RRSP contribution limit is cumulative....any amounts not used can be carried forward; therefore, all Canadian taxpayers should try to accumulate contribution room as early as possible. How about investment income???? Is that the same???? Not quite.....why??? The income earned on investments is not “earned income” --- which can be broadly defined as income that was “actively earned”. This leads us to the review of the formula for RRSP contribution limit and the definition of “earned income”. RRSP Contribution Limit: * Start with: * Lesser of: * A) 18% of prior year’s earned income (see below) * B) 2013 money purchase limit * Less: pension adjustment for prior year (from Module #5) * Less/add: PSPA (module #5) * Add: unused RRSP contribution room (carryover of amounts earned but not contributed) * Can be made from January of THAT year to 60 days afte the beginning of next year - contriubtions made in the first 60 days of the year can be used for previous year or the year of contribution Earned Income - Defined: * Generally, excludes income that is earned...
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...Losses • Tax Loss Selling What are Tax Deferral Plans? • Registered Pension Plans (RPPs) • Registered Retirement Savings Plans (RRSPs) • Registered Retirement Income Funds (RRIFs) • Deferred Annuities • Tax-Free Savings Accounts (TFSA) • Registered Education Savings Plans (RESPs) • Pooled Registered Pension Plans (PRPPs) What are Tax Planning Strategies? Summary 25•2 © CSI GLOBAL EDUCATION INC. (2013) LEARNING OBJECTIVES By the end of this chapter, you should be able to: 1. Describe the features of the Canadian income tax system, calculate income tax payable, and differentiate the tax treatment of interest, dividends and capital gains (and losses). 2. Calculate capital gains and capital losses and assess strategies for minimizing tax liability. 3. Describe and differentiate the different tax deferral plans and their uses. 4. Identify basic tax planning strategies and discuss their advantages. TAXES AND INVESTMENTS It is often said that there are only two certainties in life: death and taxes. Taxes are a reality of life for Canadians and they affect many personal and investment decisions. Complicating matters is the differential tax rates for income, dividends, and capital gains, not to mention continually changing legislation announced each year in the Federal Budget. The taxation of investment income also affects retirement planning through tax-favoured investments such as registered retirement savings...
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...Planning for Retirement Planning for retirement doesn’t usually cross the minds of young people who feel as if they have the rest of their life ahead of them. What they don’t realize is that life “happens” and then you realize you should have started planning for retirement many years ago. When you start planning for retirement at an early age, you are able to take advantage of investing and the power of compounding interest over the years, which will add up when you are ready to start using your retirement account. If you withdraw from your retirement account before age 59 ½ then you will be penalized by having at least 20 percent taxes taken out and you will be assessed a penalty fee when you file your taxes next year. Before you withdrawal any money from your retirement account, weigh the pros and cons and if it is for a major life event or because you want to purchase a midlife crisis toy. While one is planning for retirement, the best way to figure out what you will need when you retire is to conduct a financial analysis. You may want to start by looking to see what assets you possess. Assets are defined as cash, personal property, personal possessions and investments; cash in your checking and savings accounts, a house, car, television, etc. (Kapoor, Dlabay, & Hughes, 2010). When you retire, a house will probably be the most valuable asset you own. If you purchase a house in the early years, there is a possibility that you have only a few...
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...Life, the staple of Britain’s pension industry, with over a million policyholders, including a plethora of the biggest British companies, the parliamentary pension fund, the Personal Investment Authority, had no choice left but to announce that it was up for sale. To be able to cover the liability worth about £1.5 billion, it froze the value of all current with-profit policies and imposed an exit penalty of 5% on withdrawals. Fifteen prospective purchasers looked at the books of the company, but all but one – Prudential – walked away from a deal. The final straw came in December 2000, when Prudential reached the decision not to buy Equitable Life. Following the decision, Equitable doubled the exit penalty for withdrawals to 10% and closed the fund for new investors. Numerous legal actions, investigations, and reports followed. Yet the debacle is still far from over, and new inquiries into this perhaps the most shocking collapse in the insurance industry keep pouring. Equitable Life’s growing problems and policyholders’ growing despair grab headlines in British press almost daily. On December 12, 2003, BBC News ran an article on Ann Berry, 65, a former physiotherapist from West Sussex, who should have been enjoying her retirement. Ann saw her £6,000 pension slashed by nearly a quarter in the past 18 months. "It is very worrying, I did everything the government asked me to do - I saved hard for my retirement," Ann told BBC News Online. "Now my pension is being used by Equitable as...
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...QUARTERLY NEWS AND TOOLS FROM TIAA-CREF | SPRING 2005 Three Steps To Improve Your Financial Planning Understand your savings and investment habits Create a winning budget Find the right retirement product for your needs What’s the future of Medicare? COMMENT BERT SCOTT Designing Products to Meet Your Financial Needs T hroughout our 87-year history, TIAA-CREF has been an innovator in the retirement investment field. We created the variable annuity, pioneered the use of real estate and foreign investing in pension plans and helped bring inflation-linked bonds to America. But stay tuned; there’s more to come. As the leader of TIAA-CREF’s Product Management area, I am proud to be part of the team that will be bringing you our newest products and services. At Product Management, TIAACREF’s “manufacturing” center, top-notch professionals develop new investment and insurance products and make sure those we already offer are still working for you. In a continually changing financial services marketplace, our mission remains simple: to provide the tools you need to help reach your financial goals. A large part of our work involves listening to you. This enables us to know what you need now, and what you may need down the road. So we begin the product design process by asking questions: What do you, our clients, want to accomplish? ■ How will those goals change over time? ■ What do you like about what’s currently available to you? ■ What do you need that we don’t offer...
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...Sentara Healthcare for my subject is that the organization offers one of the most diverse and comprehensive benefits packages I have ever seen. Body Sentara offers a Flexible Benefit Plan (FBP) that allows employees to choose from numerous grouped plan options, or employees can pick and choose individual benefits. Employees have the option of choosing health coverage including medical insurance, dental insurance, or vision insurance. For other health insurance, qualifying employees may choose to continue health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Other benefits available to employees include: Pension plan, accidental death and dismemberment, health care flexible spending account, health savings account, life insurance, long-term disability, short-term disability, 403(b) retirement plan, a...
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...Manning & Napier Advisors, LLC Defined Benefit Pension Plan Investing: Time for a Solution that Works June 2011 Approved CAG-CIT PUB015-R (10/11) Introduction The beginning of the 21st century has been perhaps the most trying environment ever for defined benefit pension plan sponsors. This is perhaps best evidenced by the decline in the number of single-employer defined benefit plans covered by the Pension Benefit Guaranty Corporation (“PBGC”), which has gone from 53,589 in 1995 to 1 27,647 in 2009 . Clearly, two of the worst bear markets in U.S. history and a generally low interest rate environment have greatly contributed to today’s pension crisis. However, the investment strategies employed by many pension plans over this period have failed to recognize the intertwined relationship between plan assets and plan liabilities. Likewise, many investment strategies have lacked the flexibility needed to meet plan goals across a wide range of market environments. Understanding the Investment Needs of Defined Benefit Pension Plans An important first step in developing an investment strategy for any pension plan should be to understand the nature of the plan’s liabilities, which also means recognizing that the asset/liability relationship exists. Too often, the investment industry talks about pension plans as if they are one homogeneous type of investor, when, in fact, each plan has its own unique characteristics and needs. Clearly, a well-funded, young plan...
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...Personal Financial Planning “Cash Cows, Pigs and Jackpots – David Trahair” Presented to Professor E. Otuteye. By Andre Julien Caron 3289440 University of New Brunswick, Fredericton, New Brunswick. Canada ------------------------------------------------- Executive Summary This short book review will attempt to review the book “Cash Cows, Pigs and Jackpots” written by David Trahair. The aim of this review will be to give a detailed outlined of each chapter, a personal review as well as a conclusion. This book outlines many ways to save money as well as how to be efficient in terms of spending and saving. The author attempts to prove that every person should try to save in order to retire comfortably while advocating the principal of a “cash cow”. Meaning an asset that continues to produce income over its entire lifespan. Examples of a cash cow can be summed up to a dairy cow, meaning that even after the dairy cow is purchased and paid for, it continues to provide income for the owner in the form of milk. The book also attempts to reflect on different investments products such as Tax Free Savings Accounts and RRSP’s and the difference (Pro’s and Con’s) associated with each of these. This book also outlines the difference between home ownership, renting and condos. Each of these residential properties has significant Pro’s and Con’s that should be considered by all citizens that are actively looking to purchase a new residential property. Chapter...
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...Introduction In Malaysia, Employee Provident Fund (EPF) is known as Kumpulan Wang Simpanan Pekerja (KWSP). In brief, EPF is a mandatory savings scheme for every employee from Private and Non-Pensionable Public Sector in Malaysia. 11% of the employees’ monthly gross income would be contributed to the EPF. In addition, the employer would contribute certain percentage to the employees’ EPF accounts. For wages of RM 5,000 and below, the employer would contribute 13% of the wages to the employees’ EPF account, whereas for those wages exceeding RM 5,000, the employer’s contribution would be only 12%. The contribution would then be invested in a number of approved financial instruments such as Malaysian Government Securities, Money Market Instruments, Loans & Bonds, Equity and Property to generate income. The EPF ensure us to have a secure savings and reasonable dividends. A minimum dividend of 2.5% is guaranteed annually. The actual dividend rate declared would be varied according to the investment return made in approved financial instruments as stated. The annual dividends are calculated based on the opening balance in the EPF account as at 1 January of each year, while the monthly dividends would be credited into the EPF account based on the monthly contributions received. It could be observed that enormous amount of the old folks are currently working as taxi drivers, cleaners or even security guards, even after their retirement ages. That is probably because they have spent...
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...One portfolio for life? | ------------------------------------------------- Top of Form Bottom of Form Written by Paul Merriman and Richard Buck | September 23, 2005 | Many do-it-yourself investors want solutions they can implement once, then leave alone. Can individual investors adopt a strategy that's so good it will meet their needs from age 21 to 91? In this article, FundAdvice.com Publisher Paul Merriman and Managing Editor Richard Buck tell why they think the answer is yes. Much of the work we do is focused on helping individual investors find just the right combinations of assets and forms of investment ownership (IRAs, taxable accounts and the like) to meet their individual needs. Since everybody’s financial situation is unique and usually evolving, we are not big fans of one-size-fits-all solutions. We spend lots of time helping each person determine his or her risk tolerance. This is one of the most valuable things professional advisors do for their clients. But we know that in real life many investors do not have professional help. Realistically, many do-it-yourself investors simply don’t take the time to adjust their investments to their changing needs and tolerance for risk. We know that many people want solutions they can set up once and then forget about. We can't ever know in advance what the very best strategy will be. But here's an interesting question: Is there a single portfolio that will do a good job of meeting the needs of investors for...
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...everything you've been led to believe about your 401(k) retirement plan is not only untrue, but just the opposite of what you have been told? Wouldn’t you want to know immediately while there was still time to capture the American Dream? Those nearing retirement are extremely concerned, and rightly so, that a collapse of the stock market could spell possible disaster for their 401(k) and other retirement investments. The credit crunch and housing meltdown of 2007-08 are stark reminders of the dot.com debacle of 200002 that halved market values, forcing retirement for many to be postponed or scaled down in quality. Many lost their retirement, jobs, homes and lifetime savings. The information contained in this publication may well be the most important information that you have read and could affect the quality of your planned retirement for years and/or the rest of your life. In addition to learning important retirement information, you will learn the 7 S.E.C.R.E.T.S. of the Super Wealthy, how to remove your money tax-free from your company’s 401(k) plan and place it under your own control without stopping work or dropping out of your employer’s plan, and how to keep more in your estate while passing more to your family members or other designated heirs by using tax savings strategies that are the playground of the wealthy. Our goal with the production of this article is to better inform you regarding your future retirement planning and to motivate you into making quality financial...
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...Act 766 National Pensions Act, 2008 ARRANGEMENT OF SECTIONS Section PART ONE—ESTABLISHMENT OF CONTRIBUTORY THREE-TIER PENSION SCHEME AND NATIONAL PENSIONS REGULATORY AUTHORITY Contributory three-tier pension scheme 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. Establishment of contributory three-tier pension scheme Object of the scheme Contributions to the scheme Management of the schemes National Pensions Regulatory Authority Establishment of the Authority Object of the Authority Functions of the Authority Governing body of the Authority Tenure of office of members Meetings of the Board Disclosure of interest Establishment of committees Allowances Regional and district offices of the Authority Ministerial directives Administrative and financial provisions Chief Executive Officer Functions of the Chief Executive Officer Deputy Chief Executive Officer Functions of Deputy Chief Executive Officer Appointment of Solicitor Secretary Appointment of other staff Funds of the Authority Accounts and audit Annual report and other reports Miscellaneous provisions to Part One Engagement of consultants and experts Prohibition of unauthorised disclosure of confidential information Power to inspect business premises Budget and work programme Regulations PART TWO—BASIC NATIONAL SOCIAL SECURITY SCHEME Establishment of the Trust 30. Basic national social security scheme 31. Exemption from the basic national social security scheme ...
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...School. JULIO J. ROTEMBERG JOHN T. GOURVILLE New York Life and Immediate Annuities In July 2009, Ted Mathas, the chairman and CEO of New York Life Insurance Company (NYL), was satisfied with the bet he had placed on immediate annuities back in 2002. An immediate annuity was a financial product sold to a current or soon-to-be retiree. In the annuity’s simplest form, a 65-year-old person would give NYL a lump sum, say $100,000. In return, NYL would provide that person with a guaranteed income stream, say $650 a month, for the rest of his or her life. In 2002, immediate annuities were a somewhat neglected $120 million annual business for NYL. But because Americans were living longer and because corporations were cutting back on their retirement benefits, Mathas saw immediate annuities as the ideal vehicle to guarantee retirees a lifetime income. By 2008, first under Mathas and later under NYL’s senior vice-president Paul Pasteris, immediate annuities had grown into a $1.4 billion business for NYL, making the company the undisputed leader in the field (see...
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