Should you buy Aviva Next Innings Pension Plan?
Last week Aviva India launched Next Innings Pension Plan. This pension plan is for retirement planning which guarantees an amount of 210% of premiums paid. Though this plan cannot be used for risk coverage, some of the features are good. In this article, I would tell you about Aviva next innings pension plan, its features and to whom such pension plan is suitable.
Aviva India Life insurance
Aviva India is a private insurer which is a joint venture between Dabur group and Aviva Group, UK’s leading insurance service provider.
Also Read: Complete guide on NPS
Features of Aviva Next Innings Pension Plan
- This is pension cum life cover plan
- Guaranteed corpus of 210% of total premiums paid after retirement. Note that it is not 210% returns, it is just 210% of what you paid.
- One third of maturity can be commuted and balance would be used to buy annuity to get regular retirement income
- Flexibility to choose a policy term
At what age one can take this policy?
- Minimum age of entry is 42 and maximum age is 60.
- Minimum maturity age would be 55 and maximum maturity age would be 78
What about premiums to be paid?
This pension plan offers single premium or yearly premium. You need to pay a minimum of ₹ 1.5 Lakhs for a single premium or ₹ 50,000 per annum for yearly premiums. The maximum single premium should be ₹ 5 Crores.
Premium term Policy term
Single 13 years
5 years 16 years
10 years 18 years
Benefits of Aviva Next Innings Pension Plan
a) Maturity benefits: The following are the maturity benefits.
- 210% of total premiums paid would be paid at maturity (Exl taxes)
- From the maturity proceeds, one third would be commuted and balance would be used to buy an annuity from Aviva Insurance only.
- For single premiums, deferred pension plan can be purchased only from Aviva Insurance.
b) Death Benefit
- In case of death of the insured, the higher of the following would be paid:
- Premiums paid along with 6% per annum interest compounded annually.
- 105% of all premiums paid till the date of death.
Should you buy Aviva Next Innings Pension Plan?
Let us consider positive and negative factors:
Positive factors:
- In case of death, assured 6% returns would be paid on the total premiums paid.
- Maturity benefit would be 210% of all premiums paid. This works out to be 5.45% annualized returns.
- Tax benefit under section 80C and one third of maturity proceeds are tax free.
Also read: Ways to invest your retirement money in India
Negative factors:
- Generally insurance companies provide 4% to 6% annualized returns along with risk coverage. Here there is no separate sum assured. Guaranteed death benefit would be only the premiums paid along with 6% interest.
- The annuity has to be purchased only from Aviva Life insurance. In case you are not happy, you cannot withdraw the entire amount at maturity.
- Surrender value during the policy term is very low. E.g. if you opt for 16 year plan and pay premiums for 5 years, the break-even amount (your 5 years premium paid) would be only after 9 completed years. E.g. If you are paying ₹ 50,000 each year for 5 years totaling to ₹ 250,000 and you want to surrender the policy, then you would receive ₹ 250,000 only after 9 years. If you desire to withdraw before that, you would incur a loss as the surrender benefit is very low.
Download the brochure of Aviva Next Innings Pension Plan here
Conclusion: I feel this pension plan should be looked by those conservative individuals who want to have secured retirement plan with 5.5% assured returns without thinking about insurance risk coverage for long term. Such people should consider them till the end of the policy term, else they would incur loss and the end objective would not be met. The alternative options could be investing in bank FD/RD where one can get up to 9% returns and post tax the returns can be between 5% to 8% depending on the individual tax bracket.
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Suresh
Aviva Next Innings Pension Plan
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5 comments
Add a comment ↓Great Eyeopener, The last paragraph actually sums up the entire dilemma on pension plans. FD and RD or even SIP in a balanced fund can work out well. The returns are ultimately the similar.
Better go to NPS or save in PPF for retirement. If you are late saving retirement corpus, then plan for NSCs and other medium-short term low-average risk instruments.
Yes Shiv, there are other better options also available.
Suresh,
Personally, I am not a fan of Pension Plans launched by insurance companies. And on top of it, this one doesn't even have the usual life cover. Coming from an insurance company, that is a shock. In that case, this becomes a pure investment product. And in this area, PPF would beat this hollow. And if the PPF limit is exhausted, even a long term/dynamic bond fund would give more returns than this. So, I don't think this will be useful to any conservative or otherwise.
I am sure u would be aware of many more products which give a post-tax yield of more than 5.5-6% which this plan proposes to give.
Dinesh, There are several queries I am getting from conservative investors, hence I felt such products would be good for them. However I agree that there are better investment options, but people want to invest in insurance / pension plans, hence I expressed my views. Tks for your feedback