What should I do with my Pension Plans ?

POSTED BY gauravdp ON December 13, 2013 8:23 pm COMMENTS (6)

I have two pension plans:

  1. LIC Jeevan Tarang (with profits) annual Premium Rs 34000, started in 2009. Current surrender value approx. Rs 97000.
  2. HDFC Pension Plus. annual Premium Rs 15000, started in 2007. After more than 6 years, with about Rs 93750 paid in premia, the fund value is barely above Rs 100000. This is about the returns of savings bank deposits.

I am wondering whether to surrender / discontinue the above two pension plans and invest differently instead, as going by the returns these seem a waste of money. What do you recommend? Does the current fund position of the two plans warrant withdrawal or should I continue to remain invested?  If you do recommend I surrender the HDFC plan, should I do it now or wait for the stock market to rise?

Does it make sense to surrender these two pension plans and invest in PPF + mutual funds /SIP? My age is 45 and having paid off my housing loan recently I don’t have much savings to speak of.  I think I should look at a  safety:risk ratio of 70:30 (or whatever you recommend). I only recently have started a PPF and there are very small funds there.

Your recommendations are much welcome and awaited. Thanks for the sterling service you’re doing to the general investing public.

6 replies on this article “What should I do with my Pension Plans ?”

  1. swapnil.kendhe100 says:

    Thank you Ashal.

    Sincerely,
    Swapnil

  2. ashalanshu says:

    Dear Swapnil, for traditional policies, it’s 5Y. For ULIPs, it’s 3Y.

    Thanks

    Ashal

  3. swapnil.kendhe100 says:

    Dear Ashal,

    “if surrender happens after 5Y, whole amount is tax free. before 5Y, whole amount is taxable”
    Is this is applicable to all life insurance policies?

    Thanks,
    Swapnil

  4. ashalanshu says:

    Dear Gaurav, in case of Tarang, if surrender happens after 5Y, whole amount is tax free. before 5Y, whole amount is taxable.

    In case of Pension plan, all the surrender value is taxable.

    Thanks

    Ashal

  5. ashalanshu says:

    Dear Gaurav, the LIC TARANG is not a pension plan. So you can withdraw from it, after completing 5Y to receive the amount tax free.

    In case of HDFC pension plan, the surrender value is taxable in the year of receipt. Are you ready for it?

    Thanks

    Ashal

    1. gauravdp says:

      Dear Ashalanshu
      Thanks for your reply.
      In case of Tarang, the total surrender value would be less than the amount invested. Does even this come under taxation?

      In the case of HDFC, what amount is taxable — the entire surrender value, or the excess over the amount invested?

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