- May 2014
- December 2013
Ruby Jacob, 11 Jun 2013
Reliance Life Insurance launched a new pension product called Smart Pension Plan, a ULIP with annuity option for retirement planning.
Features of Reliance Smart Pension Plan
There is nothing unusual about Reliance this Pension plan. You can enter any time between 18 years and 65 years. You need to keep investing till at least you reach age 45 yrs or maximum 75 yrs (called vesting age). After this you can buy an annuity product from either Reliance Life Insurance or any other insurer for whatever fund value you get on vesting.
This annuity will give you payouts (depending on how much you invested in it and the small returns that it would make) through the remainder of your life. On death in the middle of term a death benefit, which is the value of the fund at that time or 105% of premia paid till then will be given.
Your contributions will go to a market-linked fund called Pension Smart Fund. Unlike other ULIPs Smart Pension Plan will have just one fund, so no worry of choosing between various funds. But it is also a major drawback. Pension Smart Fund will invest 70% in debt, 15% in liquid securities and only 15% in equities. 15% allocation in equities is too less for a pension product expected to manage your investment for 20-30 years. Sadly this is the case with most pension plans of other life insurance companies as well.
What's new in Reliance Smart Pension Plan
Any new product needs to have at least one differentiator. So Reliance Life Insurance has offered riders with this pension plan. Accidental Death & Disability Rider, Critical Illness Rider and 3 other riders are available for extra premiums.
Premium and charges of Smart Pension Plan
Finally come to premiums. ULIPs are never cheap - not as insurance policy nor as investment plan. Reliance Life Insurance Smart Pension Plan is no exception. A host of charges including premium allocation charge (read as agent's commission), policy administration charge, fund management charge and mortality charge is applicable. No product comes free, of course, but in ULIPs you end up paying unnecessary charges as well.
What are your alternatives?
As far as retirement planning is concerned it is best to custom-create your own product. NPS is nearly good since you have the choice of investing in equity funds, charges are cheap- 0.5% a year, further it locks your money so you cannot use it for any purpose before retirement. On comparison with pension plans its drawback is that it does not have tax free withdrawal status. However a few years down the line, in the DTC era this blotch is also expected to disappear.
Till then you can invest in a good equity mutual fund to accumulate your retirement corpus or if you are conservative choose debt funds, PPF etc. If you do not have sufficient life cover buy a term policy. Don't view pension plans as your retirement solution. They can hardly give enough returns to sustain you post retirement.