IndiaFirst Guaranteed Retirement Plan

While investment returns are pegged to the participating fund's performance, it offers guaranteed returns in initial years

This is a participating traditional pension plan by IndiaFirst Life Insurance Co. Ltd. While investment returns are pegged to the participating fund's performance, it offers guaranteed returns in initial years.

What do you get?

There are three premium payment options—single, limited, and regular. You start by choosing the premium payment term and sum assured and depending on factors like your age and policy term, the annual premium will be arrived at. Under the regular and limited options, every year you will get 9% of the cumulative premiums in the initial years. The sum of these guaranteed additions will get added to the total benefit available to you on death or maturity. Subsequently, the bonuses will accrue. Under the single premium option, there are no guaranteed additions.

How many years you get this 9% addition will depend on the premium payment term. So, under the limited pay option if you choose a premium payment term of five years, you will get guaranteed additions in the first two years. And for a regular option with a policy term of at least 15 years, you will get the additions for the first six years. From the next year, bonuses will begin to accrue. The bonus will depend on the participating fund's performance and is declared as a percentage of sum assured.

On policy's maturity, you will get the sum assured, along with bonuses and guaranteed additions, and any terminal bonus the insurer may offer. The maturity corpus is a minimum of the sum of premiums compounded at 0.15% every year.

Since this is a pension plan, you can keep only a third of this money as lump sum. You need to buy an annuity with the rest. Or, you can buy a single-premium pension plan or get the plan extended if you are below 55 years on maturity.

If you die during the term, the beneficiary gets the higher of total premiums paid compounding at 0.15% a year, or 105% of all premiums paid plus the guaranteed addition and accrued bonuses. She can take the entire proceeds or buy an annuity product.

How does this plan work?

Say, a 35-year-old buys this plan for a policy term of 25 years and sum assured of Rs.27 lakh. Under the regular option, the annual premium will be Rs.99,195. And the policyholder will get the guaranteed additions in the first six years. Bonuses accrue from the seventh year. Assuming the participating fund grows at 8%, the total maturity benefit will be around Rs.48.11 lakh—a net return (post-cost) of around 5%.

Mint Money take

There are other plans that give a higher post-cost return. As an investment, traditional participating plans return 3-5%, and according to industry experts, pension plans would return slightly higher as these have little or no insurance costs, and commissions are lower.

Further, in the current form, traditional participating plans are opaque, and you can only keep a third of the maturity corpus tax-free. Therefore, financial planners prefer products like the Public Provident Fund and National Pension System for retirement.