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Business News/ Opinion / Online-views/  Product crack: HDFC Life Pension Super Plus
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Product crack: HDFC Life Pension Super Plus

This plan offers a guaranteed death benefit and a minimum maturity benefit.

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What is it?

It’s a pension plan that lets you invest regularly to build a corpus. It’s also called a regular premium deferred pension plan.

What do you get?

Keeping in line with Insurance Regulatory and Development Authority (Irda) regulations on pension plans, this plan offers a guaranteed death benefit and a minimum maturity benefit that is a non-zero positive return. If you die during the policy term, your beneficiary will get the higher of the fund value or total premiums paid accumulating at a rate of 6% per annum. On maturity, it will return the higher of the fund value or 101% of all the premiums paid.

On maturity you can withdraw only up to 33% of the corpus as lump sum; the rest will have to buy you an annuity, a pension product that gives periodic income. As per the guidelines, you will have to buy this annuity from the same insurer. Alternatively, you can buy a single-premium deferred pension product, again from the same insurer. HDFC Life has launched both annuity and single-premium products.

What’s good

As per Irda regulations, if you make a partial withdrawal or surrender the policy mid-way, you will need to buy an annuity product with at least two-thirds or 67% of the corpus. So it makes sense to remain with the plan until maturity.

Watch out for

Since this plan offers a guarantee, it is not a pure equity-linked plan. The maximum investment in equity is 60%. Expect other insurance plans to have a similar asset allocation since the regulator mandates a non-zero positive return on death or maturity.

This plan has a very low policy allocation charge of 2.5% of the annual premium in the first 10 years. Subsequently, it adds 2.5% of the premium to the annual contribution. But this benefit gets even out to some extent by the policy administration charge of 0.40-0.47% per month. Then there is a mortality charge and a charge for providing guaranteed returns.

The plan has a maximum tenor of 20 years. So if you buy this plan at 30, your policy will mature at 50 years of age. You will then have to either annuitize the corpus immediately or buy a single-premium pension plan to defer annuitizing your corpus.

Mint Money take

For the purpose of illustration, the rate of growth is taken at 4% and 8%. For a 35-year-old, at a premium of 1 lakh every year for 20 years, an 8% assumed rate would mean a net yield of 5.25%. This means the costs are almost 2.75 percentage points. A 101% of all the premiums paid on maturity translates into a guaranteed rate of just 0.1%.

If you have a long-term horizon, we suggest you put your money in a mutual fund. You could even consider the National Pension System if you have a medium to low risk appetite.

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Published: 10 Dec 2012, 12:58 PM IST
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