Ethical investing with social benefits

Most of us are familiar with environmental investing – or even socially responsible investing – through which investors exercise their rights not to invest in companies they don’t believe in, such as the move by some health-related superannuation funds to pull out of tobacco-producing companies.

Through socially responsible investing, or SRI, investors can also choose not to invest in companies that have bad human-rights records. Also in this field is corporate activism, whereby investors – usually large institutions – invest in companies to change their practices by exercising their voting powers. Investor voting against remuneration reports at AGMs is one example of this.

To add to this list is the growing field of impact investing. This is investing in programs – usually partnerships between private and public interests – that try to achieve some kind of social change, in addition to investment returns.

Last year, in an Australian first, the NSW government announced that three community sector programs had been chosen to pilot social-benefit bonds.

A social-benefit bond is a form of funding for social services. The government pays a social services program provider an agreed funding amount on condition that the program achieves certain performance targets.

The three pilot providers were UnitingCare Burnside, Mission Australia, and the Benevolent Society.

The UnitingCare Burnside Newpin Bond was the first of the three to launch this year and it has just been forced to close to new investments a month early as a result of the high demand.

The Newpin Bond funds a program to educate new parents to return children in out-of-home care to their families. UnitingCare Burnside worked with Social Ventures Australia to develop the investment.

The saving to the NSW government is the cost of the out-of-home care, which is approximately $37,000 a child each year. There are also indirect savings, which are harder to quantify. The number of children in out-of-home care is not insignificant. As of June last year, there were 17,200 children in out-of-home care in NSW.

The targeted return for these programs is high, in line with the risk-return payoff. It is forecast to be between 10 per cent and 12 per cent annually over the seven-year period of the investment.

The executive director of Social Ventures Australia impact investing, Ian Learmonth, is also working with Mission Australia on a bond aimed at preventing recidivism. While the Newpin Bond was oversubscribed, Learmonth says there was a broad spectrum of investors across the institutional and retail space.

The bond was only seeking to raise $7 million, but it did have a minimum investment of $50,000, which makes it reasonably accessible. Learmonth says a number of investors invested the minimum amount, as did a handful of self-managed super funds.

Learmonth says the Mission Australia bond they are working on will be quite a different structure to the Newpin Bond, but the minimum investment will be the same. This means investors who are so inclined will soon have another opportunity.

These are very new kinds of investments, and before anyone jumps in, they should consider how this type of investment fits in with their overall portfolio and investment strategy.

The Newpin Bond – along with the other two bonds, which are expected to be launched this year – will be keenly watched by investors and governments. If successful, it could open doors for social programs that are greatly in need of funding, while also providing a unique investment opportunity.

David Potts is on leave

The original release of this article first appeared on the website of Hangzhou Night Net.

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2 Step Process for Entering a Conservative Trade with Ichimoku

2 Step Process for Entering a Conservative Trade with Ichimoku 2 Step Process for Entering a Conservative Trade with Ichimoku

2 Step Process for Entering a Conservative Trade with Ichimoku

Seeing a good trend and entry in “one glance” is what Ichimoku helps traders do. However, it’s important to know when to wait before entering. Article Summary: Trends that are bullish by their very nature tend to appear overbought and the bearish trends appear oversold. However, in the heat of the moment, it is often difficult to decide if price is too far away from a good entry or not. This article will show you in the light of Ichimoku how to find if the entry you’re considering is over extended. Knowing this information will help you limit the painful experience of buying at the top or selling at the bottom. New traders often fear entering a trade as the move has peaked. As you can imagine, this healthy fear can help you being cautious and on the lookout for when a move has overextended so as to make the entry time no ideal. Please understand that an overextended move doesn’t mean that the trend will full reverse or is done, but rather that a correction is likely and we should avoid entering on an extension. 2 Step Process for Entering a Trade with IchimokuMany of you who have read the weekly Ichimoku reports or attended the DailyFX Plus webinars are familiar with the checklist we refer to before entering a trade with Ichimoku. This checklist will let us know if we’re looking at a high probability buying opportunity (opposite applies for sell trades): -Price is above the Kumo Cloud-The trigger line (black line on my chart) is above the base line (baby blue line) or has crossed above-Lagging line is above price action from 26 periods ago (above the cloud is the additional filter)-Kumo ahead of price is bullish and rising (displayed as a blue cloud). This is currently not fulfilled.Once we find an entry as highlighted on the timeframe of our choosing by the rules above, we can turn to the Average True Range (ATR) to keep us from entering on an extended move. The ATR measures the average range of a fixed number of periods to help you understand current volatility. Therefore, if the ATR is 100 pips over the last 14 periods, then we can expect a move in the neighborhood of 100 pips today. Learn Forex: The Trend Is Great If You’re Already in but the Risk Profile Is Too High to Buy Now Presented by FXCM’s Marketscope Charts It’s All about Risk: Reward or Risk Adjusted EntriesThe main reason why we want to focus on ATR is due to the importance of risk to reward ratios. Quite simply, if price is a multiple of 2x the ATR from the preferred and entry we’re focusing on the Base Line, then it’s likely that price is due for a quick correction which we could then provide an entry. My preferred method for finding a multiple of ATR on the pair I’m focusing on is the ATR Pips Indicator on the FXCMApps site. To elaborate on this concept, it’s important to understand that we don’t know what will happen tomorrow but we must put the odds in our favor as much as possible and know what we will do when the future unfolds. If the daily ATR over 14 periods (standard average) is 150 pips and we see price 300 pips away (2XATR) from the base line (key timing line when trading Ichimoku) then we can wait for a correction before looking to enter the trade. At the level of 2X ATR on the time period you’re focused on, you’ll often notice profit taking in the direction of the trend as the trend stalls temporarily. Learn Forex: 200% of ATR Helps Us See When Price Is Further Than We Prefer For a Safe Entry Presented by FXCM’s Marketscope Charts I chimoku Daily Chart Trade: Buy USDJPY on Base line cross off Bullish Hammer Candle at Cloud Base Presented by FXCM’s Marketscope Charts Ichimoku Trade: Buy USDJPY near 99.34 as price would be crossing above the Base Line as all other rules above are aligned on the chart Stop: 97.50 (bottom of the cloud and recent price action wick) Limit: 103.50 (as of current price, sets our limit greater than our risk in pips)The rules for a buy trade have been listed above if you need a refresher of what constitutes a high probability trade. As some of you know, Ichimoku was created as a way to understand when a trend was present and as a complement to candlestick analysis. If you’d like to learn more about reading candlesticks, you can register for our FREE online course here. This is a heavy news week for JPY so keep an eye on the DailyFX economic calendar if you prefer to incorporate fundamentals with your trading.Happy Trading! –Written by Tyler Yell, Trading Instructor To contact Tyler, email [email protected]杭州夜网m . To be added to Tyler’s e-mail distribution list, please click here . If you would like to attend the weekly Ichimoku webinar on Thursday morning at 930 ET, you’ll need access to Daily FX Plus. Would you like dozens of trade ideas every day with updated charts to identify major levels support and resistance on the currency pair you’re trading? If so, click here to learn more about our Technical Analyzer on DailyFX Plus.

The original release of this article first appeared on the website of Hangzhou Night Net.

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Aussie dollar and ties to Asian market rattle investors

Market moves.Share investors have every right to be a bit confused by what’s been going on lately.

In countries that have been stuck in the economic doldrums for years, sharemarkets are flirting with record highs.

Take the US. While its economy is showing signs of life, it’s hardly out of the woods. About 11.7 million Americans remain unemployed, yet Wall Street hit record highs in May as investors welcomed the continuation of money-printing by the Federal Reserve.

It’s a similar story in Europe, which is still mired in the financial crisis. Despite the region’s woes, Germany’s DAX index struck a record high last month.

Even in Britain, the FTSE index has been getting close to the all-time high reached during the 1999 dot-com boom.

But in Australia, which managed to avoid the worst of the Great Recession, the sharemarket has fallen over the past three months. Forget all-time highs, we’re still more than 20 per cent below the record level of late 2007.

So what’s going on?

Sure, the economy here is hardly firing on all cylinders. But we’re still in better shape than the US or Britain. So why is our market in a weaker patch?

One reason is our closeness to Asia. Given the amount of attention paid to Wall Street in market reports, one might imagine it’s the biggest influence on Australian stocks. However, this isn’t true. The US is still the biggest economy in the world, with a huge effect on global confidence.

But for Australian firms, Asia is the more important factor because that’s where our main export markets are.

More and more, our market follows the lead of what share traders are doing in Hangzhou, not downtown Manhattan.

With escalating fears of a China slowdown, the Hangzhou Composite index has fallen about 2 per cent in the past three months – a similar performance to the ASX 200.

But it’s not just our close links to Asia; after all Japan is our second-biggest trading partner and its sharemarket is still up more than 15 per cent in the past quarter.

The other thing that’s been affecting Australia’s market is our falling dollar.

When the exchange rate falls hard, it can rattle foreign investors – who own almost half our market – because it means their Aussie dollar share holdings are not worth as much in foreign currency.

For this reason, some analysts believe further big falls in the dollar could unsettle share investors further.

But while the Australian market may have underperformed in recent months, it’s still up almost 20 per cent in the past year, even if it’s a long way from the record highs seen overseas.

The original release of this article first appeared on the website of Hangzhou Night Net.

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Struggling industry gets $7 billion aid

AI group’s council: Innes Willox, Andrew Liveris, John Pollaers and Chris Roberts. Photo: Josh RobenstoneManufacturers are receiving more government assistance than any other sector in Australia, with more than $7 billion spent on helping the struggling industry in the past financial year.

Car makers and steel producers are the biggest beneficiaries of government assistance, with each sector getting more than $1 billion in subsidies, made up of tax concessions and direct funding.

Banks and insurers are also enjoying help from Canberra, with $845 million of tax concessions granted to the sector.

The figures are detailed in an annual review of government assistance to industry by the Productivity Commission. It revealed that electricity and gas companies benefited the most from budgetary assistance, which include tax concessions and grants but not tariff assistance.

The report comes as Canberra is grappling with a fall in tax receipts as a proportion of GDP. This shift since the financial crisis is making it tougher for the government to return to a budget surplus. The review also follows the Australian Industry Group launching a powerful new manufacturing lobby to drive policy change in the sector ahead of the federal election in September.

Speaking at the launch of the new Australian Advanced Manufacturing Council, AI Group’s chief executive, Innes Willox, said the new body would focus on what support the industry needed to compete globally.

“We’re not concerned about which party wins, what we’re concerned about is whether we get the right policy settings in place going to the end of this year and into next,” he said.

Andrew Liveris, the chief executive of US-based $60 billion global firm Dow Chemicals, is one of the CEOs heading the group. He also chairs President Barack Obama’s Advanced Manufacturing Partnership as an advocate of US manufacturing.

Mr Liveris said while Australia invested heavily in education, it was lacking a “risk-taking culture” and venture capital that could spur innovation.

“Typically, great Australian inventions get innovated and monetised overseas,” he said. “An innovation hub, like Silicon Valley, needs to be designed and built in Australia. It won’t happen by accident.”

Despite its focus on policy change, the group would not say what role it saw for government subsidies in Australia’s manufacturing future.

“The industry needs to be able to compete on its own merits. It also needs to have the platform in place so that it can compete,” Mr Willox said.

Productivity Commissioner Patricia Scott would not comment on the benefit of government assistance to particular industries, but said the numbers were revealing in terms of who got what.

“It’s true that assistance helps certain industries, but it’s also true that they often come at a cost to other industries, tax payers and consumers,” she said.

“There are a large number of programs, and it’s always good to look at each program to see if it’s still fulfilling its purpose.”

Research and development grants accounted for a third of total budgetary assistance.

Cochlear chief executive Chris Roberts and Pacific Brands CEO John Pollaers are also founding members of the new manufacturing council.

The original release of this article first appeared on the website of Hangzhou Night Net.

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A G&T’s the key

The great thing about the sharemarket at the end of the year is that you can look back and see everything that you should have done. Hindsight is wonderful.

Every year you realise there were a handful of things you needed to know, things that cut through all the financial theory that the industry relentlessly and urgently throws at us.

There are a few themes and events that, had we stopped for a moment a year ago and taken the time to consider while undisturbed by a pool with a gin and tonic, we just might have guessed. All you needed to know was that the market would spend the whole year focusing on safety and income, having a bet on US recovery and that there would be a resurrection in some cyclicals – sectors such as builders and retail. The net effect (and all these are total return numbers including dividends): the NAB and ANZ returned 41 per cent, the CBA 44 per cent; Westpac 52 per cent.

With the market up, the ”stock-market stocks” such as Macquarie returned 68 per cent, the ASX 34 per cent, and AMP 45 per cent. On the income theme some of the most unlikely boring stocks have flown, including Telstra with a total return of 35 per cent. On the safety theme, stocks such as CSL have returned 60 per cent, Ramsay Health Care 63 per cent and Primary Health Care 92 per cent.

Then there was a resurrection in the retailers: Harvey Norman returned 37 per cent, Myer 42 per cent, Woolworths 29 per cent; and cyclicals rallied on the US recovery theme. Brambles returned 38 per cent; James Hardie 46 per cent. Then there were individual resurrections such as Flight Centre, up 134 per cent.

On the flipside, all you had to know was to avoid almost anything to do with resources. Atlas Iron has lost you 60 per cent over the last year, Oz Minerals 48 per cent, Lynas 44 per cent, Whitehaven 40 per cent, UGL 32 per cent, Fortescue 24 per cent, WorleyParsons 13 per cent, Monadelphous 13 per cent and PanAust 9 per cent.

Yes there were a few surprises,including Cochlear losing 11 per cent and Bluescope Steel returning 185 per cent, and if you missed those you could be forgiven. But when you look at the list you realise that at the end of any investment period you can produce a list of the best- and worst-performing stocks and the reality is that the only thing you ever really need to know is what is on that list and why, and as we look forward to 2013-14 all we need to do is guess what’s going to be on it in 12 months’ time.

How do we do that? Simple. Over any period the stocks that move are the stocks that do things that weren’t expected. Share prices move on new information; on surprises rather than on expectations being hit and forecasts being fulfilled. There is no money to be made out of consensus forecasts. What moves share prices is changes in consensus forecasts and changes in expectations.

In which case, in order to make money next year forget what everyone expects and imagine instead what’s going to happen that no one expects. That’s where the money is. So your job running into the end of July is not to pore over earnings and dividend forecasts and work out what has a low price-earnings ratio and high yield.

Your job is to get a gin and tonic, sit by the pool, shut your eyes and imagine what’s going to happen next year that’s unexpected. That’s where the money is.

Marcus Padley is the author of stock market newsletter Marcus Today. Click here for a free trial.

The original release of this article first appeared on the website of Hangzhou Night Net.

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Miners facing capital dilemma

Mining companies are faced with increased capital risk – large miners from falling commodity prices and explorers from a lack of capital – exacerbated by an increased focus on short-term returns.

An Ernst & Young survey says capital allocation and access to capital are now ranked at the top of the risk list for miners globally, up from No.8 a year ago. These ”capital dilemmas” threaten the long-term growth prospects of the larger miners and the short-term survival of cash-strapped juniors, Mike Elliott, the group’s global mining and metals head, said.

Margin protection and productivity improvement were ranked the second-highest risk, up from fourth a year ago, the survey found, with resource nationalism dropping back to the third-highest risk, down from the highest.

Mining company management is ”being driven by the need to protect returns and manage the interests of varied and often competing stakeholders”, Mr Elliott said.

”This is in stark contrast to just 12-18 months ago when fast-tracking production was still top of the agenda and capacity constraints defined the key business risks.” For larger miners, the decline in commodity prices in 2012, cost inflation and falling returns have created a mismatch between their long-term investment horizons and the short-term return horizon of yield-hungry shareholders.

”Many years of high growth in earnings, cash flows and capital appreciation has attracted a different group of investors to mining, investors with short-term investment horizons who are not as comfortable with the sector’s longer-term, and often counter-cyclical, development, investment and return horizon,” he said.

”Shareholders with very short-term investment horizons do not seem to understand that … investing in growth is fundamental for the sector. This raises the question of how to balance the demands of short-term shareholders with those investing for longer-term returns. There is concern that the pendulum may swing too far, raising the possibility of another period of endemic underinvestment in new supply and resulting in future price volatility.”

At the other end of the equation, junior miners are cash-starved with their survival under threat, the survey found.

The original release of this article first appeared on the website of Hangzhou Night Net.

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Life insurance industry feels the pinch of straitened times

Australia’s life insurance industry has had more than $1 billion wiped off its value as it battles the impact of a slowing economy and difficulties in getting big policy holders off claims.

In the past year, six of the biggest players in the industry have reported that profits have not met expectations by a combined $220 million.

They blame higher than expected loss of customers as economic conditions deteriorate and higher than expected claims costs, particularly around so-called income-protection products. These products guarantee a portion of a policy holder’s salary for a period of time if they are unable to work.

Depression and stress-related claims by middle-aged white-collar workers have proved to be a particular source of higher-income-protection claims.

According to the prudential regulator APRA, income-protection products were only marginally profitable for all providers in the year to March 31 and were loss-making in the year before.

In February, the biggest Australian life insurer by in-force premium, AMP, cut more than $500 million from the estimated value of its operations as a result of changed assumptions about the loss of customers and the cost of claims. This followed a $54 million reduction in expected profits from its life insurance operations in the six months to the end of 2012.

”The Australian insurance industry is suffering poor lapse rates and claims experience across the board, with industry lapse rates at a 10-year high,” AMP CEO Craig Dunn told the company’s annual meeting last month. ”In challenging economic times, more people are deciding to reduce their insurance cover or cancel their policies altogether.”

Also in February, the country’s biggest bank and third-biggest life insurer by in-force premium, Commonwealth Bank, said expected profits from its life insurance operations over the past year had come in $70 million lower than expected.

The industry has estimated that policy lapse rates have risen from 12.5 per cent five years ago to about 15 per cent today.

The expectation of permanently higher lapse rates is the biggest driver of the combined $1.2 billion reduction in future profit margins across the life insurance industry recorded over the past year, according to leading actuaries.

The big insurers are also blaming increased policy churn by financial planners for the shortening of time a policy stays on their books.

Earlier this year an industry push to introduce self-regulated anti-churn measures is believed to have been derailed by opposition from one major bank. The industry is mustering forces for a renewed push in the next 12 months.

Premium rises are being implemented across the industry. Industry funds have announced to members big rises in premiums as a result of higher than expected claims. For example, from June 29, the 2 million members of the biggest industry fund, AustralianSuper, will face an almost 40 per cent increase in premiums for death and total and permanent disability cover and about a 25 per cent increase for income protection. AMP has also flagged price rises for some of its customers.

But raising prices presents challenges in life insurance. Those in good health can respond by switching to a cheaper product provider, leaving only those in poorer health and more likely to make a claim within a fund, undermining the objective of the price rise.

The insurers have been ramping up efforts to manage claims more effectively, with the ultimate aim of getting claimants off claim as quickly as possible. The insurers acknowledge difficulties – ”How do you get someone who is stressed ‘off-claim’. Experience is terrible for everybody.”

The biggest fear is that a dramatic increase in unemployment rates will lead to further deterioration in industry profitability.

Despite the deterioration in lapse rates and claims costs, the Australian life insurance industry as a whole, which includes the sale of lump sum and disability products, remains profitable. It recorded a net profit of $3 billion for the year ending March 2013, according to APRA. The industry is dominated by the major banks and AMP, which have 59 per cent market share.

Stewart Oldfield is a research analyst at Wilson HTM.

[email protected]杭州夜网

The original release of this article first appeared on the website of Hangzhou Night Net.

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Be brave – dump the banks

Only the brave and the foolish suggest investors sell the banks. You can work out which one I might be over the next few hundred words.

I get all the arguments about why you should continue to hold them.

Despite anaemic credit growth retarding revenue, by managing their profit margins, cutting staff, sending jobs offshore and reducing bad-debt provisions, the banks should be able to increase earnings and dividends.

And the Australian economy is healthy, at least by global standards, with room to lower interest rates if things get tricky. The banks have also reduced their reliance on overseas funding, while keeping their capital ratios in check. Plus they have pricing power in a huge market.

And where else can you get a reliable and growing 6 per cent, fully franked dividend yield from a regulated oligopoly that would be saved by the government in a crisis?

There’s no argument, right? If only life were that simple.

To overseas investors, our banking sector and the Aussie dollar is the next big short (where you profit from the price of an asset falling). Residential property prices and our exposure to a bursting Chinese credit bubble offer them plenty of encouragement.

The argument for selling has also been bolstered by the resilience of bank stock prices despite a raft of negative economic data.

Eighteen months ago we were suggesting investors reduce their weightings to bank shares because of the risk of a slowdown in China and the potential consequences for the Australian economy. Today that is no longer a risk. It’s a reality.

More than $150 billion of resources projects were cancelled in the four months to April. And the Roy Morgan unemployment survey suggests the true unemployment rate was 10.9 per cent in February, up from 9.7 per cent a year earlier.

Meanwhile, we approach the mining cliff. BIS Shrapnel economist Adrian Hart is expecting major project work in Queensland to fall 40 per cent over the next five years as LNG projects in Gladstone are completed and the coal industry continues to struggle.

With Victoria, South Australia, Northern Territory and Tasmania already in recession, it’s hard to imagine the banks won’t eventually feel the impact. And yet bank share prices are up significantly over the past six months.

In summary, the economy is likely to slow (at best), the banks have a large exposure to mortgages, Australian consumer debt levels are very high by historical standards and bad debts are at or near record lows.

The upside from here seems limited. So this is a call to ask yourself whether you’re overexposed to the big banks. Here are four tips to help you answer that question:

1. You don’t need to own the banks

Forget the uniquely Australian notion that you need to own the banks. You don’t need to own anything. There are plenty of companies that aren’t highly leveraged, don’t face the same risks as banks and would benefit from a lower Aussie dollar. Banks aren’t essential to a high-performing portfolio.

2. Don’t anchor on higher prices

If you have 10 per cent or less invested in the banking sector then you have very little to fear. (Intelligent Investor Share Advisor’s recommended portfolio limit of 20 per cent doesn’t take valuation into account.) But if the big banks form more of your portfolio than that, don’t let their current high prices and attractive dividend yields prevent you from acting.

3. Keep it simple and avoid emotional attachment

Ask yourself whether, at current prices, you are being compensated for the risks of holding the banks? If not, then it’s time to sell down.

And try to avoid becoming emotionally attached to your stocks. A study by Dan Ariely, author of Predictably Irrational, found that we overvalue things we own. One way to counter this is to imagine you were building a portfolio from scratch today. Would it look the same as the one you own now?

4. Don’t let tax get in the way

Don’t let paying capital gains tax stop you from acting in your best interests. Better to pay the taxman and pat yourself on the back for a great investment than risk getting greedy and suffering unnecessary losses.

If your portfolio is unbalanced and you’ve enjoyed a great run with the banks, now could be a good time to lock in some profits and either wait for better opportunities, or pay a cheap or fair price for other income stocks.

This article contains general investment advice only (under AFSL 282288).

Nathan Bell is the research director at Intelligent Investor Share Advisor. You can get access to a free trial and a special end of financial year offer that includes four special reports at shares.intelligentinvestor杭州夜网

The original release of this article first appeared on the website of Hangzhou Night Net.

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Elderly passengers safe after limo fire

Ten elderly women have escaped unharmed when the limousine they were in burst into flames while idling in northern California, authorities and a passenger say.

The Sunday morning fire came just more than a month after five nurses were killed while trapped inside a burning limousine on the San Mateo-Hayward Bridge.

Fire crews were called to a gated community in Walnut Creek about 11.35am local time on Sunday for a vehicle fire. They quickly put out the burning 2009 Lincoln Town Car, a dispatcher told the Contra Costa Times.

Many of the women were in their 90s. They were headed to Sonoma to celebrate a friend’s 96th birthday.

Passenger Mary Chapman told KGO-TV the driver of the limousine told everyone to get out, and she and two other women who were more able-bodied helped others escape. She smelt and saw smoke and said flames erupted seconds later.

”When I looked out, there were red flames all over the place and black smoke,” Ms Chapman said, standing in front of the charred limousine.

The other passengers were dependent on walkers and canes, she said.

The limousine has been inspected and maintained, said Claudius Oliveira, owner of Town Car SF, which operates the limousine.

He attributed the fire to its electrical system and said a manufacturer’s defect was to blame.

”I’m speechless because this is a new car … I keep great records of the cars,” Mr Oliveira said.

Walnut Creek police are investigating the fire and have alerted the California Highway Patrol about it, Lieutenant Lanny Edwards told the Contra Costa Times.

The California Highway Patrol is also investigating the fire on the San Mateo-Hayward Bridge, which occurred on May 4.

Associated Press

The original release of this article first appeared on the website of Hangzhou Night Net.

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Staying at work can yield dividends beyond a bigger super account

More people are delaying retirement and working longer, even if part time. Not only do we need to save more for a comfortable retirement, but working helps to keep us healthy.

Data from the Australian Bureau of Statistics shows people are working longer. As reported recently by Fairfax Media, there are more than 1 million workers aged 60 and over – almost 300,000, or 40 per cent more than five years ago. The main increase in working lives is with women. Of those working into their late 60s, there are now 278,000 compared with 172,000 five years ago.

Working longer is hugely beneficial to the standard of living in retirement. There is a rough rule of thumb that says for each year someone works beyond age 55, they extend their retirement capital by about three years. That is because of the twin benefits that the money saved for retirement so far is not being used, while the superannuation guarantee paid by the employer keeps coming in.

Laura Menschik, a financial planner and director of WLM Financial Services, says the trend to work longer may also be driven by the experience of the global financial crisis when super account balances were depleted. But the benefits of working past 55 are much more than financial.

Expanding relationships

”Working for longer also helps expand social relationships,” Menschik says. ”When you retire, you have a group of friends who you have known for a long time.

”Whereas, talking to a 20-year-old and another work colleague who is having a baby gives a much broader network of people to interact with,” she says.

That is, of course, provided older workers are able to hold on to their jobs or find new employment. It means keeping up with skills, particularly in relation to technology, Menschik says.

But while more people are working longer, older workers have been contributing less to their superannuation and partially offsetting the powerful effect that working longer has on retirement savings. The latest AMP Retirement Adequacy Index shows a fall in voluntary (salary-sacrifice and after-tax) contributions to super, especially among older workers. For those aged between 60 and 64, voluntary contributions fell from 14.2 per cent of salary in 2011 to 11.7 per cent in 2012.

This data comes from members of superannuation funds run by AMP, but it is likely to be fairly representative of the broader Australian population.

A probable reason for the fall is the lowering of the salary-sacrifice cap or limit. For over 50s it was $50,000 and was lowered on July 1, last year, to the $25,000 that applies to everyone else. Subject to being passed by Parliament, the salary-sacrifice cap will be raised to $35,000 for those aged 60 and over from July 1 this year. And from July 1 next year, the higher cap will apply to over 50s.

The super paid by employers will rise from 9 per cent to 9.25 per cent of salary from July 1 this year.

The original release of this article first appeared on the website of Hangzhou Night Net.

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