Why NOT to invest in SBI Life Smart Pension Plan

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.


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  1. Greate Info bro.
    When i went to SBI branch they explained me like:
    Suppose i am investing 1 lack every year i need to do it for 5 years

    5 years — 5 lack

    and for next 5 years do not need to invest any amount.
    and after 11 years onwards i will get pension of 1 lac per year until i alive
    after my death pension will be continue to the joint member of scheme ( my wife suppose)

    and if me and my wife both died then total maturity amount will be given to my children at that time.

    he told me they are going to invest our amount in equity with very old and good firms with control of sbi
    but didn’t mention any of above charges which i can see in manual also

    • It’s totally wrong information they’re given to you. Do NOT trust them and instead, take online term insurance policy. For investments, better go for PPF, Gold ETF, Equity mutual funds via SIP.

      Hope it will help you.

  2. 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.

    • 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.