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Can the Canara HSBC EZ Pension Plan help you build a financially secure retirement, or is it just another ULIP with limited long-term benefits?
Does the Canara HSBC EZ Pension Plan offer the right balance between market-linked growth and retirement security, or are there better retirement planning options available?
Is the Canara HSBC EZ Pension Plan a smart way to create your retirement corpus, or could its features and charges affect your long-term wealth?
In this article, we take a detailed look at the plan’s features, benefits, and limitations to help you assess whether it is the right choice for your retirement planning.
Table of Contents:
What is the Canara EZ Pension?
What are the features of the Canara EZ Pension?
Who is eligible for the Canara EZ Pension?
What are the benefits of the Canara EZ Pension?
What are the fund options in the Canara EZ Pension?
What are the charges of the Canara EZ Pension?
Grace Period, Discontinuance and Revival of the Canara EZ Pension
Free Look Period for the Canara EZ Pension
Surrendering the Canara EZ Pension
What are the advantages of the Canara EZ Pension?
What are the disadvantages of the Canara EZ Pension?
Research Methodology of Canara HSBC EZ Pension
Benefit Illustration – IRR Analysis of Canara HSBC EZ Pension
Canara HSBC EZ Pension Vs. Other Investments
Canara HSBC EZ Pension Vs. Pure-term + PPF/Equity Mutual Fund
Final Verdict on Canara HSBC EZ Pension
What is the Canara EZ Pension?
Canara EZ Pension is an Individual Linked Pension Plan. It provides the benefit of equity participation to potentially enhance your retirement corpus.
What are the features of the Canara EZ Pension?
- Zero allocation charges, ensuring 100% of your premium is invested in the chosen funds.
- Flexibility to choose your retirement age and premium payment term based on your financial goals.
- Unlimited free fund switches throughout the Canara HSBC EZ Pension Plan policy term, allowing you to realign your investments as market conditions change.
- Partial withdrawal facility to provide liquidity and financial flexibility during emergencies, subject to the plan’s terms and conditions.
- The Maturity Booster benefit is designed to enhance your retirement corpus by rewarding long-term policy continuation.
Who is eligible for the Canara EZ Pension?
|
Parameter |
Minimum |
Maximum |
|
Age at Entry |
18 years |
60 years |
|
Maturity Age |
40 years |
75 years |
|
Premium paying term |
For Single pay – one-time premium only |
|
|
For Limited pay: Minimum: 5 years Maximum: 25 years |
||
|
For Regular pay: Equal to the Policy Term |
||
|
Premium amount |
Yearly – ₹ 36,000 |
No Limit |
|
Half-Yearly – ₹ 18000 |
||
|
Quarterly – ₹9,000 |
||
|
Monthly – ₹ 3,000 |
||
|
Single Premium: ₹ 5,00,000 |
||
|
Policy Term |
The minimum policy term is 15 years |
75 years less entry age or 30 years, whichever is lower |
What are the benefits of the Canara EZ Pension?
1. Death benefit
In the event of the death of the Life Assured during the Canara HSBC EZ Pension Plan policy term, provided the Policy is in force, the higher of the following will be payable:
- Fund Value (if any), as on the date of intimation of death, or
- 105% of all Premiums paid (including top-up premiums, if any) up to the date of death
The policy terminates on payment of the death benefit
Utilisation of Death benefit
The nominee/claimant shall have the option to utilise the death benefit in one of the following ways:
- Withdraw the entire proceeds of the policy
- Utilise the entire proceeds of the policy or part thereof for purchasing an immediate/ deferred annuity at the then prevailing rate from Us, which shall be guaranteed for life at the then prevailing annuity/pension rates. However, the nominee will have the option to purchase an annuity from any other insurer at the then-prevailing annuity rate by utilising not more than 50% of the death benefit net of commutation or such percentage as may be prescribed by the IRDAI from time to time. The purchase of an annuity shall be subject to the terms and conditions of the product.
2. Vesting benefit
On survival till the maturity date/vesting Date of the Policy, the Fund value is payable to the policyholder, and the Canara HSBC EZ Pension Plan Policy will terminate. On the date of vesting, you will have the following options:
- To utilise the entire Vesting Benefit to purchase an immediate annuity or deferred annuity at the then-prevailing annuity rate. You shall have the option to purchase an immediate annuity or deferred annuity from another insurer at the then-prevailing annuity rate, by utilising not more than 50% of the entire proceeds of the policy, net of commutation.
- To commute/ withdraw up to 60% of the entire Vesting Benefit and utilise the balance amount to purchase an immediate annuity or deferred annuity at the then-prevailing annuity rate. You shall have an option to purchase an immediate annuity or deferred annuity from another insurer at the then-prevailing annuity rate, by utilising not more than 50% of the proceeds of the policy, net of commutation.
- Extend the accumulation period or defer the vesting/maturity date (subject to the maximum vesting/maturity age) for the same policy with the same terms and conditions, provided the life assured is less than 60 years of age at that time. For single or limited Premium policies, only deferment of the Vesting Date is allowed, and no Premiums are to be paid during the extended period.
In case the proceeds of the policy (net of commutation) on vesting are not sufficient to purchase the minimum annuity as allowed by the Authority, as amended from time to time, such amount may be paid to the Canara HSBC EZ Pension Plan policyholder as a lump sum.
3. Maturity Boosters
This plan offers fund value-related maturity boosters at the end of the Canara HSBC EZ Pension Plan policy term.
These boosters (as a percentage of the average Fund Value, including Top-up Fund value (if any) of the last 60 monthly Policy Anniversaries.
What are the fund options in the Canara EZ Pension?
There are two investment funds in the plan. The investment and risk profile of each fund is described below:
|
S.no |
Fund Name |
Asset Allocation |
Risk Profile |
||
|
|
|
Equity |
Deb Securities |
Money Market |
|
|
1 |
Pension Nifty Alpha 50 Index Fund |
70-100% |
0% |
0-30% |
High |
|
2 |
Pension Debt Fund |
0% |
20-100% |
0-80% |
Low |
What are the charges of the Canara EZ Pension?
i. Premium Allocation Charge
There are no Premium Allocation Charges on the base premium.
ii Policy Administration Charge
For Regular / Limited premium payment policies, it will be 2.6% of the annual premium chargeable per year, subject to a cap of ₹ 500 per month, until the end of the Canara HSBC EZ Pension Plan policy term.
For Single premium payment policies, the Policy Administration Charge will be 0.6% of the Single Premium per year, subject to a cap of ₹ 500 per month, until the end of the policy term.
iii. Mortality Charge
It shall be levied on a monthly basis by way of cancellation of Units. The Mortality Charge shall apply to the sum at risk, which shall be computed as follows:
|
Age |
20 |
30 |
40 |
50 |
|
Male |
0.878 |
0.928 |
1.596 |
4.214 |
|
Female |
0.788 |
0.887 |
1.29 |
3.01 |
vi. Fund Management Charge (FMC)
|
Fund Name |
FMC |
|
Pension Nifty Alpha 50 Index Fund |
1.35% |
|
Pension Debt Fund |
1% |
|
Pension Discontinued Policy Fund |
0.50% |
v. Surrender/Discontinuance Charge
It will be based on the year of discontinuance and the premium. There is no discontinuance charge from year 5 onwards.
Inference from the charges: These charges represent an additional cost borne by investors, unlike most standalone market-linked investment products. Over the long term, they can materially reduce the power of compounding and erode your overall investment returns.
Grace Period, Discontinuance and Revival of the Canara EZ Pension
For Other Than Single Premium
Grace Period
You have a period of 30 days for the annual mode of premium payment and 15 days for the monthly mode of premium payment from the due date to pay your premiums, during which your life insurance cover will continue.
Discontinuance
Discontinuance of Premium / Surrender during the Lock-in Period: the Fund Value less applicable Discontinuance Charges will be transferred to the DPF and the risk cover under the Policy will cease. The proceeds of the DPF shall be paid to the Policyholder at the end of the Revival Period or Lock-in Period, whichever is later, and the Policy will terminate upon such payment.
Discontinuance of Premium / Surrender after the Lock-in Period: the Policy shall be converted into a Reduced Paid-up Policy. The Policy shall continue to be in Reduced Paid-up status. All applicable charges as per the terms and conditions of the Policy shall be deducted during the Revival Period.
Revival
The Canara HSBC EZ Pension Plan policy can be revived within a period of 3 consecutive complete years from the date of the first unpaid premium.
Free Look Period for the Canara EZ Pension
If Policyholder does not agree with the terms and conditions of the Policy or otherwise and have not made any claim, you shall have the option to request for cancellation of the Policy by returning the Policy Document (if issued physically upon request) along with a written request stating the reasons for non-acceptance to the Company within the free-look period of 30 days from the date of receipt of the Policy Document, whether received electronically or otherwise (whichever is earlier).
Surrendering the Canara EZ Pension
In the case of Single Premium Policies
The Canara HSBC EZ Pension Plan Policyholder has an option to surrender the Policy at any time.
Upon receipt of the request for Surrender, the Fund Value, after deducting the applicable Discontinuance charges, shall be credited to the Discontinued Policy Fund.
The Policy shall continue to be invested in the Pension Discontinued Policy Fund, and the proceeds from the Discontinuance fund shall be paid at the end of the Lock-in Period, subject to the conditions as specified below.
For Other Than Single Premium
If the policy is surrendered within the first 5 policy years, the surrender value (Fund Value less applicable surrender charges) will be transferred to the Pension Discontinued Policy Fund and will earn at least a minimum guaranteed interest rate of 4% or as decided by IRDAI from time to time.
All risk and rider cover (if any) will be terminated immediately.
If the policy is surrendered after completion of the 5th policy year, the surrender value (equal to the Fund Value, including Top-Up fund value (if any)) can be utilised by you.
Utilisation of Surrender Value
Commute/withdraw up to 60% of the entire surrender benefit and utilise the balance amount to purchase immediate/ deferred annuity, at the then prevailing annuity rates.
You will also have the option to purchase an immediate/deferred annuity from any other insurer at the then-prevailing annuity rate by utilising not more than 50% of the entire proceeds of the Policy, net of commutation.
Utilise the entire Surrender Benefit to purchase immediate/ deferred annuity at the then-prevailing annuity rates.
You will also have the option to purchase an immediate/deferred annuity from any other insurer at the then-prevailing annuity rate, by utilising not more than 50% of the entire proceeds of the Policy, net of commutation.
What are the advantages of the Canara EZ Pension?
- Partial withdrawals are permitted from the 6th policy year onwards, providing access to your accumulated corpus when needed, subject to the plan’s terms and conditions.
- Fund switching enables you to change the allocation of your existing investments among the available unit-linked funds during the policy term, helping you adapt to changing market conditions or financial goals.
- Premium redirection allows you to alter the allocation of future premiums across the available unit-linked funds without affecting your existing investments.
- After completing the first five policy years, you have the flexibility to reduce your annual premium by up to 50% of the original Annualised Premium, subject to the plan’s terms and conditions.
What are the disadvantages of the Canara EZ Pension?
- Your premiums are invested only after the applicable charges are deducted, reducing the amount available for investment.
- The plan does not provide a lump-sum maturity benefit. Instead, the accumulated corpus is vested at maturity and must be used, either wholly or partly, to purchase an annuity as per the prevailing regulations.
- The plan offers only two fund options, limiting your ability to diversify your investments across different asset classes and investment strategies.
- If you surrender the policy, the surrender proceeds cannot be freely withdrawn. Instead, they must be used, either wholly or in part, to purchase an annuity, subject to the applicable regulations.
- No loan facility is available under this plan, restricting your ability to access funds without surrendering or partially withdrawing from the policy.
Research Methodology of Canara HSBC EZ Pension
The Canara HSBC EZ Pension Plan is designed to help you accumulate a retirement corpus, which is then used to generate a regular income during your post-retirement years.
Unlike traditional insurance-cum-savings plans that provide a lump-sum maturity payout, this plan offers a vesting benefit, which comes with certain restrictions. Let’s understand this with an example.
Benefit Illustration – IRR Analysis of Canara HSBC EZ Pension
A 40-year-old male pays an annual premium of ₹1 lakh for 10 years, with a 20-year policy term and a vesting age of 60 years. The death benefit is the higher of 105% of the total premiums paid or the fund value.
|
Male |
40 years |
|
Sum Assured |
₹ 10,50,000 |
|
Policy Term |
20 years |
|
Premium Paying Term |
10 years |
|
Annualised Premium |
₹ 1,00,000 |
Based on the insurer’s benefit illustration, assuming a non-guaranteed gross return of 4% p.a., the vesting benefit at maturity is ₹15.12 lakhs, translating into an IRR of 2.69% as per the Canara HSBC EZ Pension Plan maturity calculator.
At a non-guaranteed gross return of 8% p.a., the vesting benefit increases to ₹27.59 lakhs, generating an IRR of 6.65% as per the Canara HSBC EZ Pension Plan maturity calculator.
|
|
|
At 4% p.a. |
At 8% p.a. |
||
|
Age |
Year |
Annualised premium / Maturity benefit |
Death benefit |
Annualised premium / Maturity benefit |
Death benefit |
|
40 |
1 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
41 |
2 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
42 |
3 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
43 |
4 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
44 |
5 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
45 |
6 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
46 |
7 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
47 |
8 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
48 |
9 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
49 |
10 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
50 |
11 |
0 |
10,50,000 |
0 |
10,50,000 |
|
51 |
12 |
0 |
10,50,000 |
0 |
10,50,000 |
|
52 |
13 |
0 |
10,50,000 |
0 |
10,50,000 |
|
53 |
14 |
0 |
10,50,000 |
0 |
10,50,000 |
|
54 |
15 |
0 |
10,50,000 |
0 |
10,50,000 |
|
55 |
16 |
0 |
10,50,000 |
0 |
10,50,000 |
|
56 |
17 |
0 |
10,50,000 |
0 |
10,50,000 |
|
57 |
18 |
0 |
10,50,000 |
0 |
10,50,000 |
|
58 |
19 |
0 |
10,50,000 |
0 |
10,50,000 |
|
59 |
20 |
0 |
10,50,000 |
0 |
10,50,000 |
|
60 |
|
15,12,999 |
|
27,59,720 |
|
|
|
|
|
|
|
|
|
|
IRR |
2.69% |
|
6.65% |
|
The premiums, along with the maturity booster, accumulate into the vesting benefit at retirement. However, unlike a regular maturity benefit, this amount cannot be withdrawn freely.
Instead, it must be used to purchase an annuity plan, although you may commute up to 60% of the vested corpus as permitted under the prevailing regulations.
If the entire vesting benefit is used to buy an annuity under the insurer’s illustration, the estimated annual pension would be ₹91,809 (4% scenario) or ₹1,68,150 (8% scenario) under the Immediate Annuity with Return of Purchase Price option.
These figures are only illustrative, as the actual annuity income will depend on the annuity rates prevailing at the time of purchase.
Since the vesting benefit must be converted into an annuity at future market rates, you have limited flexibility over how your retirement corpus is ultimately used. You cannot freely deploy the accumulated amount towards other financial goals or investment opportunities.
Combined with the relatively modest return potential, this restriction makes the Canara HSBC EZ Pension Plan a less compelling option for building a retirement corpus.
Canara HSBC EZ Pension Vs. Other Investments
Retirement planning consists of two equally important phases: the accumulation phase, where you build your retirement corpus, and the distribution phase, where the accumulated wealth is converted into a regular income after retirement.
The Canara HSBC EZ Pension Plan only addresses the accumulation phase, while the distribution phase depends on purchasing a separate annuity.
To understand whether this is the most efficient approach, let us compare it with an alternative strategy.
Canara HSBC EZ Pension Vs. Pure-term + PPF/Equity Mutual Fund
Using the same assumptions as the previous illustration, a pure-term life insurance policy with a sum assured of ₹10.50 lakhs costs ₹11,300 per year for a 20-year term.
From the annual budget of ₹1 lakh, the remaining ₹88,700 can be invested according to your risk appetite.
|
Pure Term Life Insurance Policy |
|
|
Sum Assured |
₹ 10,50,000 |
|
Policy Term |
20 years |
|
Premium Paying Term |
10 years |
|
Annualised Premium |
₹ 11,300 |
|
Investment |
₹ 88,700 |
|
|
|
Term Insurance + PPF |
Term insurance + Equity Mutual Fund |
||
|
Age |
Year |
Term Insurance premium + PPF |
Death benefit |
Term Insurance premium + Equity Mutual Fund |
Death benefit |
|
40 |
1 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
41 |
2 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
42 |
3 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
43 |
4 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
44 |
5 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
45 |
6 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
46 |
7 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
47 |
8 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
48 |
9 |
-1,00,000 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
49 |
10 |
-97,500 |
10,50,000 |
-1,00,000 |
10,50,000 |
|
50 |
11 |
-500 |
10,50,000 |
0 |
10,50,000 |
|
51 |
12 |
-500 |
10,50,000 |
0 |
10,50,000 |
|
52 |
13 |
-500 |
10,50,000 |
0 |
10,50,000 |
|
53 |
14 |
-500 |
10,50,000 |
0 |
10,50,000 |
|
54 |
15 |
-500 |
10,50,000 |
0 |
10,50,000 |
|
55 |
16 |
0 |
10,50,000 |
0 |
10,50,000 |
|
56 |
17 |
0 |
10,50,000 |
0 |
10,50,000 |
|
57 |
18 |
0 |
10,50,000 |
0 |
10,50,000 |
|
58 |
19 |
0 |
10,50,000 |
0 |
10,50,000 |
|
59 |
20 |
0 |
10,50,000 |
0 |
10,50,000 |
|
60 |
|
26,17,553 |
|
48,64,289 |
|
|
|
|
|
|
|
|
|
|
IRR |
6.30% |
|
10.46% |
|
Low-risk option – Public Provident Fund (PPF): After adjusting the investment to comply with the minimum contribution requirement in the final year, investing ₹88,700 annually in a PPF account generates a maturity value of ₹26.17 lakhs, delivering an IRR of 6.30%.
Although the return is comparable to the plan’s 8% illustration, the entire maturity amount is freely accessible without the obligation to purchase an annuity.
High-risk option – Equity Mutual Fund: Investing the same amount in an equity mutual fund results in a corpus of ₹54.14 lakhs.
Even after accounting for capital gains tax, the post-tax corpus is ₹48.64 lakhs, generating a post-tax IRR of 10.46%, significantly higher than the returns illustrated under the Canara HSBC EZ Pension Plan.
|
Equity Mutual Fund Tax Calculation |
|
|
Maturity value after 20 years |
54,14,616 |
|
Purchase price |
8,87,000 |
|
Long-Term Capital Gains |
45,27,616 |
|
Exemption limit |
1,25,000 |
|
Taxable LTCG |
44,02,616 |
|
Tax paid on LTCG |
5,50,327 |
|
Maturity value after tax |
48,64,289 |
More importantly, both alternatives provide complete ownership of your retirement corpus.
You retain the flexibility to allocate the accumulated wealth across suitable asset classes and generate retirement income through strategies such as Systematic Withdrawal Plans (SWPs), while maintaining the potential to earn inflation-adjusted returns.
In contrast, the Canara HSBC EZ Pension Plan restricts how the accumulated corpus can be utilised, reducing both flexibility and overall investment efficiency, making it a less compelling option for retirement planning.
Final Verdict on Canara HSBC EZ Pension
The Canara HSBC EZ Pension Plan differs from traditional endowment plans by offering a vesting benefit instead of a lump-sum maturity payout.
While the plan helps you accumulate a retirement corpus, it does not address the distribution phase.
Instead, the accumulated corpus must be used to purchase an annuity, the terms and payout rates of which are not defined within this plan and will depend on the prevailing rates at the time of vesting.
Although the plan invests in market-linked funds, the final corpus is uncertain as it depends on market performance and it also has a high agent commission.
Moreover, the mandatory annuity purchase limits your flexibility, and the resulting pension may not adequately keep pace with inflation, potentially reducing your purchasing power throughout retirement.
Successful retirement planning begins with estimating the corpus required to sustain your desired lifestyle and selecting suitable investments to achieve that objective.
Starting early, investing consistently, and periodically reviewing your portfolio are key to building long-term financial security.
A diversified portfolio comprising equities, fixed-income instruments, and other suitable asset classes can help you accumulate wealth efficiently while providing the flexibility to generate retirement income through strategies such as Systematic Withdrawal Plans (SWPs).
Compared to such an approach, the Canara HSBC EZ Pension Plan offers limited flexibility, relatively modest return potential, and a mandatory annuity purchase, making it a less compelling option for most retirement investors.
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