HDFC PENSION PLANS ARE THE BEST

Source: OUTLOOK MONEY
21 Nov 2007

HDFC Standard ULPP
This scheme could give you a bigger corpus for your retired years
SunilDhawan
Unit-linked Pension Plan (ULPP) from HDFC Standard Life Insurance Company (HDFCSLIC) is different from traditional pension plans in that the flexibility of a unit-linked plan could get you higher returns over the long term.Features. ULPP invests premiums (minimum of Rs 10,000), net of all charges, in your chosen fund till the time you want your pension to start. This is called the accumulation phase, which can be 10-40 years. The vesting age, when pension payments start, is 50-75 years. You can enter the plan between 18 and 65 years of age.This plan has no life cover and, therefore, no mortality charges. If the policyholder dies during the accumulation phase, the nominee gets the fund value and the policy ends.Options during accumulation phase. First, you have to decide the annual premium and the vesting age. Premiums go into one or more of the seven fund options, which you can change any time. Ideally, go for the growth fund option during the initial years and then move to less riskier options as you get closer to the vesting age.Options at vesting age. There is no option to get the entire accumulated fund at vesting age. The maximum you get as a lump sum is a third of the fund value, tax free. On the remaining two-thirds, the insurer starts paying you a regular pension based mainly on the then prevailing interest rates. You have the option of shifting your corpus to any life insurer which you think will give you a higher pension. Early exit. Since ULPP is a long-term plan, early exits should be avoided. If you don't want to exit, but would not like to pay regular premiums, you can stop doing so after the first three years.

Funds already invested would grow till vesting age and then pension would be payable. Ideally, this feature should be used only in case of an emergency Costs. HDFC SLIC has fewer charges than most other insurers. The front-end premium allocation charge is 25 per cent for years one and two for annual premiums up to Rs 1.99 lakh, and 1 per cent the third year onwards. Policy administration charge of Rs 20 per month is applied on the fund value all through the term of the policy. The fund management charge is the lowest among all insurers at 0.8 per cent of the fund value across all fund options. The lower FMC leaves that much more in your fund, which can become a substantial amount at vesting age.Performance. The portfolio is disclosed every month. The website has a chart analysis showing year-on-year performance of funds against a comparable market index through the 'rolling performance'. As on 30 September, the growth fund, which is actively managed, was 96.54 per cent exposed to equity. It had invested in more than 18 sectors, with about 56 per cent in capital goods, finance, transport equipment and oil (see At A Glance).What to do. This is the unit-linked pension plan with the lowest fund management charge. The clarity in the structure of charges makes it easier to understand. Over the long term, the fund has shown higher than benchmark returns. A must-consider if you are planning retirement finances.

NO INSURANCE WITH MF's

In a meeting called by the Life Insurance Council, a statutory body representing all life insurers, it was decided that customers would not get insurance cover with any investment or savings product. Says S B Mathur, the council's secretary general: "It was mutually decided by all the life insurers that insurance will no longer be bundled with any investment or savings product since, in the long term it flouts guidelines prescribed by Irda."
At present, 3 mutual fun houses - Kotak Mutual Fund, Reliance Mutual Fund & Birla Sun Life Mutual Fund - have products giving insurance cover from their sister companies. "The current investors will continue with these products, but it will not be available to fresh investors," said Mathur.