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Can the ABSLI Saral Pension Plan ensure a steady income stream after you retire so you can enjoy your golden years?
Can the ABSLI Saral Pension Plan offer ease of management and reliable returns?
Could the ABSLI Saral Pension Plan be the comprehensive solution to secure your lifestyle, independence, and the pleasures you cherish?
Let’s explore the answer by reviewing the features, advantages, disadvantages, and returns of the ABSLI Saral Pension Plan. This review will delve into how to effectively utilize your retirement corpus.
Table of Contents:
What is the ABSLI Saral Pension Plan?
What are the features of the ABSLI Saral Pension Plan?
Who is eligible for the ABSLI Saral Pension Plan?
What are the benefits of ABSLI Saral Pension Plan?
Free Look Period of ABSLI Saral Pension
Surrendering ABSLI Saral Pension Plan
What are the advantages of the ABSLI Saral Pension Plan?
What are the disadvantages of the ABSLI Saral Pension Plan?
Research Methodology of ABSLI Saral Pension Plan
Benefit illustration – IRR Analysis of ABSLI Saral Pension Plan
ABSLI Saral Pension Plan Vs Other Investments
ABSLI Saral Pension Plan Vs Fixed Return Instruments
ABSLI Saral Pension Plan Vs Inflation-adjusted Income
Final Verdict on the ABSLI Saral Pension Plus Plan
What is the ABSLI Saral Pension Plan?
ABSLI Saral Pension Plan is a non-linked non-participating, single premium, individual immediate annuity plan. ABSLI Saral Pension Plan provides guaranteed income for life and helps you and your family to lead a worry-free retirement life.
What are the features of the ABSLI Saral Pension Plan?
- Annuity once purchased is guaranteed for a lifetime.
- You have the option to choose a single life or a joint life annuity.
- You may choose to receive your annuity payouts on a yearly, half-yearly, quarterly or monthly basis, as per your needs and requirements.
- No medical tests are required to purchase this plan.
Who is eligible for the ABSLI Saral Pension Plan?
| Minimum | Maximum | |
| Age at Entry | 40 years | 80 years |
| Vesting Age | Not applicable | |
| Premium Payment Term (PPT) | Single pay | |
| Policy Term | Whole Life | |
| Annuity Payout Frequency | Yearly, Half-yearly, Quarterly, Monthly | |
| Purchase Price | ₹ 2,14,182 | No limit |
| 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 ABSLI Saral Pension Plan?
| Options | Option 1: Life Annuity with Return of 100% of Purchase Price (ROP) | Option 2: Joint Life Last Survivor Annuity with Return of 100% of Purchase Price (ROP) on death of the last survivor |
| Death Benefit | 100% of the Purchase price | On the first death of either of the Annuitants -100% of the Annuity shall continue On the death of the last survivor – Purchase Price shall be payable in lump sum |
| Survival Benefit | A fixed annuity throughout the lifetime | A fixed annuity till either of the annuitants is alive |
| Maturity Benefit | There is no maturity benefit | |
Free Look Period of ABSLI Saral Pension
You will have the right to return Your ABSLI Saral Pension Plan Policy within 15 days (30 days in the case of electronic policies and the policies issued under Distance Marketing) from the date of receipt of the Policy, in case you are not satisfied with the terms and conditions of your Policy.
Surrendering ABSLI Saral Pension Plan
You can surrender the ABSLI Saral Pension Plan policy any time after six months from the date of commencement of risk, if the Annuitant or the spouse or any of the children of the Annuitant is diagnosed as suffering from any of the 20 specified Critical Illnesses.
On approval of surrender, 95% of the Purchase Price shall be paid.
What are the advantages of the ABSLI Saral Pension Plan?
- You may take a loan against your ABSLI Saral Pension Plan policy any time after six months from the date of commencement of the policy.
- Hassle-free one-time investment which offers regular income.
What are the disadvantages of the ABSLI Saral Pension Plan?
- Annuity payments are fully taxable.
- The annuity is not adjusted for inflation.
- Limited annuity options to choose from.
Research Methodology of ABSLI Saral Pension Plan
The ABSLI Saral Pension Plus Plan is a single-pay plan where you invest your retirement corpus and receive a regular annuity. This setup might seem convenient for senior citizens as the cash payouts are guaranteed for a lifetime.
However, as an investor, it’s crucial to evaluate the plan’s returns. Let’s calculate the Internal Rate of Return (IRR) based on the figures provided in the policy brochure.
Benefit illustration – IRR Analysis of ABSLI Saral Pension Plan
A 60-year-old male purchases the ABSLI Saral Pension Plan with a single payment of ₹25 Lakhs. He selects Plan Option 1: Life Annuity with Return of 100% of Purchase Price (ROP).
This entitles him to an annual annuity of ₹1.47 Lakhs. Upon his death, the purchase price of ₹25 Lakhs is returned to his nominee. Assuming a life expectancy of 85 years for this whole life policy, the IRR for this cash flow is 5.77% as per the ABSLI Saral Pension Plan maturity calculator.
| Male | 60 years |
| Purchase Price | ₹ 25 Lakhs |
| Life Expectancy | 85 years |
| Annuity (per annum) | ₹ 1,47,069 |
| Age | Option 1: Life Annuity with Return of 100% of Purchase Price (ROP) |
| 60 | -25,00,000 |
| 61 | 1,47,069 |
| 62 | 1,47,069 |
| 63 | 1,47,069 |
| 64 | 1,47,069 |
| 65 | 1,47,069 |
| 66 | 1,47,069 |
| 67 | 1,47,069 |
| 68 | 1,47,069 |
| 69 | 1,47,069 |
| 70 | 1,47,069 |
| 71 | 1,47,069 |
| 72 | 1,47,069 |
| 73 | 1,47,069 |
| 74 | 1,47,069 |
| 75 | 1,47,069 |
| 76 | 1,47,069 |
| 77 | 1,47,069 |
| 78 | 1,47,069 |
| 79 | 1,47,069 |
| 80 | 1,47,069 |
| 81 | 1,47,069 |
| 82 | 1,47,069 |
| 83 | 1,47,069 |
| 84 | 1,47,069 |
| 85 | 25,00,000 |
| IRR | 5.77% |
This rate of return is below par. Additionally, the annuity remains fixed throughout his lifetime, which may not be sufficient to cover ever-increasing expenses and rising healthcare costs, requiring a step-up in income during the post-retirement period.
Another drawback of annuity plans is the locking up of funds. Once you purchase the ABSLI Saral Pension Plan, you cannot access your corpus except under specified conditions or upon death.
The low returns, fixed annuity without inflation adjustments, and restriction on accessing funds make the ABSLI Saral Pension Plan an inefficient product.
ABSLI Saral Pension Plan Vs Other Investments
The returns analysis clearly indicates that the ABSLI Saral Pension Plan will not be sufficient to meet your post-retirement expenses in the long run. Therefore, let’s explore better opportunities to invest your retirement corpus.
ABSLI Saral Pension Plan Vs Fixed Return Instruments
Several fixed-return instruments offer higher returns than the ABSLI Saral Pension Plan, providing a guaranteed regular income stream and serving as viable alternatives to annuity plans.
These include the Senior Citizen Savings Scheme (SCSS) with an interest rate of 8.20%, Bank Fixed Deposits (FDs) offering rates between 7% and 8%, and RBI Floating Rate Bonds at 8.05% (with a floating interest rate).
While SCSS and bank FDs provide fixed returns over their terms, the interest rate on RBI floating bonds may fluctuate.
| Alternate Investment option | Interest Rate |
| Senior Citizen Savings Schemes (SCSS) | 8.20% |
| Bank FD | 7% – 8% |
| RBI Floating Rate Bonds | 8.05% (Floating) |
However, these options also fall short of addressing ever-increasing expenses. To achieve inflation-adjusted income, it is essential to diversify your portfolio between equity and debt. Let’s consider the following scenario to understand how this strategy works.
ABSLI Saral Pension Plan Vs Inflation-adjusted Income
Assume a 60:40 ratio for equity and debt, respectively. Out of ₹25 Lakhs, ₹15 Lakhs is invested in equity for wealth accumulation, and ₹10 Lakhs is invested in debt for regular income needs. Equity returns are assumed to be 12% p.a., and debt returns are assumed to be 6% p.a.
| 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 | – | 16,80,000 | – | 10,00,000 | 1,47,069 | 9,04,107 |
| 62 | 16,80,000 | – | 18,81,600 | – | 9,04,107 | 1,47,069 | 8,02,460 |
| 63 | 18,81,600 | – | 21,07,392 | – | 8,02,460 | 1,47,069 | 6,94,715 |
| 64 | 21,07,392 | – | 23,60,279 | – | 6,94,715 | 1,47,069 | 5,80,504 |
| 65 | 23,60,279 | – | 26,43,513 | – | 5,80,504 | 1,47,069 | 4,59,441 |
| 66 | 26,43,513 | 10,00,000 | 18,40,734 | 10,00,000 | 14,59,441 | 1,55,893 | 13,81,761 |
| 67 | 18,40,734 | – | 20,61,622 | – | 13,81,761 | 1,55,893 | 12,99,420 |
| 68 | 20,61,622 | – | 23,09,017 | – | 12,99,420 | 1,55,893 | 12,12,139 |
| 69 | 23,09,017 | – | 25,86,099 | – | 12,12,139 | 1,55,893 | 11,19,620 |
| 70 | 25,86,099 | – | 28,96,431 | – | 11,19,620 | 1,55,893 | 10,21,551 |
| 71 | 28,96,431 | 28,96,431 | -0 | 28,96,431 | 39,17,981 | 1,65,247 | 39,77,899 |
| 72 | -0 | – | -0 | – | 39,77,899 | 1,65,247 | 40,41,411 |
| 73 | -0 | – | -0 | – | 40,41,411 | 1,65,247 | 41,08,734 |
| 74 | -0 | – | -0 | – | 41,08,734 | 1,65,247 | 41,80,097 |
| 75 | -0 | – | -0 | – | 41,80,097 | 1,65,247 | 42,55,741 |
| 76 | -0 | -0 | 0 | -0 | 42,55,741 | 1,75,162 | 43,25,414 |
| 77 | 0 | – | 0 | – | 43,25,414 | 1,75,162 | 43,99,268 |
| 78 | 0 | – | 0 | – | 43,99,268 | 1,75,162 | 44,77,553 |
| 79 | 0 | – | 0 | – | 44,77,553 | 1,75,162 | 45,60,535 |
| 80 | 45,60,535 | 1,75,162 | 46,48,496 | ||||
| 81 | 46,48,496 | 1,85,671 | 47,30,594 | ||||
| 82 | 47,30,594 | 1,85,671 | 48,17,618 | ||||
| 83 | 48,17,618 | 1,85,671 | 49,09,863 | ||||
| 84 | 49,09,863 | 1,85,671 | 50,07,644 | ||||
| 85 | 50,07,644 | 1,85,671 | 51,11,291 | ||||
Every five years, the debt portion is replenished from equity, and 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 Saral Pension Plan, i.e., ₹1.47 Lakhs.
At the age of 71, the equity portion is fully shifted to debt. Even after this shift, the corpus outlives you, leaving you with approximately ₹50 Lakhs at the age of 85, which is double the return of the ABSLI Saral Pension Plan’s purchase price.
The 60:40 ratio and the shift to debt at the age of 71 are illustrative and can be adjusted. Asset allocation and the shifting of funds between asset classes can be tailored to your risk appetite.
This investment strategy demonstrates the efficient use of your hard-earned retirement corpus.
Final Verdict on the ABSLI Saral Pension Plus Plan
During your post-retirement period, having a regular income stream is essential to maintain your accustomed lifestyle and handle any future contingencies.
While the ABSLI Saral Pension Plan provides a regular income, it may not be sufficient to sustain your lifestyle and manage emergencies effectively. Also ABSLI Saral Pension Plus Plan has high agent commission.
The main drawback of the ABSLI Saral Pension Plan is its lack of adaptability. It offers a fixed annuity throughout your lifetime and restricts access to the corpus, making it difficult to address emergencies or cover additional expenses that may arise over time.
A diversified investment portfolio with appropriate rebalancing is the best strategy to tackle inflation in the long run. An equity and debt portfolio can be customized based on your preferences, as there is no one-size-fits-all approach.
This strategy allows you to sustain your corpus throughout your lifetime and potentially beyond.
Do Quora, Facebook, and Twitter have the final say when it comes to financial guidance?
Retirement planning is a crucial component of everyone’s financial plan, but a standard annuity or pension plan may not support all retirees adequately.
To create a tailored retirement plan, consult a Certified Financial Planner who can help you design a strategy that meets your unique needs and goals.
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