NPS like scheme for retirement: This new pension plan offers market-linked return plus term insurance; should you buy? Investors can allocate premiums among equity, debt, and balanced funds and choose from three portfolio strategies. On maturity, 60% can be withdrawn, while 40% must be invested in an annuity scheme. The plan has no guaranteed returns. The structure of the plan is very similar to the National Pension System (NPS). How does ICICI Pru Signature Pension compare with NPS? Read on to find out
ICICI Prudential Life Insurance recently launched ICICI Pru Signature Pension plan — a market-linked pension plan to save for retirement. This is a unit-linked insurance plan that offers market-linked returns, along with tax benefits, and acts as an insurance cover for policyholders. Is ICICI Pru Signature Pension an attractive pension plan to save a lump-sum retirement corpus? Like every other financial product, ICICI Pru Signature Pension will have certain advantages and disadvantages: what are those? To answer these questions, you must first know what the plan offers. ET Wealth Online reviews the ICICI Pru Signature Pension plan to give you these and more answers.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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ICICI Pru Signature Pension plan allows you to allocate premium among the funds of your choice — equity, debt and balanced funds. You will also get three portfolio strategies — fixed portfolio, target asset allocation strategy and lifecycle-based portfolio strategy — to help you save according to your goals and risk appetite. On maturity, you can withdraw up to 60% of the maturity amount. However, you have to mandatorily invest 40% of the maturity amount in an annuity scheme, which will offer a regular income. It is a market-linked plan so there is no guaranteed return. The return from the ICICI Pru Signature Pension plan will depend on the performance of the funds into which you have allocated your money.
On maturity, you will get a pension booster. This will be the sum of all premium allocation charges, policy administration charges and mortality charges paid (excluding taxes) till the time of vesting.
ICICI Pru Signature Pension plan: Eligibility, age limits, premium, payment term
What is the minimum and maximum entry age in ICICI Pru Signature Pension plan?
The minimum and maximum entry age limits are 18 and 65 years, respectively. The minimum vesting age is 60 years and the maximum is 80 years.ICICI Pru Signature Pension plan: What are the minimum and maximum premium paying terms you can select?
You can opt to pay your premiums once with the single-pay option or go for the limited- pay option with a minimum premium payment term of five years. The outer limit to join the plan is 62 years.
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The premium payment term is a minimum of 15 years or policy term minus five years.
What is the minimum and maximum premium for ICICI Pru Signature Pension?
The minimum premium for this plan is Rs 1,00,000 for a five to nine-year premium paying term; Rs 60,000 for a 10 to 15-year premium paying term and Rs 6,00,000 for single pay. There is no limit to maximum premium but it is typically subject to the board-approved underwriting policy.ICICI Pru Signature Pension plan: All you need to know
ParametersDetails
Policy tenure
Minimum of 20 years or 80 minus age at entry
Maximum: 62 years
Premium payment term
Limited pay: 5-9 years, 10-15 years
Premium paying mode
Monthly, half-yearly and annual; single pay
Entry age
Minimum: 18 years, Maximum: 65 years
Minimum premium amount
Rs 1 lakh for 5-9 years of premium payment term
Rs 60,000 for 10-15 years of premium payment term
Rs 6 lakh for single pay
Maximum premium amount
No limit, subject to board’s underwriting policy
What are various benefits available under the ICICI Pru Signature Pension plan?
Maturity benefits: On maturity, the policyholder will get the fund value, including the top-up fund value along with pension booster (the typical charges deducted during the policy). The policyholder will have the option to withdraw up to 60% and use the rest to purchase immediate or deferred annuity from ICICI Prudential Life Insurance or other insurers for regular pension. The return from the annuity plan will depend on the rate prevailing at that time.“The policyholder will have an option to purchase immediate annuity or deferred annuity from another insurer at the then prevailing annuity rate by utilising not more than 50% of the proceeds of the policy net of commutation,” the policy document reads.
Death benefits: If the policyholder dies, the nominee(s) will receive the higher of:
1) The fund value including top-up fund value (if any)
OR
2) Minimum death benefit (105% of the total premiums paid up to the date of death)
The nominee(s) can exercise any of the following options:
1) Withdraw the entire proceeds of the policy
OR
2) Utilise the entire proceeds or a part of the policy to purchase an immediate annuity or deferred annuity at the then prevailing rate
Withdrawal benefits: Policyholders get a partial withdrawal option after five years if they meet certain conditions.
ICICI Pru Signature Pension: Eight funds where you can allocate your money based on your risk appetite
Equity funds (high risk): Pension Multi Cap Growth Fund, Pension Opportunities Fund, Pension Bluechip Fund, Pension India Growth FundBalanced funds (moderate risk): Pension Multi Cap Balanced Fund, Pension Balanced Fund
Debt funds (low risk): Pension Income Fund, Pension Money Market Fund
ICICI Pru Signature Pension plan’s asset allocation strategy
There are three portfolio strategies available under the ICICI Pru Signature Pension plan. You can choose one according to your risk appetite. Here is a summary of each portfolio:Fixed portfolio strategy: You have the option to select an automatic transfer strategy where you can save all or part of your savings in one or more pension debt/equity funds and transfer a fixed amount regularly to one or more pension equity/debt funds. You will get the option to switch funds as many times as you want without any additional cost. The minimum switch amount is Rs 5,000.
Target asset allocation strategy: You can allocate your premiums between any two funds in the proportion you want. Your portfolio will be rebalanced every quarter to ensure that this asset allocation is maintained.
Lifecycle-based portfolio strategy: The premium will be distributed between any two funds — Pension Multi Cap Growth Fund and Pension Income Fund — based on your age at the time of buying the policy. Your funds get re-distributed every year, based on your age.
You can change your portfolio strategy up to four times in a policy year. This facility is free.
ICICI Pru Signature Pension plan’s charges
Like any ULIP, ICICI Pru Signature Pension plan has various charges.1) Premium allocation charges: Premiums are allocated to the chosen funds after deducting the following premium allocation charges (shown as percentages of each premium paid):
a) Limited pay: 4%
b) Single pay: 0%
c) Top-up premium: 0%
2) Policy administration charges: The monthly policy administration charge is 0.20% of the annual premium for limited pay and Rs 500 per month for single pay. Policy administration charges will be levied at the beginning of each month by redemption of units, subject to a maximum of Rs 500 per month for the entire policy term.
3) Fund management charges: The policyholder has to bear 0.5% to 1.35% towards fund management charges.
4) Mortality charges: This plan charges a part of the sum assured as mortality charges (depending on the age). However, this charge is miniscule.
5) Discontinuation charges: This ranges from 0.50% to 2% for a one to four-year period. After five years, there are no discontinuation charges.
How does ICICI Pru Signature Pension compare with NPS?
As you can see, the pension plan is very similar to the National Pension System (NPS). Unlike NPS, you get an option to invest in equity, balanced or debt funds without any limitations. For example, if a 30-year-old wants to invest 100% of his investment in equity in ICICI Prudential Signature Plan, he can; there is a restriction in investing your entire contribution in equity in NPS. We have made a list to compare the returns from the funds available under ICICI Prudential Signature Pension and NPS.Returns from NPS equity funds
Name
6-month Returns (%)
1-year Returns (%)
3-year Returns (%)
5-year Returns (%)
Aditya Birla Sun Life Pension Scheme
13.56
33.15
16.13
19.83
AXIS Pension Fund Management Limited
14.97
34.22
--
--
DSP Pension Fund Managers Private Limited #
20.41
--
--
--
HDFC Pension Fund
13.98
33.58
15.79
20.43
ICICI Prudential Pension Fund #
13.27
35.39
16.99
20.92
Kotak Pension Fund
14.69
34.31
17.05
20.88
LIC Pension Fund #
12.37
31.77
16.03
20
Max Life Pension Fund Management Limited #
14.24
33.86
--
--
SBI Pension Fund #
11.93
30.49
15.36
19.03
Tata Pension Management Private Limited
13.8
38.82
--
--
UTI Retirement Solutions
17.05
39.17
17.53
21.12
Returns as on September 6, 2024
Assets as on August 31, 2024
#Assets as on July 31, 2024
ICICI Prudential Signature Pension plan’s returns
Fund name
Returns since inception
Inception date
Equity
Pension Bluechip Fund
10.95%
11-Jan-10
Pension India Growth Fund
NA
30-Aug-24
Pension Multi Cap Growth Fund
11.95%
11-Jan-10
Pension Opportunities Fund
12.99%
11-Jan-10
Balanced
Pension Balanced FundULIF
NA
30-Aug-24
Pension Multi Cap Balanced Fund
9.79%
11-Jan-10
Debt
Pension Income Fund
7.82%
11-Jan-10
Pension Money Market Fund
6.86%
11-Jan-10
Returns greater than 1 year are annualised
In this article we have just compared the equity returns from both NPS and ICICI Pru Signature Pension plan
Do keep in mind that the various charges of ICICI Prudential Signature Pension are typically higher than those charged by NPS. In terms of tax benefits, NPS is more tax-efficient if you include the additional investment of Rs 50,000 allowed u/s 80CCD(1B).
ICICI Pru Signature Pension Plan: Pros and cons
Advantages: If the premium paid in a year is less than Rs 2.5 lakh, the returns from ICICI Pru Signature Pension will be tax free under Section 10(10)D. The pension plan allows for emergency withdrawals in case of major life events or illnesses. Policyholders can defer the vesting date up to the age of 80, allowing their investment to grow for longer if they choose to retire later. It could be cost-effective if you stay invested till the minimum vesting age of 60 years and get pension booster benefits.Disadvantages: The policy does not offer liquidity in the first five years, which means that policyholders cannot withdraw or surrender their investments during this period. Further, if you withdraw the policy before the vesting age of 60, you will have to pay various charges, including fund management and policy administration fees, which can reduce the return on investment. Even if you get back all the charges at the vesting stage, it will have a low time value of money after a long period of investment. Further, there is a mandatory requirement to buy an annuity on maturity from the same insurer. So you cannot opt for more competitive rates in the market. When it comes to return, a good number of NPS funds have delivered higher returns than ICICI Pru Signature Pension funds.
The product can be complex for some investors, requiring careful consideration and understanding to make informed decisions. Consult an expert to get the best advice based on your needs and requirements.
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This story originally appeared on: India Times - Author:Faqs of Insurances
