Indialife First Guaranteed Retirement Plan – Does it really offer 9% returns?
Indialife First Guaranteed Retirement Plan Review
Last week, Indialife First has launched Guaranteed Retirement Plan indicating it would provide 9% guaranteed returns. Indialife First is a joint venture between Bank of Baroda & Legal and General (UK). Indialife First Guaranteed Retirement Plan is first pension plan from them. While investors would get tempted and get attracted towards such pension plans indicating 9% guaranteed returns, let me review and provide my comments about this new pension plan. What are the features of Indialife First Guaranteed Retirement Plan? What are the hidden factors an investor should know before buying Guaranteed Retirement Plan of Indialife First?
Features of Indialife First Guaranteed Retirement Plan
- It is non-linked, participating endowment deferred pension plan.
- This pension plan offers 9% guaranteed return of all premiums paid for initial period.
- Benefits of participating in company profits in later years.
- You can choose single premium plan or limited premium plan or regular premiums that can be paid every month/quarter/half-yearly or yearly.
- Retirement Plan allows policy holders to select a term as per their requirement and opt to receive funds between 40-80 years where they need to purchase annuity from them.
- Minimum sum assured is Rs 5 Lakhs for regular & limited premiums and Rs 1 Lakh for single premium plan.
- Maximum sum assured – No limit.
- Plan offer a high sum assured discount of 1% of Regular/Limited premium if the sum assured is Rs 10 lakhs or above. There will be a high sum assured rebate of 1% of single premium if the sum assured is 20 lakhs and above.
What is the tenure of pension plan and premium payment?
Who is eligible to buy Indialife First Guaranteed Retirement Plan?
What are the minimum premiums to be paid under this pension plan?
What are the benefits available Indialife First Guaranteed Retirement Plan?
The death benefit payable will be higher of,
- Defined Assured Benefit: Total premiums paid as on date of death accumulating @ 0.15% per annum compounded annually and
- 105% of the total premiums paid along with the sum of all guaranteed additions and bonuses, if any.
In case of death during deferment period, the nominee may exercise any of the below options:
I) Utilize the entire proceeds of the Plan or part thereof for purchasing an annuity at the then prevailing annuity rate from us; or
ii) Withdraw the entire proceeds of the Plan
The life assured will receive Higher of:
- Sum Assured along with sum of all Guaranteed Additions , if any, of 9% of Total Premium Paid for the first 'x' plan years and a sum of all Simple Reversionary Bonus and Terminal Bonus, if any, paid in to the plan from 'x+1' plan year onwards, as given in the table below and
- Defined Assured Benefit which is the total premiums paid accumulated @ 0.15% p.a. compounded annually.
The benefit will be payable at the end of plan term provided the plan is in-force.
In case of Vesting Benefit the Policyholder shall have the following options
- To commute to the extent allowed under the Income Tax Act and to utilize the balance amount to purchase an immediate annuity from us which shall be guaranteed for life, at the then prevailing annuity rate; or
- To utilize the entire proceeds to purchase a single premium deferred pension product from us.
- To extend the accumulation period/deferment period within the same policy with same terms and conditions as the original policy provided the policyholder is below age 55 years, subject to underwriting if there is a sum at risk on death.
What are the tax benefits available under Indialife First Guaranteed Retirement Plan?
- Tax benefits available u/s 80CCC of income tax act.
- You can get tax benefits on the extent of the commuted amount which is currently up-to 1/3 of the maturity/ vesting amount under Section 10(10A) of the Income Tax Act, 1961.
- Death benefits are tax free under Section 10(10D) of the Income Tax Act, 1961.
Can we surrender this plan before maturity?
Yes you may surrender the same any time provided three full years premiums have been paid if the premium paying term is 10 years and more or two full years premiums have been paid if the premium paying term is less than 10 years or any time after payment of premium under single premium.
The amount payable on surrender will be higher of the Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV).
Indialife First Guaranteed Retirement Plan brochure is available at this link.
Should you buy Indialife First Guaranteed Retirement Plan?
- Plan says guaranteed returns of 9%. These returns are not available for single premium plan. These 9% guaranteed returns are there for 2 years only if you opt for 5 years premium payment and 4 years only for 10 years premium payment. Even in case of regular premium payment plan, you would get these 9% guaranteed returns for 4 years for 10 years plan and 6 years for 15 to 35 years. Means, these 9% guaranteed returns are for initial 2 / 4 / 6 years only based on the plan you choose.
- In case of death of policy holder, nominee would get 105% of premiums paid or 0.15% per annum compounding interest. What a great plan?
- In case of maturity benefit, while you may get 9% guaranteed returns for initial period, later you would get simple reversionary bonus and terminal bonus which no one is aware how much you would get.
- In my opinion, these pension plans should be avoided as they do not even provide a return which can be provided by Bank Fixed Deposits. They just sell them with caption “9% guaranteed returns”. First read the policy document before taking any decision to buy such pension plans.
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Indialife First Guaranteed Retirement Plan