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ICICI Prudential Easy Retirement is a unit-linked pension plan that lets you save up to 50 per cent in equities.
The maturity benefit is guaranteed at higher of the fund value or 101 per cent of all premiums paid. On vesting, the policyholder may purchase an annuity from the same insurance company for the full amount or commute one-third of it and use the remaining amount to purchase a pension product.
You can choose policy terms ranging from 10 to 30 years with a premium payment term option of 5/10 years or till the full term. The minimum entry age is 35 years, which is a deterrent for those wishing to start earlier.
In case of an unfortunate event, the product gives higher of the fund value or 105 per cent of premiums paid to the policyholder’s nominee. The minimum investment accepted under the plan is Rs 48,000.
What’s on offer?
The plan offers two fund choices – Balanced and Secure. The easy retirement Balanced fund will invest up to a maximum of 50 per cent in equities and the balance divided between debt and money market instruments. The Secure fund will invest purely in debt.
After initial selection, switches between funds are allowed. The first four switches are free in any policy year. The plan gives loyalty benefit in the form of additional units to the policyholder on the completion of the tenth policy year and every five years thereafter. This will be equivalent to 5 per cent of the average daily fund value of the preceding 12 months.
The premium allocation charge is 3 per cent (where annual premium is less than Rs 5 lakh) and will be levied throughout the premium payment term. Policy administration charge (levied every month for first 10 years) is a percentage of annual premium and not a fixed sum as in most other pension plans and is capped at Rs 6,000 a year. Fund management charge is 1.35 per cent per annum. The guarantee charge is at 0.5 per cent for the balanced fund and 0.10 per cent for the secure fund. The plan doesn’t have mortality charge.
Our view
The funds of ICICI Prudential Life Insurance – equity, debt and balanced – have a track record of outperforming their standard benchmarks. A disciplined investment for 25/35 years in ICICI Prudential’s pension plan may thus help you build a good corpus for retirement. Exiting the plan in the initial years will be costly.
Withdrawal of the fund value is not allowed before five years as is the case with all unit-linked plans. Also, at the end of the fifth year, the entire amount can’t be taken out. A part of it has to be annuitised.
When taking an annuity it is always recommended to choose a joint annuity option where the surviving partner gets to receive the pension. The balanced option may be a suitable one as long-term corpus building is better done with equity as it can provide inflation-beating returns.
rajalakshmi.sivam@thehindu.co.in
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