10 replies on this article “Surrender Value ICICI Forever life pension plan”

1. Prasanta says:

   April 14, 2016 at 8:23 pm

   i am from port blair, Andaman and Nicobar Islands. i have invested in ICICI Pension Plan . Now the office has been shifted from port Blair to Kolkata. I don’t know the office address in kolkata where the office is shifted. Now i want to surrender the policy. Please help me.

   Reply
   1. Manish Chauhan says:

      April 20, 2016 at 4:17 pm

      Hi Prasanta

      The best answer you can get only from the agent you invested through or just contact the company. The thing is your case is a bit personalised and other than company, no one can give accurate information

      Manish

      Reply
2. shashank kashettiwar says:

   December 6, 2010 at 11:48 am

   Here the main confusion is arising because of the bonuses. Sajit, the bonuses and guaranteed additions are reversionary i.e. they are declared today but paid in cash at the end of the policy tenure only. So they are notional in nature as of today.(Actually the whole of the corpus getting created at the end of the vesting age in a pension plan is notional. It is even called as ‘notional corpus’, because you cannot have it in your hands at maturity also. Only @ one third of it can be commuted and taken out without tax impact. With rest of the money you have to compulsorily buy some annuity!). Now when you want to surrender the policy, the bonuses will give you a proportionate cash value only; which is a discounted value arrived from their future value. This is also mentioned in the formula which the e mail from the company is being produced above. Their calculations are very much correct.

   What you are doing in your calculations is adding up the bonus figures as they are, which is incorrect. Even in the policy document the formula would state this word ‘cash value’ of bonuses. But you have missed this word while reading or the true meaning of it has not occured to you and you let it slip. This happens because almost everyone thinks of bonus in the usual form known to us i.e. a cash handed over at the moment it is declared.

   We may feel this to be unfair because when we calculate based on the money we have put in and the surrender value or the cash value returns of the policy ;we find a huge negative return on the money invested if we are exiting the product in the early years of the tenure. Till almost one third part of the tenure, the cash value of the policy would be showing negative returns. The next third part of the tenure would show small size positive returns and in the last one third part of the tenure the surrender/cash value would start growing more speedily and catch up with the notional corpus value.

   If you surrender the product today, you will have @ 26,000 post tax in your hand. Yes, the @38,250/- amount would be added to your current income( and assuming you are in 30% tax bracket).

   Today your policy’s paid up value is probably @ 1,40,000( assuming a 20 yr tenure). So in next 13 years(if out of 20 yrs, 7 have elapsed) this @38000 is going to be almost 1,40,000. So a CAGR of almost 10% on this surrender value.So even if we consider that you surrender the policy at tenure end still you would get @ 1,00,000 post tax GUARANTEED. So surrendering today, having @26000 in hand and growing this money to a post tax GUARANTEED figure of @ 1,00,000 in next 13 years would also demand a GUARANTEED post tax rate of @ 10%.

   One more thing, if the death occurs today then this product would give the family almost the whole paid up value of @ 1,40,000.( the traditional pension plans also have built in death benefit attached!). Now if you take out the surrender value and invest the post tax amt. in the highest returns generating asset class then also if the death occurs in coming @ 10 yrs the investment cannot leave more money for the family.

   Now that brings us to the final question; should we have bought this product in the first place or are any pension plans in the market today(including NPS) worth buying today?

   (more on it some other time)

   shashank.

   Reply
3. Manish Chauhan says:

   December 3, 2010 at 11:03 pm

   Sajit

   You have given so much of detials that no body is reading fully , can you just tell if the Way you are calculating the surrender value is matching what is given in the policy document ?

   What difference is their in your and company method ?

   Manish

   Reply
   1. Sajit Zachariah says:

      December 4, 2010 at 9:47 am

      Thanks Manish.

      I calculated the surrender value based on what is mentioned in the insurance offer letter, ie. 35% of premiums paid excluding the first premiums and any extra premiums + guarenteed additions + accrued bonus.

      No idea on how ICICI came up with the surrender value. I have send a reminder to ICICI and they have send me an SMS saying they need more time to respond to this request!? Don’t know why they need this extra time for a simple calculation and to explain how they calculate the surrender value.

      I would appreciate if you can tell me your views on this policy and if my idea of surrendering after paying the premium for 7 years is good..

      Thanks,
      -Sajit

      Reply
      1. Manish Chauhan says:

         December 6, 2010 at 8:59 am

         The main doubt is in bonus numbers . You should be able to get actual numbers from ICICI only

         Manish

         Reply
4. Dominic Prakash says:

   December 3, 2010 at 10:38 pm

   There are certain policies where the surrender charges are calculated based on number of premium payments. So the surrender % will not change if you leave the policy as it is. Not sure about the policy in question though.

   Reply
5. Ramesh Mangal says:

   December 3, 2010 at 4:33 pm

   Why not make it a “Paid Up” policy rather than surrendering it?

   Reply
   1. Sajit Zachariah says:

      December 4, 2010 at 9:48 am

      Ramesh,

      How is a paid up policy benifit me. I thought I will surrender this policy an invest this in NPS or a in a MF..

      Thanks for your thoughts

      -Sajit

      Reply
      1. Ramesh Mangal says:

         December 4, 2010 at 12:19 pm

         This was in regard to the explanation given by shashank in

         http://localhost/jagoforum2/comments-on-jeevan-tarang-life-insurance-policy-by-lic-with-profits-table-no-178/701/#comment-1999

         In bull-markets, you feel that investing in other instruments is senseless and you would be much better off in stock markets. Though no one can predict the future, it is always better to have a balanced approach.

         My idea is if you think it is a “bad” product, minimize your mistake. By not pouring more money into it. But by the illustrations given, it appears as a quite reasonable debt plan (with probably tax exemption on exit, if done now).

         There is no guarantee that pulling your money from it and investing it elsewhere will fetch you much better returns. It may or may not!

         Reply

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