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Gold Monetisation Scheme

Thought that the gold you own is only to wear in high-end weddings and is of no use to you. It is definitely considered as one of the best forms of Emergency Funds but beyond that what. How about we tell you that there is a way to earn interest in a safe way on your gold via Gold Monetisation Scheme. This scheme helps you to monetize the gold that you have and earn interest on the same.

The Gold Monetisation Scheme allows you to earn interest on the gold you own. It also saves the storage cost for gold. To gain benefit from the scheme, you need to deposit gold in any physical form, jewelry, coins or bars. This gold will then earn interest based on its weight. You get back your gold in the equivalent of 995 fineness gold or Indian rupees, as you desire (this option is to be exercised at the time of deposit).

Eligibility –  Restricted for sale to resident Indian entities, including individuals, HUFs (Hindu
undivided families), trusts, universities, charitable institutions

Tenure –  One to three years (short term); Five to seven years (medium-term); 12–15 years (Long term)

Interest: Both principal and interest to be paid to the depositors of gold are ‘valued’ in gold. For example, if a customer deposits 100 gm of gold and gets one percent interest, then, on maturity, he has a credit of 101 gm. The interest rate is decided by the banks concerned.

Minimum Deposit – 30 gram (any form bullion or jewelry)

Interest & Taxation – Interest paid in gold terms. Fully tax-exempt, no capital gains

Remember that since the gold that you deposit will be melted, you won’t get back the gold in the same form as you had deposited.

How to Open an Account – You need to first go to a collection and purity-testing center to ascertain the purity of your gold. You can deposit your gold if it clears the criterion set for gold content. You will be provided with a certificate of purity and gold content. You will need to present the certificate to the bank where you want to open the account.

Redemption – you can take back gold or cash at redemption but the preference must be stated at the time of deposit.

Wealth Cafe Actionable – In the scheme, you give your gold to the bank which is then melted so if its jewelry ensure that you won’t get it back. Also, it is bank-specific so be sure to go to a good bank for this scheme to be sure of getting your returns and money/gold back.

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Investing in Gold Online – Digital Gold

In today’s time when we can do every other transaction online then why not invest in Gold. Almost all the wallets and payment portals let you invest in 1 gram 99.99% finesse gold.

What is Digital Gold:

Digital Gold is relatively new in the market. It is a simple way to buy and sell gold instantly. With physical gold one has to save enough, go to the store and buy the same. In physical gold, you either buy it as jewelry or coins. Digital Gold as the name suggests can be bought online in digital form online. The same is in your online account. You will have to sell the same to buy gold jewelry, coins or get cash in return.

How to buy Digital Gold

You can get digital gold via any of the following portals:

  1. GooglePay
  2. Paytm
  3. Phone Pe
  4. HDFC Securities
  5. Motilal Oswal Securities
  6. Stock Holding Corporations of India

Where is your Gold kept?

You gold is stored in vaults of MMTC-PAMP tagged in your name. MMTC – PAMP is a joint venture between Switzerland based bullion brand, PAMP SA, and MMTC Ltd, a Government of India Undertaking.

Features:

  1. A customer using either of the two platforms can buy 24 Karat / 999 fineness gold.
  2. Some of these portals allow you to buy gold with a minimum value of INR ONE.
  3. You can buy & sell gold anytime even on public holidays and weekends.
  4. There is a limit of tenure up to which you can invest in digital gold after that you can either convert it to jewelry or cash.
  5. It is important to keep your account with these portals active – Paytm has a time period of 6 months. Without any transactions for 6 months your account is inactive.
  6. Non-cancellation – Once you have placed a transaction (buy or sell) on these platforms, you cannot cancel the same.

What to do with digital gold

You can use your digital gold to buy gold jewelry with partner jewelers of the portals you are using to buy digital gold, sell and get cash on prevailing rates or get gold coins in return.

However, the price at which a customer can sell the digital gold back to Paytm is slightly less than the price at which he can buy the gold, says Hegde. This is due to various transaction-related costs including taxes, bank charges for processing your payment, technology costs and hedging costs since the market prices may fluctuate between a customer placing an order and MMTC-PAMP buying the gold. Similar costs are involved while selling of gold by MMTC-PAMP, too, when a customer sells gold on the Paytm. The same must be rechecked with other portals as well.

It is important that you check the costs that you have to bear when you sell your digital gold for cash or the making charges for coins and any other charges that may be applicable.

Is digital gold safe?

There has been some debate around it being a safe investment option or what guarantee does an investor have?  One of the biggest risks of investing in digital gold is that it is not regulated yet. All these platforms – Paytm, Phone Pe, Google pay and others act as a platform or payment portals to help you buy gold which is safely kept with MMTC PAMP, it is not with these portals. Hence, it is very important to know where and how you are investing because if tomorrow any of these portals, you as an investor should have a redressal system in place to go to or approach MMTC PAMP directly. There are some grey areas on this right now. The convenience of investing in gold through these portals comes at a cost and you must be aware of the same.

Wealth Cafe actionable – Digital gold is a very interesting new addition to the world of investing in gold and it allows you to invest in smaller proportions in gold. However, there are more regulated means of investing in gold where the risk is relatively less.  

 

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Sovereign Gold Bonds

Global gold prices have risen 20% in the last one year and are reaching a new high of approximately 39,000 INR.

Gold, typically, flourishes as a safe haven in times of uncertainty, where people are unsure of the movements in the Equity /Debt Markets. India is not immune to these conditions. “A number of global issues have surfaced such as the Iran conflict and trade wars, and gold serves as a store of value in such situations. With investor interest rising in the yellow metal, we tell you about some of the options available for investing.

Instead of going for physical gold investments, there are other ways of investing in gold like the Sovereign Gold Bonds, Golds Exchange Traded Funds (ETFs), Gold Monetisation Scheme, Indian Gold Coins, and Mutual Funds.

With the intent to provide gold-like returns, along with some interest, the government has launched the Sovereign GoldBond Scheme. Sovereign Gold Bonds (SGBs) were
introduced in tranches. The first tranche was offered in November 2015. In the financial year 2019-20, four tranches of SGBs will be issued every month from June 2019 to September 2019.

Price of SGB – The price of the Gold Bond is linked to Gold Prices. If the gold prices go up, then your bond value will increase and if not, then another way around. Gold Bonds are issued in multiples of 1 gram of gold. You can hold these bonds in paper physical form. The risks and costs of storage are eliminated. The risks and costs of storage are eliminated.SGBs bonds are free from issues like making charges and purity. These bonds are held in the Demat form, eliminating the risk of loss of scrip.

Interest Payments – Given that these are bonds i.e paper form of gold investments, an interest of 2.5% is paid semi-annually on the initial amount of investment. This Interest is taxable.

Eligibility – Restricted for sale to resident Indian entities, including individuals, HUFs (Hindu undivided families), trusts, universities, charitable institutions.

Investment Amount – Investors are required to buy a minimum of one gm of gold. The maximum limit that can be subscribed is four KG of gold for an individual in a financial year.

Tenure – The bond is of eight-year with an option to exit after the fifth year onwards. However, gold bonds can be transferred to the stock market.

Taxation – Capital gain tax arising on the redemption of SGB to an individual has been exempted. The indexation benefit will be provided to LTCG arising to any person on the transfer of bonds.

Where & How to Buy – Gold bonds can be bought through banks, post offices and the Stock Holding Corporation of India. They are available both in Demat and paper forms. Know-your-customer (KYC) norms are the same as those for the purchase of physical gold.

The main objective of the Sovereign Gold Bond Scheme is to reduce the demand for gold in the physical form by encouraging people to buy it in the paper form. The rate of interest for 2019–20 is fixed at 2.50 percent per year, payable on a halfyearly basis.

Wealth Cafe Actionable – Gold Bonds are a great form of Investments for individuals who want to make long term ‘Investment’ in gold for a period of more than 5 years and do not want to go through the hassle of purity, safety, and other risks.

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Why you should avoid investing all your money in a FIXED DEPOSIT?

First job – first income – first savings – first investment is always a fixed deposit. The moment there is any lump sum savings in our bank account, we make a fixed deposit.

Recurring deposits are also a type of fixed deposits where a fixed amount is invested monthly in the deposit account.

Most either invested in a fixed deposit or a recurring deposit once in our lifetime. Fixed Deposit is the stepping stone to our investment journey.

Fixed Deposit is a low risk – low return investment product.

Return: A fixed deposit currently gives a return of 7%-7.5% before tax and after taking into an account the tax rate of 30% on the income from fixed deposit. It would be anything between 5.75% – 6%.  Hence, the return from a fixed deposit is not a lot.

Risk: Investors assume that Fixed Deposit is the safest investment option and nothing can go wrong with them. It is important to note that a small amount of risk is always associated with every investment. The RBI ensures a balance of Rs. 1 lakh per account holder in case of default by any scheduled bank. Anything more than that in any bank is not insured and hence, is at risk, if the bank was to shut down. So, if you have a deposit of 5 lakh rupees with a scheduled bank and it was to go bust, RBI will only pay you back 1 lakh rupees. Also, it is important to know that the banks are governed by RBI and the big banks will not just shut down tomorrow, there is a relative risk which we all bear when we take a fixed deposit.

Co-operative Banks: Co-operative banks are not scheduled banks. They generally give a return of 1% or 2% more than the other private/public banks making a fixed deposit with these banks a  very lucrative investment option. However, a higher return means higher risk. Co-operative banks are notoriously known for shutting down without any prior notice and the government may not come to rescue these banks. So, the amount of risk that you take for 1% extra return is not justifiable and it is not a MEASURE RISK and hence, you should try and avoid the same.

Why do you invest?

  1. You can own what you cannot own today
  2. You can own more than what you want to own today but cannot.

Basically, your investments should beat inflation. Because with time, things keep getting more expensive at the rate of inflation, so your money today has to grow at a rate higher than the inflation rate for you to be able to afford what you cannot afford today.

The current rate of inflation is 5% – 5.5% and hence, your investments must fetch you more than this to help you get whatever that you want to own.

Are your fixed deposits giving you a return higher than the inflation rate?

We have tabulated below to explain how your money grows in a fixed deposit versus in a mutual fund. This growth in money is compared to the price of movie tickets and how the same has grown expensive over a period of time.

In this table, you can see the difference in the price of a movie ticket, 10 years ago and today. The same is compared to the growth in your fixed deposit investment @current rate of 6%.

Whereas, if you invest in mutual funds, your money would grow @15% and after 10 years, you will have 4 times the value and in 20 years, 10 times the value you get from a fixed deposit.

You should just not invest your money, but you should invest it right to get more than what you can today.

If you can 10 years from today exactly what you can today, what is the point of investing. This is what fixed deposit does to your money. It does not make it work hard enough for you to be able to enjoy life. By investing in a fixed deposit, you will only be able to own what you have today, tomorrow, not really a lot more.

Wealth Cafe Actionable – Invest in fixed deposit when you are closer to your goal and cannot afford to take a risk. You can also invest for your emergency fund in a fixed deposit as the returns are similar to a liquid fund but fixed deposits are safer. The only problem with fixed deposits is that they are illiquid and you have to bear a penalty for premature withdrawal of a fixed deposit.

 

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Why do Women need Financial Education and Money Management Skills?

Apart from the fact that everyone (men and women alike) should be aware of how to manage their money appropriately. The socio-economic situation around us increases the need to know how to grow one’s wealth for women.

1. The cost of being a woman – Spendthrift nature

Women have always been considered as spenders. The temptation to shop and hoard things is perceived as a common womanly trait. Moreover, it is considered okay for women to do the same. Statistically, women are the best buyers – so things are marketed towards women including the men’s products. Discounts, offers and sale days such as Women’s Wednesday Bazaar are specifically women-oriented because we make the most of such days.

Due to this innate spendthrift nature, even the banks have introduced special ‘Woman’ bank accounts with special ‘Debit/Credit card’ which allows them additional points for shopping. Women are encouraged to let their purse loose at every other step.

2. The cost of being a Woman – More expensive things

A study from New York – has shown that woman pays thousands of dollars (equivalent to lakhs of INR) over their lives to purchase similar products as men. Women’s products cost 7 percent more on average than similar products for men across toys, clothing, accessories, personal care, home, and health. The report also pointed out that although gendered products often differ in branding, construction, and ingredients, shoppers do not have control over those factors and must purchase what is available at a higher cost. Women have no choice but to buy expensive products.

Apart from this price differential treatment, there are certain expenses that we have to incur such as sanitation, hygiene, skin care because of our body, biology, and gender.  These are certain basic expenses which cannot be avoided.  So, how do we continue to afford everything? We cannot stop using the basic things which have become a part of our life just because it’s more expensive as compared to men. Should we just start buying men’s products which are similar to ours?

3. The disparity in the pay scale

According to The Global Wage Report 2016-17 published by the International Labour Organization, the gender pay gap in India amounts to 30%. To put in simple terms, men get paid 30% more just for being born as men.

Apart from getting paid less, the number of paid working days are lesser than men, women tend to take more leaves over their working career as compared to their men. They do so during their pregnancy, marriage, taking care of their children and elderly in the house resulting in lost income and depleted savings.

4. Longer life expectancy

Women live longer than men by an average of 5 years. So, we need more money for our retirement and insurance for a longer duration than men. Further, a woman has a 50per cent chance that at some point in her life, she will need long-term care – meaning a period of at least 90 days when she requires assistance with activities like dressing, eating, and bathing.

5. No support to fall back on

Most of us are used to being dependent on our families or partners for financial support. We have always had someone to fall back on in case of a financial emergency. 

Women who are suddenly single, like divorcees and widows, obviously are at an immediate disadvantage. They do not have that financial backing. 8 out of 10 women are responsible for taking care of their finances at some point in life.

6. Ability to take decisions

Researchers have proven that women have the ability to make smart decisions under pressure and are not carried away by market trends and investment biases. Women’s behavior with respect to handling money is very stable. This is also the reason why women asset managers for mutual funds are very sought out for.

Wealth Cafe :

Women have limited income and a list of unavoidable expenses.

The only way to deal with this is to grow your wealth by yourself. Learn about the farfetched world of finance.

Our workshops are designed to you (women) acquire the skills of financial planning and money management. Rather than leaving the money matters to the other members of the family, money education will make you more independent and empowered to make smart money decisions confidently. 

Don’t just be a feminist, be a ‘fe-money-ist’.

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Atal Pension Yojana – Things you must know

Atal Pension Yojana (APY) is a pension scheme mainly aimed at the unorganized sector such as maids, gardeners, delivery boys, etc.

The goal of the scheme is to ensure that no Indian citizen has to worry about any illness, accidents or diseases in old age, giving a sense of security. Private sector employees or employees working with such an organization that does not provide them pension benefit can also apply for the scheme.

There is an option of getting a fixed pension of Rs 1000, Rs 2000, Rs 3000, Rs 4000, or Rs 5000 on attaining an age of 60. The pension will be determined based on the individual’s age and the amount that you contribute towards it each month before you retire.

The Government would also make a co-contribution of 50% of the total contribution, or Rs. 1000 per annum, whichever is lower, to all eligible subscribers who had joined between June 2015 and December 2015 for a period of 5 years i.e., for financial years 2015-16 to 2019-20. To avail this additional contribution from the government, the subscribers should not be part of any other statutory social security schemes (For eg: Employee’s provident fund), or should not be paying income taxes.

2. Eligibility

To avail benefits from the Atal Pension Yojana, you must fulfill the below requirements:

  1. Must be a citizen of India.
  2. Must be between the age of 18-40
  3. Should make contributions for a minimum of 20 years.
  4. Must have a bank account linked with your Aadhar
  5. Must have a valid mobile number

Those who are availing benefits of Swavalamban Yojana will be automatically migrated to Atal Pension Yojana.

3. How to Apply?

Follow these steps to avail the benefits of APY

  1. All nationalized banks provide the scheme. You can visit any of these banks to start your APY account.
  2. Atal Pension Yojana forms are available online and at the bank. You can download the form from the official website.
  3. The forms are available in English, Hindi, Bangla, Gujarati, Kannada, Marathi, Odia, Tamil, and Telugu.
  4. Fill up the application form and submit it to your bank.
  5. Provide a valid mobile number, if you haven’t already provided to the bank.
  6. Submit a photocopy of your Aadhaar card.

You will be sent a confirmation message when the application is approved.

4. Monthly Contributions

The monthly contribution depends upon the amount of pension you want to receive upon retirement and also the age at which you start contributing. The following table tells you how much you need to contribute per annum based on your age and pension plan.

5. Important Facts to know about APY

  1. Since you will be making periodic contributions, the amounts will be debited automatically from your account. You need to make sure that you have sufficient balance in your account before each debit.
  2. You can increase your premium at your will. You just have to visit your bank and talk to your manager and make the necessary changes.
  3. In case you default on your payments, a penalty will be levied. A penalty of Rs. 1 per month for a contribution of every Rs. 100 or part thereof.
  4. In case you default on your payments for 6 months, your account will be frozen and if the default continues for 12 months, the account will be closed and the remaining amount will be paid to the subscriber.
  5. Early withdrawal is not entertained. Only in cases like death or terminal illness, the subscriber, or his/her nominee will receive the entire amount back.
  6. In the event that you close the scheme before the age of 60 for any other reason, only your contribution plus interest earned will be returned. You will not be eligible to receive the government’s co-contribution or the interest earned on that amount.

Wealth Cafe tip – This scheme is a helpful scheme for the unorganised sector as it will provide monetary support post their retirement (the age after which they cannot do labour infused work). People from organised sectors, options like PPF, EPF and Mutual funds are better for their retirement/pension planning.

 

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Pradhan Mantri Shram Yogi Maan-Dhan – Eligibility and Criteria

Pradhan Mantri Shram Yogi Maan – Dhan (PMSYM) is a pension scheme launched by the government on 15th February 2019. It is a new pension scheme for the unorganized   sector. Some of its features are similar to Atal Pension Yojana (APY). However, it is important to note the important features and the eligibility criteria of this scheme.

Such schemes are very welcomed in India, given that there is no proper pension plan being managed by the government.

Eligibility of PMSYM

  • Monthly income should be Rs.15,000 or less than that.
  • Age should be between 18 years to 40 years.
  • They should not be covered under the schemes like the New Pension Scheme (NPS), Employees’ State Insurance Corporation (ESIC) scheme or Employees’ Provident Fund Organisation (EPFO).
  • They should not be Income Tax Payer.
  • Their profession is like home-based workers, street vendors, mid-day meal workers, head loaders, brick kiln workers, cobblers, rag pickers, domestic workers, washermen, rickshaw pullers, landless laborers, own account workers, agricultural workers, construction workers, beedi workers, handloom workers, leather workers, audio-visual workers.

Features of PMSYM

1. Minimum Pension– Each subscriber under the PM-SYM, shall receive the minimum assured pension of Rs.3000/- per month after attaining the age of 60 years.

2. Family Pension– During the receipt of the pension, if the subscriber dies, the spouse of the beneficiary shall be entitled to receive 50% of the pension received by the beneficiary as a family pension. Family pension is applicable only to a spouse.

If a beneficiary has given a regular contribution and died due to any cause (before age of 60 years), his/her spouse will be entitled to join and continue the scheme subsequently by payment of regular contribution or exit the scheme as per provisions of exit and withdrawal.

3. A default of Contributions-If a subscriber has not paid the contribution continuously he/she will be allowed to regularize his contribution by paying entire outstanding dues, along with penalty charges, if any, decided by the Government.

4. Pension Pay out-Once the beneficiary joins the scheme at the entry age of 18-40 years, the beneficiary has to contribute till 60 years of age. On attaining the age of 60 years, the subscriber will get the assured monthly pension of Rs.3000/- with a benefit of a family pension, as the case may be.

5. Matching contribution by the Central Government – PM-SYM is a voluntary and contributory pension scheme on a 50:50 basis where prescribed age-specific contribution shall be made by the beneficiary and the matching contribution by the Central Government as per the chart. For example, if a person enters the scheme at an age of 29 years, he is required to contribute Rs 100/ – per month till the age of 60 years. An equal amount of Rs 100/- will be contributed by the Central Government.

How to enroll in PMSYM?

The subscriber will be required to have a mobile phone, savings bank account, and Aadhaar number. The eligible subscriber may visit the nearest Community Service Centre (CSC)s and get enrolled for PM-SYM using Aadhaar number and savings bank account/ Jan-Dhan account number on a self-certification basis.

Later, the facility will be provided where the subscriber can also visit the PM-SYM web portal or can download the mobile app and self-register using Aadhar number/ savings bank account/ Jan-Dhan account number on self-certification basis.

The enrolment will be carried out by all the Community Service Centers (CSCs).  The unorganized workers may visit their nearest CSCs along with their Aadhar Card and Savings Bank account passbook/Jandhan account and get registered themselves for the Scheme.  Contribution amount for the first month shall be paid in cash for which they will be provided with a receipt.

All the branch offices of LIC, the offices of ESIC/EPFO and all Labour offices of Central and State Governments will facilitate the unorganized workers about the Scheme, its benefits and the procedure to be followed, at their respective centers.

How to exit or withdraw from Pradhan Mantri Shram Yogi Maan-Dhan?

Considering the hardships and erratic nature of employability of these workers, the exit provisions of the scheme have been kept flexible. Exit provisions are as under:

  • In case subscriber exits the scheme within a period of less than 10 years, the beneficiary’s share of contribution only will be returned to him with savings bank interest rate.
  • If subscriber exits after a period of 10 years or more but before superannuation age i.e. 60 years of age, the beneficiary’s share of contribution along with accumulated interest as actually earned by the fund or at the savings bank interest rate whichever is higher.
  • If a beneficiary has given regular contributions and died due to any cause, his/ her spouse will be entitled to continue the scheme subsequently by payment of regular contribution or exit by receiving the beneficiary’s contribution along with accumulated interest as actually earned by the fund or at the savings bank interest rate whichever is higher.
  • If a beneficiary has given regular contributions and become permanently disabled due to any cause before the superannuation age, i.e. 60 years, and unable to continue to contribute under the scheme, his/ her spouse will be entitled to continue the scheme subsequently by payment of regular contribution or exit the scheme by receiving the beneficiary’s contribution with interest as actually earned by fund or at the savings bank interest rate whichever is higher.
  • After the death of the subscriber as well as his/her spouse, the entire corpus will be credited back to the fund.
  • Any other exit provision, as may be decided by the Government on the advice of NSSB.

Who will manage the Pradhan Mantri Shram Yogi Maan-Dhan Fund?

PM-SYM will be a Central Sector Scheme administered by the Ministry of Labour and Employment and implemented through Life Insurance Corporation of India and CSCs. LIC will be the Pension Fund Manager and responsible for Pension payout.  The amount collected under PM-SYM pension scheme shall be invested as per the investment pattern specified by the Government of India.

Wealth Cafe tip – PMSYM is another pension scheme for the unorganized sector similar to Atal Pension Yojana (APY)  and NPS scheme. Instead of investing in 2 different pension schemes, it is advisable to stick to one pension scheme.

 

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How to calculate Pension under EPS

We have discussed everything about EPS in our series of Articles on EPS.

You can read them

http://www.wealthcafe.in/basics-of-employee-pension-scheme-eps/

http://www.wealthcafe.in/forms-of-eps/

http://www.wealthcafe.in/is-the-monthly-pension-paid-under-eps-just/

Monthly pension calculation (Employed after 16/11/1995)

The pension amount for those employed after 16th November 1995 is calculated as follows:

Pension amount = (Pensionable salary * Service period)/70

In order to calculate the monthly pension, in this case, the following points need to be kept in mind:

  • Pensionable salary is the average income of the preceding 60 months. Most employers have a restriction on pension contribution to either Rs.1,250 or 8.33%, whichever is minimum. In these scenarios, the maximum pensionable salary would be Rs.15,000.
  • Only the basic pay and dearness allowance are considered a salary.
  • If an employee has completed over 20 years of service, then two years should be added as a bonus in the equation. According to the rules, the bonus can be also applied for the service before 16/11/1995.
  • The new rules make it mandatory for the pension to be more than Rs.1,000 per month.
  • An employee is eligible for a pension after completion of 10 years of service.

2.      Monthly Pension Calculation for a member who joined EPF before 15.11.1995 have 3 components in the Pension calculation

a) Procedure for calculating the Past Service Pension

  • The pension is calculated twice based on the period of employment.
  • Once before 16/11/1995 and once after 16/11/1995.
  • For calculation of pension before 16/11/1995, the following table can be used. In this table, the pension is fixed based on the pay and period of service.
Years of past serviceUp to Rs.2,500 (Salary)Above Rs.2,500 (Salary)
Below 11 years8085
Between 11 to 15 years95105
Between 15 to 20 years120135
More than 20 years150170
  • Find out the period that had elapsed between 16.11.1995 and the date of exit and based on this period locates the corresponding Table ‘B’ Factor. Date of Exit is Date of attaining 58 years for superannuation/early pension, Date of Death for widow pension and Date of Disablement for Disablement Pension.
  • Multiply the Past Service Benefit and the Table B factor, which gives the Past.

b) Procedure for calculation of Pensionable Service Pension

  • Find out the Category of the member as to whether he belongs to X, Y or Z Category.
  • X – Date of commencement of pension is between 16.11.1995 and 15.11.2000 Y – Date of commencement of pension is between 16.11.2000 and 15.11.2005 Z – Date of commencement of pension on or after 16.11.2005.
  • Find out the Pensionable Service and Pensionable Salary of the member and substitute the same in the formula given as below.

(Average Salary X Service)/70

  • If the formula pension calculated is less than 335/438/635 respectively, for X, Y, Z categories, then only that minimum pension is to be given.

c) Procedure for the calculation of Total Pension-Add the Past Service Pension and the Formula Pension.

  • Add the Past Service Pension and the Formula Pension.
  • If the total pension is less than 500/600/800 respectively, for X, Y, Z categories, then that minimum pension shall be the total pension.
  • But this total pension is for an eligible service of 24 years or more, and if the eligible service is less than 24 years, then this total pension has to be proportionately reduced subject to a minimum of 265/325/450 depending on X, Y, Z categories (only when the minimum pension is given).
  • If the total pension itself is more than the minimum, then the proportionate reduction need not be made even if the eligible service is less than 24 years.

Wealth Cafe Tip – We tend to accept EPF the way it is displayed in our passbooks. There is always a scope of error and one should verify every return and investment they are making.

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Investing in Gold

Apart from Fixed Deposits, Gold and Real Estate have been the other favourite avenues for investors in India. Gold particularly has been very close to the heart of Indian families, generation after generation.

Gold acts as a very good investment in times of high inflation as it is a natural hedge to inflation. Also, in times of uncertainties in economies and currency values, investors flock to gold as they consider it the only asset to have real value. There are a number of options through which you can invest in Gold:

 

Jewellery

This is the most popular form of investments by Indian households. Purchase of Jewellery by the women of the house on festive and other occasions acts like an unintended SIP wherein you invest at regular intervals. 

Pros: 

  • Easy to purchase from the next door jeweller.

Cons: 

  • Issues with respect to purity of gold can crop up.
  • Regular use of jewellery results in wear and tear and reduction in the weight of the gold.
  • On sale of the jewellery items, making charges are deducted resulting in lower gains for the investor.
  • Storage of physical jewellery in a safe place is a problem.

Do you have Gold in your Portfolio?

 

Gold Bars and Coins

Gold bars and coins can be purchased from your local jeweller or from a bank. 

Pros: 

  • You can save on the making charges incurred for purchase of jewellery.
  • Gold can be bought in quantities as small as 1 gm.
  • Gold Bars…score over jewellery in terms of purity.
Cons:
  • Safe Storage is again a problem with Gold bars and coins.
  • They are sold at a price higher than the prevailing market price increasing your cost price.
  • Banks do not purchase back gold bars and coins. So you have no option but to sell it to the local jeweller which is generally at a small discount to the market price. 

 

Gold ETFs

This is also known as paper gold. As the name suggest, Gold Electronic Traded Funds(ETFs) can be traded on the Stock exchange. Just like you purchase a share, quantities of gold can be purchased and held in your demat account.

Pros: 

  • No Storage worries as gold purchased is directly credited to your demat account. No Purity Issues as well.
  • Gold can be purchased and sold at real time at the prevailing market prices.
  • Gold can be bought in quantities as small as 1 gm.

Cons: 

  • You need to have a broking and demat account to buy a Gold ETF. Brokerage costs need to be incurred on both purchase and sale of Gold ETF units.

 

Hybrid Funds

Of late a number of Mutual Funds have launched Schemes which invest in a mix of Debt and Gold or Debt, Equity and Gold. Investing in such schemes enables you to get some exposure to the yellow metal.

Pros: 

  • Like all other Mutual Fund Investments, these funds can be a part of your portfolio at no brokerage cost and without a demat/broking account.
  • No Storage costs and no Purity Issues. 
 Cons:
  • Your exposure to gold depends on the call taken by the Fund manager of the scheme.You cannot take exposure in defined quantities.
  • Forced to stay invested in debt/equities as a part of the Hybrid Scheme.
 In the past few years, Gold ETFs have become the most popular form of investment in gold because of their obvious advantages. However, physical jewellery still enjoys the largest share of Gold sales India.



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