Why NOT to invest in SBI Life Smart Pension Plan

by Admin on February 22, 2011. Updated February 4, 2012 · 2 comments · Insurance, Why Not


Why NOT to invest in SBI Life Smart Pension Plan, 9.0 out of 10 based on 1 rating
a WordPress rating system

SBi Life Insurance has just launched a new pension plan – Smart Pension Plan on new guidelines of IRDA. I've already posted the details of this plan from the official website of SBI Life Insurance.

But shall you invest in this plan? Let's interpret the plan in simple language and conclude the result.

The plan provides Guaranteed Pension Fund (GPF). This fund invests maximum of 10% in equity and the rest 90% in debt. Can you expect more than 4% with this kind of portfolio? Also, this return is based on Gross premium (i.e. premium – charges).

Now what are these charges.

1. Fund Management charges: It will be 1% p.a.

2. Guarantee Charge: 0.35% of the fund value per annum. ( I don't find any logic in this charge)

3. Policy Admin Charge of Rs.50 per month i.e. 50×12 = Rs.600 p.a. That means if the investor invests Rs.50,000 p.a., he will pay 1.2% as policy admin charges per annum.

Add all the above charges. What you're getting out of that?

Another line quoting from page no. 3 of its official brochure.

"The guaranteed  interest  rate applicable  shall be subject  to a maximum of 6% and a minimum of 3%. "

With this kind of inflation and still increasing, can you survive your old age with these kind of so-called Guaranteed returns. All above, the pension from this plan is taxable.

Even FD in banks, PPF, MIS etc. gives more return than this return. One can plan to invest in this scheme to get some milk or biscuits at old age, but not more than that.

I think, this is the best example of worst plan in the industry.

It's better to invest in equity diversified mutual funds via SIP and expect a 15%-18% in long term and that too tax-free.

These are my views. You're free to interpret the plan and share your views and doubts in comments section below.

 






Subscribe Updates, Its FREE!

Email ID:



+Admin


Admin February 22, 2011

Those who found this page were searching for:

{ 2 comments… read them below or add one }

irshad February 22, 2011 at 5:11 pm

Yes, you rightly said. no use of this kind of plans where inflation is eating all the investments. IRDA/Govt should consider inflation while calculating and appoving any such plans.

Reply

admin February 22, 2011 at 6:33 pm

Don’t expect from Govt. agencies what you’ll never get. This is the same IRDA who has already approved some insurance ULIP’s where charges are in the range of 20%-80% of the premium. So, it’s better to learn basics of financial planning and take wise decisions on their own.
Admin

Reply

Leave a Comment

Previous post:

Next post: