Personal Finance and Protection - Newspaper Summary

 The sources provide extensive detail on Personal Finance and Protection as of October 2025, primarily focusing on managing risk through insurance, planning for retirement (NPS reforms), utilizing gold as a financial asset, managing short-term goals with debt funds, and navigating major financial life stages like late parenthood and job loss.

I. Health Insurance and Claims Protection

The sources emphasize the importance of having adequate health insurance that adapts to an individual's age and life stage, while also highlighting major industry pain points related to claims.

1. Tailored Health Cover Strategies: The need for health insurance changes due to age, family size, and medical inflation, necessitating periodic review. Specific recommendations based on life stage include:

• Mid to Late 20s: Focus on basic individual indemnity plans for emergencies and accidents. Starting early ensures low premium costs and allows waiting periods for later-life illnesses to be served out. A suggested basic plan size is ₹10 lakh.
• 30s (Family Formation): Transition to a Family Floater Plan and consider buying a smaller basic policy supplemented by a larger, cost-effective Top-up Plan. It is advisable to buy both the base and top-up plans from the same insurer for easier claim processing. A typical family floater plan is recommended at ₹10 lakh, supplemented by a ₹20 lakh top-up plan with a ₹10 lakh deductible.
• 40s (Critical Period): This decade often marks the onset of lifestyle diseases. Investors should acquire a Critical Illness Plan, especially if there is a family history of specific diseases or a highly stressful job.
• 50s (Highest Risk): Maximize coverage, opting for a sum insured ranging from ₹50 lakh to ₹1 crore. Children who are financially independent should be removed from the family floater. The Accidental Disability Plan may be discontinued at this stage.
• After 60 (Retirement): If employed, port the employer's policy to an individual plan. Without an existing cover, purchasing a new policy is difficult, especially with medical conditions, and senior plans are expensive and limited. Keeping a financial buffer for out-of-pocket expenses is advised if insurance is insufficient. A recommended coverage includes a ₹10 lakh family floater and a ₹90 lakh Super Top-up Plan (with a ₹10 lakh deductible). Super top-up plans are valuable at this stage because they aggregate the deductible across all hospitalizations in a year, which is useful given the likely increased frequency of visits.

2. Claims and Industry Pain Points: Despite having coverage, policyholders face issues such as claim rejections and delayed discharges.

• "Reasonable and Customary" Clause: This common clause allows insurers to reject claims based on their assessment of whether the treatment or charges are necessary and appropriate, often leading to rejections of bills deemed excessive.
• Delayed Discharges: Delays in hospital discharge prolong patient stays and can indirectly deplete the policyholder's sum insured. The causes are typically attributed to time taken for preparing discharge summaries and coordination delays between hospitals and insurers.
• Solutions for Expedited Claims: Stakeholders, including hospitals and insurance officials, are taking steps to address delays. Solutions include hospitals providing advance intimation of likely discharges and approximate bills, especially for planned procedures. Insurers are seeking to boost efficiency by standardizing queries and documentation.

II. Retirement and Long-Term Savings

3. NPS Reforms for Predictable Income: The PFRDA (Pension Fund Regulatory and Development Authority) is reviewing the National Pension System (NPS) to shift focus from accumulation to providing a stable monthly pension. Retirees are seeking answers on predictability, lifetime coverage, and inflation protection.

• Scheme 1 (Step-up SWP + Annuity): This combines a Systematic Withdrawal Plan (SWP) for the first 10 years followed by a fixed annuity. Simulations show that the required annuity yield (3–6%) is achievable within current market pricing. The limitation is that the post-70 annuity does not adjust for inflation, eroding purchasing power.
• Scheme 2 (Assured Inflation-Linked Pension): This scheme splits the corpus into two pools: a risk-free pool for fixed base payments and a growth pool (35% equity) to fund inflation-linked top-ups. Simulations showed a strong result, with the failure rate (corpus running out before age 85) being under 1%. This design works well because the withdrawal rate aligns with research on India’s sustainable withdrawal rates.
• Significance: These proposals, if adopted, can transform NPS from a pure savings plan into a reliable pension system, offering retirees either simplicity and choice (Scheme 1) or predictability and inflation protection (Scheme 2).

4. Retirement and Inflation Risk (FDs): For retirees who rely solely on bank Fixed Deposits (FDs), the sources warn that while FDs offer predictable returns and safety, they typically fail to keep pace with inflation. Inflation (assumed at 6%) can double expenses every 12 years, while FD returns (typically 6%–8%) remain static, leading to erosion of purchasing power and long-term inflation risk. A more prudent approach for a corpus (e.g., ₹2.5 crore) involves a bucket strategy allocating funds for short-term needs (FDs), medium-term needs (hybrid mutual funds with SWP), and long-term growth (equity-oriented instruments) to combat inflation.

III. Utilizing Gold as a Financial Asset

India’s vast household gold stock, estimated at over 34,600 tonnes (valued at approximately $3.8 trillion as of June 2025), is being viewed as a "dynamic financial tool" rather than passive wealth. Investors have several avenues to put idle gold to productive use:

• Gold Loans: Pledging gold ornaments to a bank or NBFC allows individuals to retain ownership while unlocking liquidity. The loan-to-value (LTV) ratio is capped by the RBI at 85% (75% for loans above ₹5 lakh). Gold loans are attractive for short-term liquidity due to ease of availability, minimal documentation, and lower interest rates (9%–15%) compared to unsecured personal loans.
• Converting to Financial Gold (ETFs/Mutual Funds): Selling physical gold to invest the proceeds in Gold ETFs or mutual funds offers benefits like enhanced security, transparency, and liquidity. Financial gold eliminates storage risk and is benchmarked to real-time market rates. Tax treatment is favorable: long-term capital gains are taxed at 12.5% after 12 months. However, selling physical gold triggers capital gains tax, and no direct conversion mechanism to ETFs currently exists.
• Gold Monetisation Scheme (GMS): This government scheme allows individuals to deposit gold with banks and earn interest (2.25%–2.5%), without worrying about storage or purity. Since March 2025, only the short-term option (1–3 years) is available. Participation is limited partly due to the sentimental value attached to physical gold and jewellery.
• Gold Leasing: This transforms idle gold into an income-generating instrument by lending it to jewelers for working capital in exchange for a yield (2%–5% annually), paid in grams of gold.
• Jewellery Upgrading: This aesthetic and financial strategy involves retaining the full metal value of old jewelry while reducing costs, as the individual only pays for new design and craftsmanship.

IV. Financial Planning for Different Goals

5. Debt Funds for Short- and Medium-Term Goals: Debt funds are crucial for meeting short- to medium-term financial targets because they offer better yields and tax deferral benefits than traditional bank instruments. Matching the fund’s Macaulay duration (approximate fund maturity based on cash flows) to the investment horizon is key to managing interest rate risk.

Fund Type	Investment Horizon	Recommended Use	Yield/Return (as of 23 Oct 2025)	Risk Profile
Overnight/Liquid Funds	Up to 3 months	Cash management, emergency funds	5.5% to 6.5%	Very Low Interest Rate & Credit Risk
Ultra-Short/Money Market	3–12 months	Insurance premiums, minor renovations, bridge investments	6.5% to 7.5%	Low Interest Rate Risk
Short Duration	1–3 years	Short-term goals, balancing safety with higher returns	6.5% to 8.5% (Average 7.86%)	Moderate Interest Rate Risk, Low Credit Risk
Corporate Bond / Banking & PSU	3–5 years	Medium-term goals, core debt allocation in conservative portfolios	7.5% to 8.5% (Average 7.84%–8.12%)	Moderate Interest Rate Risk, Low/Moderate Credit Risk

Debt funds offer tax deferral benefits, as gains are taxed only upon redemption at the investor’s slab rate (since indexation benefits were removed post-April 2023). Investors must avoid funds with high credit risks.

6. Life Events and Financial Adjustments:

• Late Parenthood: Couples embracing late parenthood (e.g., in their early 40s) face the challenge of balancing child-related expenses with retirement savings when time before retirement is limited. Experts advise giving retirement savings priority over education savings, as education can be funded through loans. A protection plan, a sizeable contingency fund, adequate life and health insurance (perhaps with a disability rider), and estate planning (setting up a trust and naming a guardian/trustee) are critical steps.
• Job Loss: An individual laid off after 15 years in IT (e.g., at age 48) needs an emergency fund covering 6–12 months of expenses. Severance packages (e.g., ₹60–70 lakh) should be invested according to risk profile and asset allocation, prioritizing goals like retirement and daughters’ education. A balanced, goal-linked plan should use a diversified mix of assets including equity funds, fixed income, and gold-silver exposure for stability and growth.
• Student Savings (Short-Term Goals): For young individuals saving for foreign education within a short horizon (e.g., two years), investing in equity is too risky due to potential sharp market corrections. Savings should be directed via Systematic Investment Plans (SIPs) into direct plans of debt mutual funds, targeting returns of 6.5%–7%. Education loans are a viable option to bridge the financing gap for studying abroad.

V. Legal and Taxation Aspects

• Property Inheritance: A Bombay High Court ruling clarified that a daughter’s children cannot claim a share in their maternal grandfather’s ancestral property, defining the scope of coparcenary rights granted to daughters under the Hindu Succession (Amendment) Act, 2005.
• Tax Compliance: Taxpayers relying on documents like Form 26AS and Annual Information Statement (AIS) must reconcile these records with their own books, as discrepancies can trigger tax notices or additional tax demands. A rectification process involves identifying mismatches, contacting the deductor for TDS-related errors, and using the feedback option in the AIS utility for other discrepancies.
• FD-Backed Credit Cards: These cards use a Fixed Deposit as security for the bank.
• Credit Card Rewards: The practice of "raking up points" by overspending is cautioned against. Banks have cracked down on those who "game their systems" to procure "ill-gotten" reward points, sometimes shutting down points on high-value purchases like jewellery, which affects genuine users.