Shariah Tax Savings

Kolkata: Bajaj Allianz Life Insurance has quietly gave a 97% return on its lesser-known pure stock pension plan or Shariah fund in just eight months of its inception.

The pure stock pension plan, which is a niche fund, saw a return of 97% as against a 72% return by the Nifty Index, as on December 31, 2009.

Interestingly, this is one of the three ‘ethical funds’ among the many other regular funds of the insurer offers. Sashi Krishnan, chief investment officer, Bajaj Allianz told DNA Money, “We’ve got three ethical funds, which adhere to the Shariah fund and our pure stock pension fund happens to be Shariah-compliant.

The certification was received from an organisation called Taqwaa Advisory and Shariah Investment Solutions (TASIS) a few months back.”

The other two ethical funds that Bajaj Allianz has are a pure stock fund and a pure equity fund. Very few life insurance companies offer Shariah-compliant funds.

Tata AIG Life incidentally offers ‘select equity fund’ and ‘future select equity fund’ options, which are shariah-compliant. These funds are offered in nine of Tata AIG Life’s products.

Analysts said that the global size of the market for Shariah funds is estimated at $1 trillion (Rs 50 lakh crore approximately) and this segment is expected to grow at 10-15% annually.

Experts are optimistic about the scope of this segment in the country and expect more fund houses to develop their own Shariah-compliant funds over the short and medium term.
To get a Shariah certification, certain norms have to be strictly followed.

An ethical fund which is a Shariah-compliant fund can invest in equity and equity-linked instruments and excludes investing in companies predominantly dealing in gambling, lotteries/contests, animal produce, tobacco, entertainment, hotels, banks and financial institutions, which are said to be “haram” by the Shariah law.

Meanwhile, Bajaj Allianz, which launched a new unit-linked plan Bajaj Allianz Shield Plus, has guaranteed a minimum 170% return at maturity under Shield Plus fund 1 in a 10-year policy term.

Krishnan said, “Investments to guarantee the amount will be in high yielding bonds and equity. Bonds carry a low credit risk and the surplus generated here will go to the equity funds.”

Speaking on the company’s performance he said that it suffered a knock in new business premiums in the first half of the year, but has generated a 10% and 30% growth in new business premium in November and December respectively.

“Our persistency ratio is high over 70% and gross written premium which includes renewal premiums is high,” he said.

http://www.dnaindia.com/money/report_bajaj-allianz-s-shariah-pension-fund-pays-rich-dividends_1332564