Name: Avani Jain

Roll No.: 524

TYBMS-A
WEALTH MANAGEMENT
ASSIGNMENT

A] John and Sam were involved in a car accident. As a result, John’s car was severely
damaged, and he required Rs. 30,000 for the repair of the vehicle. Luckily, John’s car
was insured, and he recovered the full cost of the repair (Rs. 30,000) through an
insurance claim.
Eventually, an investigation determined that Sam was responsible for the accident as
he exceeded the speed limit
Can Insurance Company recover the amount paid as claim from SAM? Justify your
stand.
Answer: Yes insurance company can recover the amount paid as claimed. In such a
case, John’s insurance company can use the subrogation doctrine to recover its
losses. The insurer can sue Sam to recover its losses while representing the interests
of John in the court.
Subrogation in the insurance sector generally involves three parties: the insurer
(insurance company), the policymaker (insured party), and the party responsible for
the damages.
The process usually starts when the insurer pays out the losses of the insurance claim
filed by the policymaker. When the policyholder receives the amount of money for
the claim, the insurer may start the process of collecting the amount of the claim
from the party that caused the damages.
Note that if the party responsible for the damages is covered by another insurance
carrier, the carrier will represent the interests of the client.
The insurance sector is considered a primary area of application of the subrogation
principle. By using subrogation, an insurance company can recover the amount of
the insurance claim paid to the insured client from the party that caused the
damage. Note that in such situations, the insurance company represents the
interests of its insured client. In other words, subrogation is a remedy to the
insurance company for the paid-out insurance claim.
The subrogation right is generally specified in contracts between the insurance
company and the insured party. The contracts may contain special clauses that
provide the right to the insurance company to start the process of recovering the
payment of the insurance claim from the party that caused the damages to the
insured party.
Subrogation is one of the equitable doctrines in countries with common law legal
systems.

D] Mention and explain any three Retirement Schemes you wish to suggest to the
Clients that come to you as a Wealth Manager.
Answer: The following are the Retirement Schemes I would like to explain:
1. National Pension Scheme:
The central government has created a dedicated body called PFRDA (Pension Fund
Regulatory and Development Authority) to administer a country-wide pension
scheme, called NPS (National Pension Scheme). The scheme consists of two tiers.
Tier-1 is the mandatory account, in which the subscriber has to deposit a minimum
amount of Rs.6000 every year. There are withdrawal restrictions in this account. You
cannot withdraw any amount from a Tier-1 NPS account till it matures to 10 years.
After the same, you can withdraw 25% of your corpus, only for specific purposes.
Over the years, the fund gets accumulated with compounding effects. When you
attain 60 years of age, you can withdraw 40% of the accumulated fund. For the
balance amount, you can buy the annuity to avail regular pension income. You can
select a monthly, quarterly, six-monthly or annual option to receive the regular
pension. On the other hand, the Tier-2 account offers much more flexibility to invest
and withdraw your fund. You can freely invest your surplus money in this account
and use the money as and when you need it. For both the accounts, you can select
either “Auto Choice” or Active Choice”. If you have opted for “Auto Choice”, based
on your age, the fund is bifurcated between equity and debt automatically. You don’t
have to take any further action. If you have opted “Active Choice”, you will have an
option to select your portfolio. You can opt for either 50% debt and 50% equity, or
debt only or equity dominated portfolio. You can choose different or same choices
for your Tier-1 and Tier-2 accounts. Your investment in a Tier-1 account brings
attractive tax benefits for you. The investment up to Rs.150000 qualifies for your
80CCD (1) deduction. Moreover, you can claim an additional deduction of Rs.50000
under section 80CCD (1)(B). Hence, your actual investment reduces by the amount
equivalent to tax savings. It gives you a higher real rate of return indirectly.

2. Public Provident Fund:

Although PPF (Public Provident Fund) is not declared as a pension plan, it serves all
the purposes of the pension plan, if managed properly. Being a government backed
scheme, it provides sovereign guarantee for your hard earned money. You can invest
yearly Rs.1,50,000 in your PPF account. The money keeps on growing with an
attractive interest rate. You can withdraw the entire amount after 15 years of tenure
and buy the annuity plan from any PFRDA recognised pension companies. Such an
annuity plan will give you a monthly pension for life. In case you are still in your
active working life after completing 15 year tenure, you can extend your PPF account
for the block of five years. You can extend the account multiple times. Moreover,
when you invest in a PPF account, you can avail tax benefits under section 80 of the
income tax act. Hence, your real investment is much lower than what you actually
invest in your PPF account.

3. Senior Citizen Saving Scheme (SCSS):

As the name suggests, any senior citizen of above 60 years can invest in this scheme
up to Rs. 15 lacs and avail regular pension. The pension amount is credited directly
into the bank account of the senior citizen at the end of each quarter. Like PMVVY,
this scheme is also backed by the central government. Major benefit in investing
with SCSS is stability of interest rate. Once you lock-in your fund at a particular
interest rate, it remains constant during the entire term of the scheme. The current
interest offered in the scheme is 7.40% per annum. The scheme tenure is of five
years and can be extended for further three years once it matures.