One more Asian billionaire every other day: UBS study finds

According to a study by UBS and PwC a billionaire in Asia is created every other day. Total billionaires in Asia are 637 as compared to 563 in U.S. The study further says that a 17% surge in billionaire wealth is supported by new billionaires born in Asia as well as an uptick in growth in materials, industrial, financial and technology sectors.

The total billionaire wealth has increased from USD 5.1 trillion to USD 6 trillion in 2016.

Billionaires from United States owns 2.8 trillion USD, an increase of .4 trillion dollars. Combined wealth of Asian billionaires grew from 1.5 trillion dollars to 2 trillion USD. Combined total wealth of 342 European billionaires was 1.3 trillion USD.

The study also mentioned that if the current trend continued, it is likely that Asian billionaires would overtake U.S. billionaires in wealth in four years. The surge in billionaires’ population in Asia can be attributed to growth in China and India, which have 318 and 100 billionaires respectively.

The report further points to increasing role of networks in raising capital outside financial markets which is no surprise, given the increasing role of Asian businesses which feels comfortable going to family rather than capital markets for funds.

Europe, the report says, in 2016 was the story of multigenerational wealth preservation. The number of billionaires in Europe was 342, by the end of the year.

The business controlled by these billionaire employees 27.7 million people, which is roughly the size of U.K. workforce.

Provident funds and Gratuity funds

According to Pakistani law provident fund and gratuity funds are two distinct things.  Provident funds are paid to regular employees and gratuity payments are made to contract employees. Gratuity is a tip for good services and therefore its payment is contingent on successful completion of contract. Employees who are removed on disciplinary basis are not entitled to gratuity payments.

Permanent employees are to be paid provident fund at the end of service irrespective of quality of their services. Hence, removal of permanent employee from employment on disciplinary basis doesn’t disqualify him/her for receiving provident fund.

How these funds work

Employer makes regular payment to these funds and these funds are then invested in variety of securities. The returns generated on these funds are reinvested and generally paid to employees at the end of their term.

Employers register these funds as trusts and appoint the trustee who oversee and invest these funds for the ultimate benefit of beneficiaries.

Tax treatment

These funds are exempt from taxes provided they are registered. Any unregistered fund is to be taxed at reduced rate.

Where these funds are invested

These funds are invested in variety of securities. Generally Govt. securities are preferred for the investment as these are secure and there is smaller risk of default. A small portion of fund can also be invested in equity to generate increased return. The problem faced by the managers of the fund is to strike a balance between return and risk.

Federal Govt provident fund

Federal Govt maintains provident fund for its employees. Finance Ministry has notified new rates for minimum subscription to GP fund. Employees in grade 1 has to pay at least 3% of their average salaries in the fund. From BPS 2 to BPS 11 employees has to subscribe atleasat 5% of their mean salaries into the fund whereas BPS 12 and above will have to contribute on minimum 8% of their mean salaries to the fund.

Govt. pays 11.30 % per annum mark up on the fund to civilian employees serving under ministries other than defense and railway ministry.

Challenges for provident funds/gratuity funds

These funds must earn huge returns to pay off the accruing liabilities. This present a challenge to fund manager (trustee), who has to invest these funds in venues where returns outweigh the risk. With one wrong decision, the fund manager risks millions of workers’ hard earned money. To find a right balance between risk and reward a manager employees the services of financial analysts. These professionals make sure that workers’ hard earned money doesn’t wipe away in market crashes.