Is continuing with Pension Plan benefitial/wise decision in the long run ?

POSTED BY Rajiv94 ON March 17, 2014 8:18 am COMMENTS (7)

Hi

I have taken a Pension Plan – Swarna Vishranti of Bajaj Allianz with following details: –

Sum Assured: 770000
Premium Amount: 30000 / Annum
Duration (Yrs): 20 yrs
End Date : 23/03/2028

As per company following will be minimum proposed amount i will get: ->
770000  :  Sum Assured
500000  :  Bonus
33%ofTerminal Bonus

3850  :  some extra declared by company

1273850:    Total Amount at time of maturity; A figure company tells

Please let me know, whether i should continue with this Pension
Plan or start investing the same amount in SIP. But if i surrender
this policy, i will get only 1/4th of Premium amount i have paid till now minus the
First Premium.

You help will be highly appreciable as iam confused right now.

Thanks

Rajiv

7 replies on this article “Is continuing with Pension Plan benefitial/wise decision in the long run ?”

  1. ashalanshu says:

    Dear Rajiv, even a simple thing like FD can better return than this policy net of taxes. If you put this amount in debt MFs, even better tax adjusted return. The focus should be on your needs and then align the products to your need. It’s not that first you decide product and than align your needs to the product.

    Thanks

    Ashal

  2. Rajiv94 says:

    Thanks Ashal.

    Can you please guide me how can i can generate better return on my surrender amount if i opt to surrender now?
    Also, any clarified/suggestive with name specified would be a lot of help.

    Regards

  3. ashalanshu says:

    Dear Rajiv, you can generate better return on your surrender amount if you opt to surrender now. To invest in MFs, FDs, Bonds etc. ‘ll be your personal choice.

    Thanks

    Ashal

  4. Rajiv94 says:

    i checked with my Pension plan cum insurance provider : bajaj allianz
    No. of Paid Premium = 6yrs i.e. 30,000X6=1,80000 Rs
    Bonus i have till accrued on this = Rs 1,20,000. (which is sure, if i surrender now)
    So, Surrender Value i will get now = Rs. 1,20,000.

    If i stop my premium payment now, On Maturity(after 14yr) i will get:-
    Only the premium paids + some bonuses = Rs 3Lakh THAT TOO AFTER 14 yrs. 🙁

    Now, what if i carry on for Premium Payment for 14yrs more :-
    Premium Amount : Rs 30,000/Annum
    SA: 7,70,000
    Revisionary Bonus : Approx 3 Lakh
    Terminal Bonus : Rs.3850
    Total Amount Receivable = Around 11 Lakh (Plus Minus depending upon Bonus declared time to time by Company)

    For Life Insurance i have taken Term Insurance for 49 lakh already.

    1. Now, tell me, if i surrender this policy, and invest it in SIP,
    Will i be able to generate same ROI and more returns comparatively to Pension Plan.
    As MF are also subjected to risk.??

    2. if FD/PPF, then how much same 1.2 lakh investment, would i be able to accumulate then??

    3. Can i get any comparative study in this Case Study with other investment options available in market. And suggest, what would be the best decision for me at this time?

  5. ashalanshu says:

    Dear Seeni, please ask for your paid up value quote. The current 5L Rs. figure is not your paid up value.

    Thanks

    Ashal

  6. ashalanshu says:

    Dear Rajiv, why did you purchase the policy in first place?

    What ‘ll be your reaction if I say, please book your loss and divert your money into plain investment instruments like PPF, FDs, MFs?

    Thanks

    Ashal

    1. seeni_pv says:

      Dear Rajiv,

      You’re not alone. I have made similar mistake of taking Jeevan anand (10L/20Yrs) at similar point of time due to lack of awareness. Thanks to JI & AIFW , now i realized that endowment policy is not worth continuing. What i have decided is, to Stop paying the premium, as i have already fullfilled the minimum requirement of paying premium for atleast 3 years, I can stop. the other option is to surrender it but then you will get only max 30% of what you have paid so far (with LIC, not sure with Bajaj). Please clarify this with your agent.

      Dear Mr.Ashal,

      With the above said endowment (Jeevan anand), the accumulated value so far is around 5L (premium + Bonus). If I book the loss i will end up with just around 1,8L. Instead of loosing 3L+, why i shouldn’t just stop paying the premium? and divert the future investment in MF. Later when the policy matures (14 yrs from now) i will get the sum assured on prorata basis with some bonus.

      Assuming that i book the loss and invest the 1,8L into FD @ 8,75% for 14 years, the maturity amount is around 5,8L (before tax), if the tax slab is 30%, the final amount will be 4,6L. This amount will be more or less the same if I let that endowment policy to mature. Please correct me if i’m wrong.

      With Best Regards,
      Poovannan

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