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SIMPLIFYING THE RETIREMENT FUND DEATH CLAIMS PROCESS

By Dolana Conco, Regional Executive at Alexander Forbes

 

Losing a loved one is one of the most difficult experiences a person can go through, and during this difficult time, you don’t want your loved ones to have to worry about finances.

Your family will receive a share of your retirement savings and a life insurance pay-out if you die while being a member of a retirement fund. The trustees of the fund have a legal responsibility to make sure that death benefits from the fund are paid to those who are financially dependent on you.

If your death benefit is through a policy that is separate to the fund, then the trustees will not be involved and this benefit will be paid out according to the nomination of beneficiaries’ form that you’ve completed with that specific insurer, or else your employer will decide.

 

What retirement fund members need to do

  1. Keep your ‘Who needs financial support when I die?’ form up to date

This form is so much more important than anyone thinks – even though it is not a last will and testament. The trustees must, by law, find all the people who are financially dependent on you, as well as those whom you love and would want to leave a portion of your death benefit to when you die. Those who depend on you for financial survival are called your dependants. Examples are your spouse or life partner, children (of any age), parents, people you need to pay maintenance to or anyone else in your life who depends on you financially.

If no one is financially dependent on you in any way, you can choose someone else as a beneficiary (family, friend, or even a charity). If you choose to give your death benefit to a charity when you die, the money will first be paid to your estate and then paid over to the charity of your choice. If this form is not up to date, it could take the trustees much longer to identify who should receive a share of your death benefit from the fund.

 

  1. Submit the correct documents

The most common reason for delays in paying an insured death claim is that there are missing, incomplete or incorrect documents submitted with the claim. Your employer can assist with what is needed and can check that the form has been completed fully and correctly before submission. In general, the following information is needed:

  • a certified copy of the death certificate
  • the identity document or passport of the deceased member
  • a copy of a pension-backed housing loan (if applicable)
  • proof of the extent of any financial dependency of the beneficiaries

What your retirement fund needs to do

The trustees of your fund have a legal duty when you die to distribute your death benefit from and through the fund. The trustees must find all dependants and nominees to decide how to share the retirement savings and life insurance pay-out fairly. To make a fair decision, the trustees will consider the following factors, among others:

  1. Age of the beneficiaries
  2. Relationship to the deceased
  3. How financially dependent they were on the deceased
  4. Their financial affairs
  5. Their future earning potential and prospects
  6. The total amount of the retirement saving to be distributed

The trustees can choose to give a beneficiary no pay-out, as the law doesn’t say that every beneficiary must get some money. However, they must consider the needs of each beneficiary and the amount available for distribution.

If there’s information that the trustees may not have considered when they made their decision and the draft resolution has already been prepared, your family needs to contact the trustees urgently. The fund’s administrators will pay the death claim once they get a response from all beneficiaries, or if no response has been received within 30 days of sending the draft resolution document.

There are various reasons for delays in paying a death claim from or through the fund, including the employer not completing the claim form in full, missing or incorrect documents, investigations for the trustee resolution taking longer than expected, outstanding tax issues and beneficiaries not providing their bank account details.

Make sure your family knows what can go wrong and what to do to make the process run smoothly – it all plays a part in leaving a legacy that you can be proud of.

 

Top 10

THE COMPLETE GUIDE TO TRANSFERRING SHARES FROM ONE DEMAT ACCOUNT TO ANOTHER

A Demat Account functions like a savings bank account with the obvious difference in the fact it stores stocks instead of money. To be similar to a savings account also implies that a Demat Account can be used to transfer shares from one Demat Account to another Demat or trading account.

Shares are generally transferred from one Demat Account to another for the purpose of changing depositories. However, there can also be other reasons for transferring shares such as merging the investments in different Demat Accounts in a single Demat Account.

Whatever the reason, in order to understand how to transfer shares from Demat Account, it is important to first understand what is Demat Account.

What Is Demat Account?

The most simplified way of answering what is Demat Account is to understand it as a digital platform where investors can store all their shares and other forms of investment in an electronic form. Demat is a short form for dematerialization which refers to the process of converting physical share certificates into the electronic form. A Demat Account can only be opened with the help of a Depository Participant or DP and a depository. A DP is an agent or broker who acts as an intermediary between the depository and investor. A depository is a financial institution in which investors open their Demat Account. Read more about what is Demat Account to understand it in more thorough details.

It is necessary to know about Demat Accounts before attempting other things like transferring shares, etc.

 

How To Transfer Shares From Demat Account

After the meaning of what is Demat Account is cleared, it is time to understand how to transfer shares from Demat Account to another Demat Account. There are two types of transfer:

  • Intra-depository transfer: In this type of transfer, shares are transferred from one Demat Account to another in the same depository.
  • Inter-depository transfer: In inter-depository transfer, shares are conveyed from one Demat Account to another account which is in a different depository.

The two ways in which shares can be transferred are the manual procedure or online procedure.

 

Manual Transfer Of Shares

For the manual transfer of shares, investors are required to ask for delivery instruction slip or DIS from their brokers or DPs. DIS is not just an important but also an integral part of the manual transfer of shares. It contains some mandatory fields which have to be filled to process the transfer of shares.

1.    Beneficiary Owner ID (BO ID)

Beneficiary owner ID (BO ID) refers to a 16-digit ID number of a broker. An investor has to mention in DIS the IDs of both the current broker and the broker to which the shares will be transferred.

2.    International Securities Identification Number (ISIN)

International Securities Identification Number or as it is commonly known ISIN is a unique ID number appropriated to each share of an investor which he holds in a Demat Account. In order for the transfer to take place, ISIN has to be provided to designate which particular shares are to be transferred.

3.    Inter or Intra

This is the distinctive part of DIS where an investor has to choose whether to make an intra-depository or inter-depository transfer. In the case of intra-depository transfer, the column denoted as ‘off-market transfer’ has to be selected. Whereas, in the case of inter-depository transfer, the column designated ‘inter-depository’ has to be selected. An investor should be extra careful while filling this part of DIS.

4.    Signature

Little needs to be said about this part of DIS. Just like any other important document, DIS too needs to be signed. Once an investor has signed DIS, it should be submitted to the broker.

A broker may charge a small fee for the transfer of shares. It usually takes 3-5 business days for the shares to be transferred.

 

Online Transfer of Shares

Central Depository Services Limited (CDSL) has made the online transfer of shares a very easy process. All that an investor has to do is to follow these simple steps.

  1. The ‘Register Online’ option at the CDSL website has to be selected.
  2. There would appear an option called EASIEST which then has to be selected.
  3. A form would generate which accordingly has to be filled.
  4. Once the form fill-up is complete, a print out of the same has to be taken out. This print out is to be submitted to the account holder’s Depository Participant.
  5. The DP will verify the document and once the verification process is completed, a password will be generated.

Using this password, an investor can log in and transfer shares on his own.

Thus, the two ways in which shares can be transferred from one Demat Account to another is not at all complex and can be easily achieved through both manual and online procedure. With a proper understanding of what is Demat Account and how the transfer of shares takes place, an investor can effectively send the shares to another account either on his own or through the help of a DP.

 

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Wealth Management

DEMANDING EFFECTIVE WEALTH MANAGEMENT DURING THE PANDEMIC

By Christophe Lapaire, Senior Project Manager at the Swiss Stock Exchange

 

2020 has so far presented the world with near unprecedented change. For investors, this change has mostly manifested in asset price volatility, ultra-low interest rates and tumbling financial markets.

Despite markets appearing to somewhat stabilise, revenues cannot currently be guaranteed, and return opportunities for investors are likely to be hard to come by over the next twelve to eighteen months. Private banks and wealth managers around the world have been left wondering what more can be done to safeguard performance in investment portfolios.

While there are several ways to identify efficiencies – with many simply just looking to negotiate a fee discount – to maximise performance, only forward-thinking private banks and wealth managers are exploring the option of utilising tax optimisation for their portfolios. A solution that looks to safeguard the performance of portfolios and achieve this aim of maximising the performance.

 

Easier said than done

Utilising tax optimisation to increase portfolio performance has clear benefits. However, the mere fact that it will benefit all private banks or wealth managers does not mean that all of them are capable of doing it.

When it comes to providing tax optimisation services to end investor clients, private banks and wealth managers have a decidedly mixed record. Many do not have the correct solutions – both in terms of software and processes – and they rely on antiquated technology and manual processing. This may set them up fine to conduct general business, but when it comes to delivering tax optimisation services, it just won’t cut it.

Given the benefits it provides to the client and the necessary infrastructure to support it, those who do offer tax optimisation services often see it as an integral part of the overall investment offering provided. Highlighting the offering to clients and explaining how it can help to reclaim any foreign withholding taxes.

 

What it means for clients

On the face of it, tax optimisation may not always seem so integral, given that many countries (including the UK) provide capital gains exemptions so that foreign investment trading is not impacted. Unfortunately, however, the same cannot be said for all countries. With these countries having a detrimental impact on the after-tax performance of any portfolio not optimising effectively.

Even when you do avoid paying tax twice on any dividends pay-out, getting the money back is not always as simple as it is sounds. When you couple this with the fact that many countries often have contradictory taxation rules or requirements, it becomes very clear that lacking the right expertise may mean you incur tax you may have avoided or mitigated.

As such, effective tax optimisation and knowledge is vital if you wish to be protected from the worst of any tax leakage at the investment level. This successful tax optimisation allowing investment managers to manage and subsequently reinvest funds easily.

Most notably, those who do not recognise the opportunities that tax optimisation presents risk losing clients to private banks and wealth managers that do.

 

Making use of tax optimisation

While tax optimisation is a no-brainer in theory, it is not always the right fit for every private bank or wealth manager. As previously mentioned, without the right setup – innovative technologies and automation – tax reporting to fiscal authorities can be incredibly labour intensive when done manually.

With that in mind, it is truly critical that providers who intend to offer the service are enabled with the right software and data processing capabilities to report tax information on behalf of clients, to ensure it is as efficient as possible. Doing so in a way that is sustainable and creates savings without detrimentally increasing labour efforts.

Those who do not have the requisite infrastructure in house should fear not however, as there are solutions available – such as the Swiss Stock Exchange’s Advanced Tax Reclaim – that allow them to offer a reclaim service at a reasonable cost, and therefore deliver value to clients.

These straightforward end-to-end tax reclaim services offer a huge number of advantages to private banks and wealth manages, but arguably most importantly, it allows them to provide a new service to end clients that strengthens existing commercial relationships and even attracts more business.

As investors seek to eke out returns amid the downturn, the demand for innovative solutions that blunt the impact of COVID-19 will only increase. The private banks and wealth managers that are suitably equipped to provide these innovative solutions will be the ones that reap the rewards. Again, in the end, those who do not equip themselves effectively will run the risk of losing current and new clients to someone who will.

 

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