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Can the ABSLI Index Guaranteed Annuity Plus Plan truly provide dependable lifelong income, or does the security of guaranteed payouts come with important trade-offs?
Does the ABSLI Index Guaranteed Annuity Plus Plan offer the retirement income security you need, or could other retirement strategies provide better value?
Is the ABSLI Index Guaranteed Annuity Plus Plan a smart choice for predictable retirement income, or does certainty come at the cost of flexibility and growth?
This article explains how the plan works and evaluates its features, benefits, and limitations to help you assess whether it is suitable for your retirement needs.
Table of Contents:
What is the ABSLI Index Guaranteed Annuity Plus?
What are the features of the ABSLI Index Guaranteed Annuity Plus?
Who is eligible for the ABSLI Index Guaranteed Annuity Plus?
What are the annuity options and their benefits of the ABSLI Index Guaranteed Annuity Plus?
Option 2: Life Annuity with Return of Purchase Price
Option 3: Deferred Life Annuity with Return of Premium
Grace Period, Discontinuance and Revival of the ABSLI Index Guaranteed Annuity Plus
Free Look Period for the ABSLI Index Guaranteed Annuity Plus
Surrendering the ABSLI Index Guaranteed Annuity Plus
What are the advantages of the ABSLI Index Guaranteed Annuity Plus?
What are the disadvantages of the ABSLI Index Guaranteed Annuity Plus?
Research Methodology of ABSLI Index Guaranteed Annuity Plus
Benefit Illustration – IRR Analysis of ABSLI Index Guaranteed Annuity Plus
ABSLI Index Guaranteed Annuity Plus Vs. Other Investments
ABSLI Index Guaranteed Annuity Plus Vs. Fixed-Income Instruments
ABSLI Index Guaranteed Annuity Plus Vs. Inflation-Adjusted Income
Final Verdict on ABSLI Index Guaranteed Annuity Plus
What is the ABSLI Index Guaranteed Annuity Plus?
ABSLI Index Guaranteed Annuity Plus (iGAP) is a Non-Participating, Non-Linked, Individual General Annuity Plan.
It is designed to offer the best of both worlds. A hybrid plan offering regular income for life, part of which is guaranteed, with a potential upside.
What are the features of the ABSLI Index Guaranteed Annuity Plus?
- Offers guaranteed returns along with the potential for additional upside to help address rising living costs.
- Choose from three different annuity options based on your retirement income needs.
- Receive annuity income immediately or after a chosen deferment period, depending on your preference.
- Enjoy flexible premium payment options with the choice of Single Pay or Limited Pay.
Who is eligible for the ABSLI Index Guaranteed Annuity Plus?
| Parameters | Minimum | Maximum | |
| Age of the Annuitant(s) at Entry | Immediate Annuity | 40 years | 80 years |
| Deferred Annuity | 40 years | 75 years | |
| Vesting age & Deferment Period | Deferment period (Single Pay) | 1 year | 10 years subject to Maximum Vesting age |
| Deferment Period (Limited Pay) | Chosen PPT, subject to a minimum of 5 years | 10 years subject to Maximum Vesting age | |
| Vesting age | 40 years | 80 years | |
| Premium Payment Term (PPT) | Single Pay/ Limited Pay (2 – 10 Years) | ||
| Policy Term | Whole Life | ||
| Annuity Pay-out Frequency | Frequency of Annuity | Annuity Amount payable | |
| Yearly | Total Annuity | ||
| Half yearly | 98%* Total Annual Annuity/2 | ||
| Quarterly | 97%* Total Annual Annuity/4 | ||
| Monthly | 96%* Total Annual Annuity/12 | ||
| Minimum Annuity Amount | Yearly | 12,000 | |
| Half yearly | 6,000 | ||
| Quarterly | 3,000 | ||
| Monthly | 1,000 | ||
| Maximum Annuity Amount | No Limit | ||
| Minimum Premium/Purchase Price | Single Pay – Rs. 87,664 | ||
| Limited Pay – Rs. 12,501 | |||
| Maximum Premium/Purchase Price | No Limit | ||
What are the annuity options and their benefits of the ABSLI Index Guaranteed Annuity Plus?
Option 1: Life Annuity
Survival benefit
Annuity, as per the chosen frequency of Annuity payment, is payable in arrears as long as the Annuitant is alive.
Death benefit
No death benefit is payable
Option 2: Life Annuity with Return of Purchase Price
Survival benefit
Total Annuity as per chosen frequency of Annuity payment is payable in arrears as long as the Annuitant is alive.
Death benefit
On death of the Annuitant, a lump-sum amount equal to the Purchase Price will be paid to the nominee/legal heir. Death Benefit shall be subject to a minimum of Surrender Value applicable at the time of death.
Option 3: Deferred Life Annuity with Return of Premium
Survival benefit
During the Deferment Period, no annuity is payable to the Annuitant.
Total Annuity as per chosen frequency of Annuity payment is payable in arrears after the end of the Deferment Period, as long as the Annuitant is alive.
Death benefit
On death of the Annuitant during the Deferment period, 105% of Purchase price/ Total Premium paid shall be payable in a lump-sum to the nominee/legal heir.
On death of the Annuitant, after the Deferment period, a lump-sum amount equal to Purchase price/ Total Premium Paid is paid to nominee/ legal heir. Death Benefit shall be subject to a minimum of Surrender Value applicable at the time of death.
Grace Period, Discontinuance and Revival of the ABSLI Index Guaranteed Annuity Plus
Grace Period
For Limited Pay, the ABSLI Index 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.
Discontinuance
The policy acquires Surrender Value upon payment of 1 full year’s premium 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 policy will cease immediately.
Once the 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
A ABSLI Index 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 (along with the interest) to date.
Free Look Period for the ABSLI Index Guaranteed Annuity Plus
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 Index Guaranteed Annuity Plus Plan Policy.
In case you disagree with the terms & conditions of your Policy, you have the option to return the original policy document to the company for cancellation.
Surrendering the ABSLI Index Guaranteed Annuity Plus
This Policy shall acquire a Surrender Value provided one full year’s premium for the first Policy Year has been received under Limited Pay Option.
For Single Pay policies, Surrender Value is available at any time after policy issuance. For Single Pay policies, the Surrender Value payable will be equal to the higher of Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV).
For Limited Pay policies, where One Full Year Premium for the first Policy Year has been received, and the Policyholder opts to surrender the Policy at any time during Policy Term, the Surrender Value payable will be equal to the Special Surrender Value.
Where the ABSLI Index Guaranteed Annuity Plus Plan Policyholder opts to surrender the Policy in the first policy year, the Surrender Value shall become payable immediately after receipt of the first full year’s premium.
For Premium Payment Terms of less than 5 years, the Surrender Value will be payable only at the end of the first Policy Year, for other Premium Payment Terms.
What are the advantages of the ABSLI Index Guaranteed Annuity Plus?
- A policy loan facility is available under Annuity Options 2 and 3, where the annuity includes a 100% guaranteed component.
What are the disadvantages of the ABSLI Index Guaranteed Annuity Plus?
- Your retirement corpus remains locked in, with the surrender facility available only under select variants.
- Only a portion of the annuity income is guaranteed, while the remaining income depends on market performance.
- Annuity income is taxable as per your applicable income tax slab.
Research Methodology of ABSLI Index Guaranteed Annuity Plus
Choosing this plan solely for its guaranteed annuity and potential upside may not be sufficient.
To assess whether it is suitable for your long-term retirement needs, it is important to evaluate its Internal Rate of Return (IRR) and compare it with other investment options.
Benefit Illustration – IRR Analysis of ABSLI Index Guaranteed Annuity Plus
Consider an example from the policy brochure. A 60-year-old male invests ₹25 lakhs under Option 2: Life Annuity with Return of Purchase Price, with annual payouts(60% guaranteed payouts).
He receives a guaranteed annual annuity of ₹1,01,250, along with an additional variable annuity linked to market performance. Assuming a life expectancy of 85 years, the nominee receives the purchase price of ₹25 lakhs on his death.
| Male | 60 years |
| Purchase Price | ₹ 25 Lakhs |
| Life Expectancy | 85 years |
| Guaranteed Annuity (per annum) | ₹ 1,01,250 |
The brochure illustrates variable annuity growth rates of 4% and 8%. These rates are purely illustrative, are not guaranteed, and do not represent the upper or lower limits of the variable annuity under the plan.
| Option 2: Life Annuity with Return of Purchase Price (ROP) | |||
| Age | Guaranteed Annuity | Guaranteed Annuity + Variable Annuity 4% | Guaranteed Annuity + Variable Annuity 8% |
| 60 | -25,00,000 | -25,00,000 | -25,00,000 |
| 61 | 1,01,250 | 1,23,750 | 1,63,750 |
| 62 | 1,01,250 | 1,23,750 | 1,63,750 |
| 63 | 1,01,250 | 1,23,750 | 1,63,750 |
| 64 | 1,01,250 | 1,23,750 | 1,63,750 |
| 65 | 1,01,250 | 1,23,750 | 1,63,750 |
| 66 | 1,01,250 | 1,23,750 | 1,63,750 |
| 67 | 1,01,250 | 1,23,750 | 1,63,750 |
| 68 | 1,01,250 | 1,23,750 | 1,63,750 |
| 69 | 1,01,250 | 1,23,750 | 1,63,750 |
| 70 | 1,01,250 | 1,23,750 | 1,63,750 |
| 71 | 1,01,250 | 1,23,750 | 1,63,750 |
| 72 | 1,01,250 | 1,23,750 | 1,63,750 |
| 73 | 1,01,250 | 1,23,750 | 1,63,750 |
| 74 | 1,01,250 | 1,23,750 | 1,63,750 |
| 75 | 1,01,250 | 1,23,750 | 1,63,750 |
| 76 | 1,01,250 | 1,23,750 | 1,63,750 |
| 77 | 1,01,250 | 1,23,750 | 1,63,750 |
| 78 | 1,01,250 | 1,23,750 | 1,63,750 |
| 79 | 1,01,250 | 1,23,750 | 1,63,750 |
| 80 | 1,01,250 | 1,23,750 | 1,63,750 |
| 81 | 1,01,250 | 1,23,750 | 1,63,750 |
| 82 | 1,01,250 | 1,23,750 | 1,63,750 |
| 83 | 1,01,250 | 1,23,750 | 1,63,750 |
| 84 | 1,01,250 | 1,23,750 | 1,63,750 |
| 85 | 25,00,000 | 25,00,000 | 25,00,000 |
| IRR | 3.95% | 4.84% | 6.44% |
Based on these assumptions, the IRR works out to:
- Guaranteed Annuity: 3.95% as per the ABSLI Index Guaranteed Annuity Plus Plan maturity calculator
- Guaranteed Annuity + 4% Variable Annuity: 4.84% as per the ABSLI Index Guaranteed Annuity Plus Plan maturity calculator
- Guaranteed Annuity + 8% Variable Annuity: 6.44% as per the ABSLI Index Guaranteed Annuity Plus Plan maturity claculator
Even under the 8% variable annuity scenario, the overall return remains relatively low and may only broadly keep pace with inflation.
A Bank Fixed Deposit (FD) may offer a better return, particularly for senior citizens who are generally eligible for an additional 50 basis points.
FDs also provide greater liquidity, allowing you to access the invested corpus when required. In contrast, an annuity locks in the capital, and access to the corpus is subject to the specific terms of the chosen option.
Under this annuity option, the purchase price is returned only to the nominee after the annuitant’s death.
Therefore, the ABSLI Index Guaranteed Annuity Plus Plan appears less attractive in terms of both returns and liquidity.
Other investment avenues may provide better returns, greater flexibility, and the potential to generate income that is better positioned to keep pace with inflation. Let us explore these alternatives in the next section.
ABSLI Index Guaranteed Annuity Plus Vs. Other Investments
This section explores how you can convert your retirement corpus into a reliable income stream without giving up flexibility or control over your money. Retirement planning is highly individualised, and a one-size-fits-all approach may not work for everyone.
Fortunately, there are investment options that can potentially offer better returns than annuity plans while allowing you to customise withdrawals based on your financial needs.
ABSLI Index Guaranteed Annuity Plus Vs. Fixed-Income Instruments
Some fixed-income instruments that can offer attractive yields along with greater liquidity include:
1. Bank Fixed Deposits (FDs)
A stable option for retirees, offering predictable interest income with flexible tenure choices and relatively easy access to funds.
2. Senior Citizen Savings Scheme (SCSS)
A government-backed savings scheme that offers relatively high interest rates and regular income with low investment risk.
3. RBI Floating Rate Savings Bonds
These bonds offer interest rates linked to prevailing rates and provide semi-annual interest payouts. However, the returns can fluctuate as interest rates change.
These instruments can provide better liquidity and flexibility than traditional annuity plans, as the entire corpus is not permanently locked in. However, they may not provide inflation-adjusted income. This is an important consideration because your expenses are likely to increase throughout retirement.
ABSLI Index Guaranteed Annuity Plus Vs. Inflation-Adjusted Income
One way to address this is to include an appropriate allocation to equity in your retirement portfolio.
A balanced combination of equity and fixed-income investments, along with periodic rebalancing, can help you:
- Preserve and grow your retirement corpus
- Counter the impact of inflation
- Generate regular income
- Improve the probability of making your retirement corpus last throughout your lifetime
Let us revisit the earlier ABSLI Index Guaranteed Annuity Plus example. A ₹25 lakh corpus generates an annual income of approximately ₹1.63 lakhs under the 8% variable annuity scenario.
Instead of committing the entire ₹25 lakh to an annuity, let us consider a more flexible and growth-oriented approach using the same corpus.
Under the proposed 60:40 asset allocation, ₹15 lakhs (60%) is invested in equity for long-term growth, while ₹10 lakhs (40%) is allocated to debt instruments to provide stability and support regular withdrawals.
For illustration, we assume an annual return of 12% from equity and 6% from debt.
| Age | Equity Portion | Shift from Equity to Debt | Debt Portion | ||||
| Opening Balance | Yearly withdrawal | Closing Balance | Opening Balance | Yearly withdrawal | Closing Balance | ||
| 61 | 15,00,000 | 0 | 16,80,000 | 0 | 10,00,000 | 1,63,750 | 8,86,425 |
| 62 | 16,80,000 | 0 | 18,81,600 | 0 | 8,86,425 | 1,63,750 | 7,66,036 |
| 63 | 18,81,600 | 0 | 21,07,392 | 0 | 7,66,036 | 1,63,750 | 6,38,423 |
| 64 | 21,07,392 | 0 | 23,60,279 | 0 | 6,38,423 | 1,63,750 | 5,03,153 |
| 65 | 23,60,279 | 0 | 26,43,513 | 0 | 5,03,153 | 1,63,750 | 3,59,767 |
| 66 | 26,43,513 | 10,00,000 | 18,40,734 | 10,00,000 | 13,59,767 | 1,73,575 | 12,57,364 |
| 67 | 18,40,734 | 0 | 20,61,622 | 0 | 12,57,364 | 1,73,575 | 11,48,816 |
| 68 | 20,61,622 | 0 | 23,09,017 | 0 | 11,48,816 | 1,73,575 | 10,33,755 |
| 69 | 23,09,017 | 0 | 25,86,099 | 0 | 10,33,755 | 1,73,575 | 9,11,791 |
| 70 | 25,86,099 | 0 | 28,96,431 | 0 | 9,11,791 | 1,73,575 | 7,82,509 |
| 71 | 28,96,431 | 28,96,431 | 0 | 28,96,431 | 36,78,940 | 1,83,990 | 37,04,647 |
| 72 | 0 | 0 | 0 | 0 | 37,04,647 | 1,83,990 | 37,31,897 |
| 73 | 0 | 0 | 0 | 0 | 37,31,897 | 1,83,990 | 37,60,782 |
| 74 | 0 | 0 | 0 | 0 | 37,60,782 | 1,83,990 | 37,91,400 |
| 75 | 0 | 0 | 0 | 0 | 37,91,400 | 1,83,990 | 38,23,856 |
| 76 | 0 | 0 | 0 | 0 | 38,23,856 | 1,95,029 | 38,46,556 |
| 77 | 0 | 0 | 0 | 0 | 38,46,556 | 1,95,029 | 38,70,619 |
| 78 | 0 | 0 | 0 | 0 | 38,70,619 | 1,95,029 | 38,96,126 |
| 79 | 0 | 0 | 0 | 0 | 38,96,126 | 1,95,029 | 39,23,163 |
| 80 | 39,23,163 | 1,95,029 | 39,51,822 | ||||
| 81 | 39,51,822 | 2,06,731 | 39,69,797 | ||||
| 82 | 39,69,797 | 2,06,731 | 39,88,850 | ||||
| 83 | 39,88,850 | 2,06,731 | 40,09,047 | ||||
| 84 | 40,09,047 | 2,06,731 | 40,30,455 | ||||
| 85 | 40,30,455 | 2,06,731 | 40,53,148 | ||||
Withdrawals begin at ₹1.63 lakhs in the first year and increase by 6% every five years to partially account for rising expenses.
To maintain the desired balance between growth and stability, a portion of the equity corpus is periodically transferred to debt every five years.
The final transfer takes place at age 71, gradually increasing the debt allocation as the investor gets older.
This strategy provides three key advantages:
- Regular income: The debt allocation provides a source of funds for planned withdrawals.
- Inflation-adjusted withdrawals: Withdrawals can be increased periodically to reflect rising living costs.
- Capital appreciation: The equity allocation provides the potential for long-term growth even while withdrawals are being made.
Based on the assumptions above, by age 85, the strategy leaves a remaining corpus of approximately ₹40 lakhs, even after making regular withdrawals that increase periodically. This is significantly higher than the ₹25 lakh purchase price returned to the nominee under the ABSLI Index Guaranteed Annuity Plus plan.
The Key Difference
The ABSLI Index Guaranteed Annuity Plus plan includes a market-linked component that can potentially increase the annuity. However, the resulting cash flow is not entirely predictable because the variable component depends on market performance.
In the alternative strategy, the ₹25 lakh corpus is deliberately divided between debt and equity. The debt component is used to support near-term cash-flow requirements, while the equity component provides the potential for long-term capital appreciation.
This approach provides greater flexibility, liquidity and control over the retirement corpus while creating the potential for both regular income and long-term growth.
Final Verdict on ABSLI Index Guaranteed Annuity Plus
The ABSLI Index Guaranteed Annuity Plus Plan is designed to provide regular income, with a portion of the annuity guaranteed and the remaining income dependent on market performance.
With three annuity options and flexible payout frequencies, the plan may initially appear attractive to retirees looking for a regular source of income.
However, a closer evaluation highlights several important limitations. The returns are modest, while the retirement corpus remains largely locked in, restricting access to the invested capital.
This can become a significant drawback during emergencies or when funds are required for other financial needs and it also has a high agent commission.
More importantly, a market-dependent income stream may not be suitable for meeting essential retirement expenses. Retirement income needs are predictable, whereas market returns are not.
Equity markets are inherently volatile and are generally better suited for long-term wealth creation rather than funding immediate and regular cash-flow requirements.
By combining annuity income with a variable component linked to market performance, the plan does not provide the level of income certainty that retirees typically need. Therefore, it may not be an ideal choice as a core retirement-income solution.
A more effective approach is to build a well-diversified portfolio across equity and debt and rebalance it periodically.
The debt component can support regular cash-flow requirements, while equity provides the potential for long-term growth and inflation protection. This approach also gives you greater control over your corpus and the potential to leave a larger legacy for your family.
Instead of relying entirely on packaged annuity or pension products, consider developing a customised retirement strategy based on your income requirements, life expectancy, inflation, risk tolerance and legacy objectives.
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