What it is
It’s a market-linked pension plan that lets you invest regularly to build a retirement corpus.
What you get
On death, the beneficiary will get the higher of the fund value or the guaranteed death benefit. The regulations stipulate that pension plans will need to offer a guaranteed positive rate of return on death and maturity. The guaranteed death benefit in this plan is higher of 101% of all premiums paid or premiums paid till date compounding at a rate of 0.5% to 3% per annum depending upon the fund your choose. So if you choose an aggressive fund with high exposure to equity, the premiums compound at a rate of 0.5%. For conservative fund with little exposure to equity, the premiums compound at 3% per annum.
Minimum guaranteed maturity value depends on the tenor of the policy. So if you choose the shortest tenor of five years, you get 105% of the premiums paid only if you are invested in a conservative fund. With a tenor of 26-30 years, you get 105% to 140% of the premium paid for aggressive and conservative funds, respectively. You get higher of the fund value or the minimum guaranteed maturity value.
On maturity you can withdraw only up to 33% of the corpus as lump sum and the rest will buy you an annuity product, a pension product that gives periodic income. You can also use this money to buy a single premium deferred annuity product from the same insurer. A single premium deferred annuity product is also like a pension plan wherein you invest in a lump sum and after a number of years the corpus is available to be annuitized.
Your exposure to equity will depend upon the tenor of the product and the fund. An aggressive fund chosen for a tenor of 26-30 years will have an exposure up to 100% in equities in the first five years. It will then taper off to zero in the last five years of the tenor. A moderate fund will have an exposure up to 75% and a conservative fund will have an exposure up to 50% to start with over the same tenors. For lower tenors, the exposure in equity will reduce accordingly.
What it costs
The premium allocation charge in this plan is high compared with other plans which have been launched. However the charge for guaranteed return is lowest so far at 0.25% per annum.
Mint Money take
Assuming the fund grows at 8%, a 30-year-old investing Rs.1 lakh for 30 years will get a corpus of Rs.99.79 lakh on maturity. This is a net return of 6.93%. The guarantees in the product are nothing to write home about but compared with other unit-linked pension plans, it has an edge on two counts. First it offers the longest tenor of 30 years with a regular premium feature, other plans are either a 20-year product or have a pay-in of up to 10 years. And over a long term of 30 years, the cost in the plan is relatively lower.