Shubh Retirement, a unit-linked pension plan from ICICI Prudential Life Insurance, works in two stages—accumulation and income. The accumulation phase involves yearly premium payment towards the retirement corpus. On reaching your retirement or vesting age, you can commute up to one-third of the accumulated corpus and get compulsory pension on the balance. You can alternatively buy an annuity with the whole amount. The income stage starts when you start getting annuities after retirement.

ON MATURITY

You will receive the higher of the fund value or the guaranteed benefit amount (See: Guaranteed Benefits Table). For instance, based on the assumed growth rate of 8 per cent, the fund value for a 40-year-old (who has chosen aggressive investment style) investing `1 lakh per annum over 10 years for a policy term of 20 years works out to `24.19 lakh, of which the guaranteed amount is `10.10 lakh. The net yield is calculated at 5.78 per cent.

FUND ROLE

The premium, after deducting charges, is invested in two funds—Pension Growth Fund, an equity fund, and Pension Secure Fund, a debt fund. The allocation depends on the type of risk profiles. It also depends on the period and the premium payment term of the policy.

ON DEATH

A nominee receives the higher of the guaranteed death benefit or the fund value on the death of the policyholder. The guaranteed death benefit is the guarantee factor multiplied by the sum of premiums paid.

ON EARLY EXITS

If discontinued before the fifth year of the policy, discontinuation charges will be deducted from the fund value and the balance will be moved to the discontinuation fund. There are no surrender charges after the fifth year. However, the fund value will not be given to you before the vesting age. Moreover, on vesting, you either have to commute up to one-third of the amount and use the balance to purchase an immediate annuity plan, or buy a single pay deferred pension plan.

ON VESTING

The accumulated corpus is used to buy annuity options from the same insurer at the prevalent interest rates. You can choose from the different types of annuities available to suit your income requirements.

COMPARISON

Recently, several insurers have launched unit-linked pension plans with unique characteristics. So, they cannot be compared. However, you can consider the National Pension System (NPS), which allows up to 50 per cent of equity exposure.

CONCLUSION

Annuity works well if you don't fall in the high tax bracket. Do not expect high returns from the plan as investment in equities would be inhibited by the in-built guarantees in the plan.

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