What are the disadvantages of the ABSLI Guaranteed Annuity Plus Plan?

Annuity payments are fully taxable. Once selected, the annuity option cannot be changed after the ABSLI Guaranteed Annuity Plus Plan policy begins. The annuity is not adjusted for inflation.

ABSLI Guaranteed Annuity Plus Plan: Good or Bad? An Insightful Review

Listen to this article

Can the ABSLI Guaranteed Annuity Plan provide peace of mind that comes with guaranteed financial stability in their golden years?

Can the ABSLI Guaranteed Annuity Plan take control of your future and offer both security and flexibility?

Could the ABSLI Guaranteed Annuity Plan provide you with a regular, steady source of income during your golden years?

Let’s explore its features, advantages, disadvantages, and returns through an Internal Rate of Return (IRR) analysis.

What is the ABSLI Guaranteed Annuity Plus Plan?

ABSLI Guaranteed Annuity Plus Plan is a non-linked, non-participating, general annuity plan. ABSLI Guaranteed Annuity Plus Plan provides you with various annuity options providing guaranteed income for life.

With the deferred annuity option, you have the choice to plan early for your retirement and lock annuity rates at present for a guaranteed life-long payment.

What are the features of the ABSLI Guaranteed Annuity Plus Plan?

Annuity once purchased is guaranteed for life.
You have the option to choose a single life or a joint life annuity.
You can opt to invest today to build a guaranteed lifetime income stream for tomorrow.
Choose from various annuity options to suit your financial needs.
Choose the accumulation period ranging from 5 years to 15 years, depending upon your needs and requirements under the Limited Pay Option.
You can increase your annuity through the Top-up option.
You may choose to receive annuity pay-outs monthly, quarterly, half-yearly or yearly as per your need and requirement.

Who is eligible for the ABSLI Guaranteed Annuity Plus Plan?

	Minimum	Maximum
Age at Entry	45 years	65 / 75 / 90 years
Vesting Age	46 years	90 years
Deferment period (single pay)	1 year	15 years subject to vesting age
Deferment period (Limited pay)	Chosen PPT	15 years subject to vesting age
Premium Payment Term (PPT)	Single pay / Limited pay (5-10 years)
Policy Term	Whole Life
Annuity Payout Frequency	Yearly, Half-yearly, Quarterly, Monthly
Purchase Price	₹ 1,50,000 for Single Pay Depends on the minimum Annuity amount for Limited Pay	No limit
Minimum Annuity Amount	₹ 1,000 per month, ₹ 3,000 per quarter, ₹ 6,000 per half year and ₹ 12,000 per year.	No limit

What are the benefits of the ABSLI Guaranteed Annuity Plus Plan?

Annuity Options available under the plan are as mentioned below. The option once chosen at inception cannot be changed thereafter.

Option	Joint Life	Survival Benefit	Death Benefit	Surrender
Option 1LIFE ANNUITY (level /increasing at 3% /increasing at 5%)	Yes	Level Annuity / Increasing annuity throughout life (primary/secondary)	No Death Benefit is payable	Not Applicable
Option 2ANNUITY CERTAIN FOR A SPECIFIED PERIOD AND THEREAFTER FOR LIFE (Annuity certain period – 5 years, 10 years, 15 years or 20 years)	No	Guaranteed for a certain period and thereafter continue as long as the annuitant is alive	For a certain period, the annuity is paid to the nominee	Not Applicable
Option 3LIFE ANNUITY WITH RETURN OF BALANCE OF PURCHASE PRICE IF ANY (Level /increasing at 3% /increasing at 5%)	No	Level Annuity / Increasing annuity throughout life	Purchase Price less the sum of Annuity already paid.	Not Applicable
Option 4LIFE ANNUITY WITH 50% ANNUITY PAYABLE TO SECONDARY ANNUITANT ON DEATH OF PRIMARY ANNUITANT	Yes	100% till the primary annuitant is alive and then 50% annuity to the secondary annuitant	No Death Benefit is payable	Not Applicable
Option 5LIFE ANNUITY WITH RETURN OF PURCHASE PRICE (100% ROP /75% ROP /50% ROP)	Yes	Annuity throughout life (primary/secondary)	100% or 75% or 50% of the Purchase Price as chosen at inception	Special Surrender Value will be payable
Option 6LIFE ANNUITY WITH ENHANCED ANNUITY ON CRITICAL ILLNESS/ ACCIDENTAL PERMANENT DISABILITY AND WITH RETURN OF PURCHASE PRICE	No	Annuity throughout life On the occurrence of specified Critical Illnesses or specified Accidental Permanent Disability – Annuity enhanced by 50%	Purchase Price will be paid to the nominee	Special Surrender Value will be payable
Option 7LIFE ANNUITY WITH RETURN OF PURCHASE PRICE ON ATTAINMENT OF AGE 80 YEARS	No	Annuity throughout life On attaining 80 years of years – Purchase price is returned and the annuity continues	On the death of the Annuitant before the attained age of 80 years – The purchase price is returned On the death of the Annuitant post the age of 80 years – No death benefit	Before attaining 80 years of age – A special Surrender value is payable After attaining 80 years of age – Not applicable
Option 8LIFE ANNUITY WITH PARTIAL RETURN OF PURCHASE PRICE TO SURVIVOR AND BALANCE TO NOMINEE.	Yes	Annuity throughout life (primary/secondary)	On first death – 50% of purchase price On the second death – 50% of the purchase price	Special Surrender Value will be payable
Option 9DEFERRED LIFE ANNUITY WITH RETURN OF PREMIUM	Yes	Annuity throughout life (primary/secondary)	Death benefit varies based on the occurrence of death – During the deferment period or after the deferment period	Single pay – any time, Limited – after paying 2 years’ premium
Option 10NPS – FAMILY INCOME	Regulations as prescribed by the Pension Fund Regulatory and Development Authority (PFRDA)

Grace period, Paid-up benefits and Revival of ABSLI Guaranteed Annuity Plus Plan

Grace Period

None for Single Pay.

For Limited Pay, the ABSLI Guaranteed Annuity Plus Plan Policyholder will have a Grace Period of 30 days (15 days in case of monthly mode frequency) from the premium due date to pay premiums.

Paid-Up Benefits

Single Pay Not Applicable

Limited Pay, the ABSLI Guaranteed Annuity Plus Plan policy acquires Surrender Value upon payment of 2 full year premiums from the date of inception of the policy.

Where the policy has not acquired Surrender Value and if the due premium is not received till the expiry of the grace period, such policy shall lapse and all benefits under the ABSLI Guaranteed Annuity Plus Plan policy will cease immediately.

Once the ABSLI Guaranteed Annuity Plus Plan policy has acquired Surrender Value and if the due premium is not received till the expiry of the grace period, then such policy shall continue on a Reduced Paid-Up (RPU) basis.

Revival

An ABSLI Guaranteed Annuity Plus Plan policy can be revived to its full value within five years from the due date of the first unpaid premium by paying all due and unpaid policy premiums

Free Look Period of ABSLI Guaranteed Annuity Plus Plan

For Individual policies you have a free look period of 30 days from the date of receipt of the Policy, to review the terms and conditions of the ABSLI Guaranteed Annuity Plus Plan Policy.

In case you disagree with the terms & conditions of your ABSLI Guaranteed Annuity Plus Plan Policy, you have the option to return the original policy document to us for cancellation.

Surrendering ABSLI Guaranteed Annuity Plus Plan

Plan options 5, 6, 7, 8, and 9 can be surrendered, with the benefits varying depending on the chosen plan option. For more details, please refer to the benefits section.

What are the advantages of ABSLI Guaranteed Annuity Plus Plan?

During the term of the ABSLI Guaranteed Annuity Plus Plan policy, you have the option to increase the annuity by paying an additional amount, known as the Top-Up Purchase Price.
Loans can be availed at any time after six months for Single Pay Policies and Limited Pay for Option 9, provided the ABSLI Guaranteed Annuity Plus Plan policy has acquired surrender value at the time of the loan request.

What are the disadvantages of ABSLI Guaranteed Annuity Plus Plan?

Annuity payments are fully taxable.
Once selected, the annuity option cannot be changed after the ABSLI Guaranteed Annuity Plus Plan policy begins.
The annuity is not adjusted for inflation.

Research Methodology of ABSLI Guaranteed Annuity Plus Plan

Under the ABSLI Guaranteed Annuity Plus Plan, various annuity options allow you to tailor your cash flow according to your needs.

Some may prefer a regular income, while others might choose options such as regular income with the return of purchase price, immediate and deferred annuity, or guaranteed annuity for a limited period.

However, the cash flow pattern alone does not provide insight into the returns. Therefore, we will calculate the Internal Rate of Return (IRR) using the figures provided in the policy brochure.

Benefit Illustration – IRR Analysis of ABSLI Guaranteed Annuity Plus Plan

For example, a 60-year-old male purchases the ABSLI Guaranteed Annuity Plus with a single payment of ₹10 Lakhs.

Since all annuity options are for a lifetime, we will assume a life expectancy of 85 years (for both primary and secondary annuitants). Let’s calculate the IRR for a few plan options under the ABSLI Guaranteed Annuity Plus Plan.

Male	60 years
Purchase Price	10 Lakhs
Life Expectancy	85 years

	Life Annuity (level)	Annuity Certain for a specified period and thereafter for Life (10 years)	Life Annuity with Return of Balance of Purchase Price (Level)	Life Annuity with 50% Annuity payable to secondary annuitant on the death of primary annuitant (joint life)	Life Annuity with Return of Purchase Price (100%RoP)	Life Annuity with enhanced Annuity on Critical Illness / Accidental Permanent Disability and with Return of Purchase Price	Life Annuity with ROP on attainment of Age 80 years
60	-10,00,000	-10,00,000	-10,00,000	-10,00,000	-10,00,000	-10,00,000	-10,00,000
61	86,362	85,124	82,876	76,644	69,776	58,046	56,428
62	86,362	85,124	82,876	76,644	69,776	58,046	56,428
63	86,362	85,124	82,876	76,644	69,776	58,046	56,428
64	86,362	85,124	82,876	76,644	69,776	58,046	56,428
65	86,362	85,124	82,876	76,644	69,776	58,046	56,428
66	86,362	85,124	82,876	76,644	69,776	58,046	56,428
67	86,362	85,124	82,876	76,644	69,776	58,046	56,428
68	86,362	85,124	82,876	76,644	69,776	58,046	56,428
69	86,362	85,124	82,876	76,644	69,776	58,046	56,428
70	86,362	85,124	82,876	76,644	69,776	58,046	56,428
71	86,362	85,124	82,876	76,644	69,776	58,046	56,428
72	86,362	85,124	82,876	76,644	69,776	58,046	56,428
73	86,362	85,124	82,876	76,644	69,776	58,046	56,428
74	86,362	85,124	82,876	76,644	69,776	58,046	56,428
75	86,362	85,124	82,876	76,644	69,776	58,046	56,428
76	86,362	85,124	82,876	76,644	69,776	58,046	56,428
77	86,362	85,124	82,876	76,644	69,776	58,046	56,428
78	86,362	85,124	82,876	76,644	69,776	58,046	56,428
79	86,362	85,124	82,876	76,644	69,776	58,046	56,428
80	86,362	85,124	82,876	76,644	69,776	58,046	10,56,428
81	86,362	85,124	82,876	76,644	69,776	58,046	56,428
82	86,362	85,124	82,876	76,644	69,776	58,046	56,428
83	86,362	85,124	82,876	76,644	69,776	58,046	56,428
84	86,362	85,124	82,876	76,644	69,776	58,046	56,428
85	0	0	0	0	10,00,000	10,00,000	0

IRR	6.89%	6.73%	6.43%	5.58%	6.87%	5.69%	6.16%

From the table, we can infer that the IRR ranges between 5.6% and 6.8% as per the ABSLI Guaranteed Annuity Plus Plan maturity calculator. These rates are comparable to returns from debt instruments, with some options yielding even lower returns.

Given the rising expenses, a standard income may not suffice, leading to a financial shortfall over time.

Moreover, your funds are locked into the investment, as only a few options offer the possibility of surrender or return of premium. This lower return, combined with the locking of funds, represents a significant drawback of the ABSLI Guaranteed Annuity Plus Plan.

ABSLI Guaranteed Annuity Plus Plan Vs. Other investments

The ABSLI Guaranteed Annuity Plus Plan does not offer favourable returns for investment. To achieve regular cash flow, there are better-yielding products available in the market that provide guaranteed returns and consistent income streams.

ABSLI Guaranteed Annuity Plus Plan Vs. Fixed return instruments

For senior citizens, the following instruments offer reliable income and higher rates than the ABSLI Guaranteed Annuity Plus Plan, along with liquidity:

Alternate Investment option	Interest Rate
Senior Citizen Savings Schemes (SCSS)	8.20%
Bank FD	7% – 8%
RBI Floating Rate Bonds	8.05% (Floating)

Senior Citizen Savings Scheme: This scheme offers a return of 8.20% p.a., allowing you to park your retirement corpus and receive regular income.

Bank Fixed Deposits (FD): Bank FD rates range between 7% – 8% p.a., with some banks offering an additional 25 basis points for senior citizens. You can either accumulate the interest or receive it as regular income.

RBI Floating Rate Bonds: These risk-free investments currently offer an interest rate of 8.05% p.a., with interest paid semi-annually.

However, these options overlook a crucial aspect called inflation. To ensure a regular income that keeps pace with inflation, it’s essential to incorporate equity into your investment portfolio.

By periodically rebalancing the portfolio every five or six years, you can potentially achieve returns that are adjusted for inflation.

ABSLI Guaranteed Annuity Plus Plan Vs. Inflation-adjusted Income

Let’s assume that 60% of ₹10 Lakhs is invested in equity for wealth creation and the remaining 40% in debt for regular income needs. We assume an equity return of 12% and a debt return of 6%. Every five years, the debt portion is replenished from equity.

Age	Equity Portion			Shift from Equity to Debt	Debt Portion
Age	Opening Balance	Yearly withdrawal	Closing Balance	Shift from Equity to Debt	Opening Balance	Yearly withdrawal	Closing Balance
61	6,00,000	–	6,72,000	–	4,00,000	69,776	3,50,037
62	6,72,000	–	7,52,640	–	3,50,037	69,776	2,97,077
63	7,52,640	–	8,42,957	–	2,97,077	69,776	2,40,939
64	8,42,957	–	9,44,112	–	2,40,939	69,776	1,81,433
65	9,44,112	–	10,57,405	–	1,81,433	69,776	1,18,356
66	10,57,405	5,00,000	6,24,294	5,00,000	6,18,356	73,963	5,77,057
67	6,24,294	–	6,99,209	–	5,77,057	73,963	5,33,281
68	6,99,209	–	7,83,114	–	5,33,281	73,963	4,86,877
69	7,83,114	–	8,77,088	–	4,86,877	73,963	4,37,689
70	8,77,088	–	9,82,338	–	4,37,689	73,963	3,85,551
71	9,82,338	9,82,338	-0	9,82,338	13,67,889	78,400	13,66,858
72	-0	–	-0	–	13,66,858	78,400	13,65,765
73	-0	–	-0	–	13,65,765	78,400	13,64,606
74	-0	–	-0	–	13,64,606	78,400	13,63,378
75	-0	–	-0	–	13,63,378	78,400	13,62,077
76	-0	-0	0	-0	13,62,077	83,104	13,55,711
77	0	–	0	–	13,55,711	83,104	13,48,963
78	0	–	0	–	13,48,963	83,104	13,41,810
79	0	–	0	–	13,41,810	83,104	13,34,228
80					13,34,228	83,104	13,26,191
81					13,26,191	88,091	13,12,386
82					13,12,386	88,091	12,97,754
83					12,97,754	88,091	12,82,243
84					12,82,243	88,091	12,65,801
85					12,65,801	88,091	12,48,373

Additionally, every five years, your annual withdrawal increases by 6% to combat inflation.

The first-year annuity amount is assumed to be similar to the ABSLI Guaranteed Annuity Plus Plan’s Life Annuity with Return of Purchase Price (100% ROP), which is ₹69,776 per annum. Upon death, the purchase price is returned to the nominee.

In this strategy, the equity portion is completely transferred to debt at age 71, although this can be adjusted based on your risk tolerance. Even with a full shift to debt, the corpus outlives you.

Under this alternate investment strategy, at age 85, you would have a corpus of ₹12.65 Lakhs, which is higher than the return on purchase price of ₹10 Lakhs offered by the ABSLI Guaranteed Annuity Plus Plan.

Overall, this strategy provides inflation-adjusted income and full liquidity, both of which are missing in the ABSLI Guaranteed Annuity Plus Plan.

Final Verdict on ABSLI Guaranteed Annuity Plus Plan

The main selling point of the ABSLI Guaranteed Annuity Plus Plan is to provide a regular, steady source of income throughout your lifetime. While this cash flow may seem sufficient initially, it can become inadequate over time. The annuity may create a financial shortfall in later years.

Cash flow analysis shows that regular income is not sufficient unless adjusted for inflation. Additionally, the locking of funds is a significant disadvantage.

These factors make the ABSLI Guaranteed Annuity Plus Plan an unsuitable option for your retirement portfolio and also it has a high agent commission

For regular income, alternative instruments offer better returns and liquidity, which are lacking in the ABSLI Guaranteed Annuity Plus Plan. To combat inflation in the long run, always include equity in your investment portfolio. Regularly review and rebalance your portfolio to ensure your retirement corpus remains sustainable.

When it comes to financial advice, are Quora, Facebook, and Twitter the final word?

Retirement planning is a crucial aspect of personal finance. For a personalized retirement plan, consult a Certified Financial Planner who can assist you in creating a tailored retirement strategy.

ABSLI Guaranteed Annuity Plus Plan: Good or Bad? An Insightful Review

Table of Contents:

What is the ABSLI Guaranteed Annuity Plus Plan?

What are the features of the ABSLI Guaranteed Annuity Plus Plan?

Who is eligible for the ABSLI Guaranteed Annuity Plus Plan?

What are the benefits of the ABSLI Guaranteed Annuity Plus Plan?