HDFC Life has launched Saral Pension which is immediate annuity pension plan. This standard pension policy is issued as per guidelines from IRDA which has same terms and conditions across insurance companies. Earlier LIC has launched Saral Pension plan. What are the features of HDFC Life Saral Pension? What are various benefits in Saral Pension Plan of HDFC Life? Should you invest in HDFC Life Saral Pension Policy? In this article we would do HDFC Life Saral Pension Plan review.
How does immediate annuity pension plans work?
Let me explain this to you in simple terms.
1) One needs to purchase the pension plan in a lump sum. E.g. Rs 10 Lakhs or Rs 20 Lakhs.
2) Insurance company would pay the annuity pension amount based on the option chosen and lumpsum invested.
3) Since this is immediate annuity plan, the pension income starts immediately after the purchase of the plan and paid based on the mode of payment chosen (monthly, quarterly, half yearly or yearly). This would be directly credited to investors bank account.
4) Pension amount would depend on the terms of the pension policy.
You can watch below Annuity Pension Plans video (5 mts watch). Credit: Myinsuranceclub.com
Features of HDFC Life Saral Pension
This Saral Pension plan is launched few days back and is available now to purchase.
This is a standard pension plan based on IRDA guidelines. The T&C would remain almost same across insurance companies.
This is non-linked, non-participating, single premium, individual immediate annuity plan.
This is a single premium lump sum pension plan where one can get an immediate pension income.
The minimum purchase price would depend on the minimum annuity being opted.
Highest annuity rates for large purchase price.
There is no maximum purchase price limit.
Minimum age of entry to take this pension plan is 40 years.
Maximum age of entry to take this plan is 80 years.
The annuity is payable either monthly, quarterly, half yearly or yearly.
There are two annuity options in HDFC Life Saral Pension Plan. One on life annuity and second is joint life annuity.
One can surrender the pension plan after 6 months based on specific terms and conditions.
One can avail loan on this pension plan.
What annuity options available in HDFC Life Saral Pension Plan?
This pension plan comes with two annuity options.
Option-1: Life Annuity with Return of 100% of Purchase Price (ROP).
Option-2: Joint Life Last Survivor Annuity with Return of 100% of Purchase Price (ROP) on death of the last survivor.
HDFC Life Saral Pension annuity calculator
The annuity pension calculator would help you to know how much pension you can get based on the annuity option, investment amount, mode of payment and age of the investor.
You need to visit HDFC Life website at this link and provide some basic details to know the pension amount.
How does HDFC Life Saral Pension work – Explained with an example
Here is how this plan works. Click on image to enlarge.
What is minimum and maximum annuity under this scheme?
Here is the minimum annuity payable under this scheme.
1) Annuity Monthly – Rs 1,000 per month
2) Annuity Quarterly – Rs 3,000 per quarter
3) Annuity Half yearly – Rs 6,000 every 6 months
4) Annuity Yearly – Rs 12,000 per annum.
There is on maximum limit on the annuity income.
How to buy HDFC Life Saral Pension Plan?
You can purchase this HDFC Life pension plan either online or offline. For offline purchase, you need to approach HDFC Life agent or HDFC Life branch. You can buy HDFC Life Saral Pension at this link.
How is annuity pension income is taxed?
The pension amount received is taxable as per the income tax slab applicable to individuals.
Benefits in HDFC Life Saral Pension Plan
Here are the benefits in this pension plan from HDFC Life.
1) Survival benefit: Annuity pension would be paid based on the option chosen and based on frequency.
Single life: Annuity would be paid as per mode of payment chosen to the annuitant.
Joint Life: Annuity would be paid as per mode of payment to primary annuitant. In case of death of primary annuitant, the annuity would be paid to secondary annuitant.
2) Maturity benefit: There is no maturity benefit available in this pension plan.
3) Death Benefit:
Under Single Life with return of purchase price plan, upon the death of the annuitant, the purchase price of the plan would be returned to nominee / legal hairs of the annuitant.
Under Joint Life with return of purchase price plan, on the death of both the primary annuitant and secondary annuitant, the purchase price of the plan would be returned to nominee / legal hairs of the annuitant.
4) Surrender Benefit: The pension plan can be surrendered any time after 6 months, if the annuitant or spouse or any of the children of the annuitant is diagnosed as suffering from any of the specified critical illnesses as Annexure, based on the documents produced to the satisfaction of the medical examiner of the Corporation.
On approval of the surrender, 95% of the Purchase Price shall be paid to the annuitant, subject to deduction of any outstanding loan amount and the loan interest, if any.
Are there any negative or hidden factors in this pension plan?
Here are some negative factors in this plan.
1) Pension plans in general come with low returns. This HDFC Life Pension plan provide low returns of 5% to 5.5%. The returns are simple to calculate as the purchase price is paid back at the end of the period and the yearly pension income is known. E.g., On investment of Rs 10 lakhs, the pension is Rs 52,750 (depending on the age, this would vary), then the returns are 5.27%.
2) One can surrender this pension plan and get 95% of purchase price if annuitant or their spouse or children are diagnosed with critical illness. Annuitant cannot surrender if they need money for any other reason.
You may like: ICICI Pru Life Long Guaranteed Pension Plan
Should you invest in HDFC Life Saral Pension?
Is HDFC Life Saral Pension a good pension plan? You should be able to make this judgement based on the positive and negative factors.
1) This HDFC Life Pension plan provides returns in the range of 5% to 5.5%. Post tax returns + after inflation, the returns would be negative. If you are okay with such returns, you can consider this pension plan.
2) If you have received your retirement benefits through various ways (EPF, PPF, accumulated corpus through various sources, etc.,) and need to consider pension plan, you can park some of your funds in any pension plan that beats at inflation. You can also check other retirement options like Senior Citizens Saving Scheme, Pradhan Mantri Vaya Vandhana Yojana Scheme, debt mutual funds, balanced mutual fund schemes, etc.
3) If you are young or in the middle age and still not planning for retirement yet, you can avoid such immediate annuity pension plans and invest in equity or mutual funds that can fetch you better returns in the medium to long term.
4) Investors can effectively invest their lumpsum through two bucket strategies where they can get highest returns compared to traditional retirement plans.
You are the best judge to check what is suitable to you.
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