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Can the Canara HSBC Saral Pension Plan ensure a secure and comfortable life during your golden years?
Can the Canara HSBC Saral Pension Plan secure your golden years with a well-structured annuity plan?
Is Canara HSBC Saral Pension Plan the pension plan that provides financial stability throughout your retirement?
This article dives into an in-depth analysis of the plan’s features, benefits, and drawbacks, complete with detailed calculations to help you make an informed decision.
Table of Contents:
What is the Canara HSBC Saral Pension Plan?
What are the features of the Canara HSBC Saral Pension Plan?
Who is eligible for the Canara HSBC Saral Pension Plan?
What are the plan options and the benefits of the Canara HSBC Saral Pension Plan?
Free Look Period Canara HSBC Saral Pension Plan
Surrendering Canara HSBC Saral Pension Plan
What are the advantages of the Canara HSBC Saral Pension Plan?
What are the disadvantages of the Canara HSBC Saral Pension Plan?
Research Methodology of Canara HSBC Saral Pension Plan
Benefit Illustration – IRR Analysis of Canara HSBC Saral Pension Plan
Canara HSBC Saral Pension Plan Vs. Other Investments
Canara HSBC Saral Pension Plan Vs. Fixed – Return Instruments
Canara HSBC Saral Pension Plan Vs. Inflation-adjusted Income
Final Verdict on Canara HSBC Saral Pension Plan
What is the Canara HSBC Saral Pension Plan?
Canara HSBC Saral Pension Plan is a Non-Linked, Non-Participating Single Premium, Individual Immediate Annuity Plan. The plan ensures a steady income for life and helps you and your family to lead a worry-free retirement life.
What are the features of the Canara HSBC Saral Pension Plan?
- Two annuity options available to suit your needs
- Financial security for your family with a return of purchase price in case of death
- Option to surrender the policy in the event of a critical illness
- Flexibility to select the annuity payment frequency: Monthly, Quarterly, Half-Yearly, or Yearly
- Higher purchase price rewards you with a better annuity amount
Who is eligible for the Canara HSBC Saral Pension Plan?
| Parameter | Details |
| Entry Age | Minimum: 40 years Maximum: 80 years |
| Annuity Options | 1. Life Annuity with Return of Purchase Price (ROP) on death 2. Joint Life Last Survivor with 100% of Annuity to spouse & with Return of Purchase Price (ROP) on the death of Last Survivor |
| Purchase Price | Depends on annuity Amount |
| Premium paying term | Single Premium |
| Annuity Term | Whole life |
| Minimum Annuity Amount | Yearly – 12,000 Half-yearly – 6,000 Quarterly – 3,000 Monthly – 1,000 |
| Maximum Annuity Amount | No Limit |
| Annuity Modal factor | Monthly – 0.96 Quarterly – 0.97 Half-yearly – 0.98 Yearly – 1.00 |
What are the plan options and the benefits of the Canara HSBC Saral Pension Plan?
Maturity Benefit: There is no maturity date. Hence, no maturity benefit is available in the Canara HSBC Saral Pension Plan
Free Look Period Canara HSBC Saral Pension Plan
You will have the right to return your 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 Canara HSBC Saral Pension Plan
You can surrender the Canara HSBC 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 Canara HSBC Saral Pension Plan?
- Borrow against your policy any time after six months from its start date.
- Enjoy a hassle-free, one-time investment that provides a steady income.
What are the disadvantages of the Canara HSBC Saral Pension Plan?
- Annuity payments are subject to full taxation.
- No adjustment for inflation in annuity payouts.
- Limited range of annuity options available.
- Policy surrender is permitted only under specific conditions.
Research Methodology of Canara HSBC Saral Pension Plan
The Canara HSBC Saral Pension Plan provides a regular cash payout for life. While this steady annuity may appear convenient for senior citizens, it’s essential to assess the plan’s returns before committing.
With guaranteed lifetime payouts, let’s evaluate the plan using figures from the Canara HSBC Saral Pension Plan policy brochure.
Benefit Illustration – IRR Analysis of Canara HSBC Saral Pension Plan
For instance, a 60-year-old male invests a lump sum of ₹25 Lakhs in Plan Option 1: Life Annuity with Return of 100% of Purchase Price (ROP). This option offers him an annual annuity of ₹1.66 Lakhs.
| Male | 60 years |
| Purchase Price | ₹ 25,00,000 |
| Annuity | ₹ 1,66,425 |
| Annuity Option | Option A |
| Returns | 6.55% |
Upon his demise, the original purchase price of ₹25 Lakhs is returned to his nominee.
Assuming a life expectancy of 85 years, the Internal Rate of Return (IRR) for this cash flow is calculated at 6.55% as per the Canara HSBC Saral Pension Plan maturity calculator.
| Age | Purchase Price / Annuity |
| 60 | -25,00,000 |
| 61 | 1,66,425 |
| 62 | 1,66,425 |
| 63 | 1,66,425 |
| 64 | 1,66,425 |
| 65 | 1,66,425 |
| 66 | 1,66,425 |
| 67 | 1,66,425 |
| 68 | 1,66,425 |
| 69 | 1,66,425 |
| 70 | 1,66,425 |
| 71 | 1,66,425 |
| 72 | 1,66,425 |
| 73 | 1,66,425 |
| 74 | 1,66,425 |
| 75 | 1,66,425 |
| 76 | 1,66,425 |
| 77 | 1,66,425 |
| 78 | 1,66,425 |
| 79 | 1,66,425 |
| 80 | 1,66,425 |
| 81 | 1,66,425 |
| 82 | 1,66,425 |
| 83 | 1,66,425 |
| 84 | 1,66,425 |
| 85 | 1,66,425 |
| 25,00,000 | |
| IRR | 6.55% |
Although this return might seem appealing, the annuity remains fixed throughout his lifetime. Considering rising living costs and increasing healthcare expenses, a fixed income may not be sufficient during retirement, whereas a step-up income would be more beneficial.
Another significant drawback is the lack of liquidity. Once the Canara HSBC Saral Pension Plan is purchased, access to the invested corpus is restricted, except under specific conditions or upon death.
In summary, the fixed payouts, lack of inflation adjustment, low returns, and inability to access funds make the Canara HSBC Saral Pension Plan a less efficient choice for retirement planning.
Canara HSBC Saral Pension Plan Vs. Other Investments
With rising inflation, the fixed annuity from the Canara HSBC Saral Pension Plan may fall short of covering post-retirement expenses in the long run.
In this section, we’ll explore more effective ways to invest your retirement corpus, providing better insights into its optimal utilisation.
Canara HSBC Saral Pension Plan Vs. Fixed – Return Instruments
Several fixed-return instruments in the market offer higher returns than the Canara HSBC Saral Pension Plan, delivering a guaranteed income stream and serving as viable alternatives to annuity plans. For example:
Senior Citizen Savings Scheme (SCSS): 8.20% interest rate
Bank Fixed Deposits (FDs): 7%–8% interest rate
RBI Floating Rate Bonds: 8.05% (with a variable rate)
| Investment Option | Expected Returns (as of Jan 2025) |
| Bank Fixed Deposit (FD) | 5-7% annually |
| Senior Citizen Savings Scheme (SCSS) | 7.4% annually |
| RBI Floating Rate Savings Bond | 8.05% annually |
While SCSS and FDs provide fixed returns for their terms, RBI Floating Rate Bonds have an adjustable interest rate. However, these options also fail to address the challenge of ever-increasing expenses.
To achieve inflation-adjusted income, diversification between equity and debt becomes essential. Let’s illustrate this strategy with an example. (We assume the same purchase price of ₹ 25 Lakhs)
Canara HSBC Saral Pension Plan Vs. Inflation-adjusted Income
Suppose ₹25 Lakhs is invested in a diversified portfolio with a 60:40 equity-to-debt ratio. Here, ₹15 Lakhs is allocated to equity for wealth growth, and ₹10 Lakhs to debt for regular income. Equity returns are assumed at 12% p.a., and debt returns at 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 | 1,66,425 | 8,83,590 |
| 62 | 16,80,000 | – | 18,81,600 | – | 8,83,590 | 1,66,425 | 7,60,194 |
| 63 | 18,81,600 | – | 21,07,392 | – | 7,60,194 | 1,66,425 | 6,29,396 |
| 64 | 21,07,392 | – | 23,60,279 | – | 6,29,396 | 1,66,425 | 4,90,749 |
| 65 | 23,60,279 | – | 26,43,513 | – | 4,90,749 | 1,66,425 | 3,43,783 |
| 66 | 26,43,513 | 15,00,000 | 12,80,734 | 15,00,000 | 18,43,783 | 1,76,411 | 17,67,415 |
| 67 | 12,80,734 | – | 14,34,422 | – | 17,67,415 | 1,76,411 | 16,86,465 |
| 68 | 14,34,422 | – | 16,06,553 | – | 16,86,465 | 1,76,411 | 16,00,658 |
| 69 | 16,06,553 | – | 17,99,339 | – | 16,00,658 | 1,76,411 | 15,09,702 |
| 70 | 17,99,339 | – | 20,15,260 | – | 15,09,702 | 1,76,411 | 14,13,289 |
| 71 | 20,15,260 | 20,15,260 | -0 | 20,15,260 | 34,28,549 | 1,86,995 | 34,36,047 |
| 72 | -0 | – | -0 | – | 34,36,047 | 1,86,995 | 34,43,995 |
| 73 | -0 | – | -0 | – | 34,43,995 | 1,86,995 | 34,52,420 |
| 74 | -0 | – | -0 | – | 34,52,420 | 1,86,995 | 34,61,350 |
| 75 | -0 | – | -0 | – | 34,61,350 | 1,86,995 | 34,70,816 |
| 76 | -0 | -0 | 0 | -0 | 34,70,816 | 1,98,215 | 34,68,957 |
| 77 | 0 | – | 0 | – | 34,68,957 | 1,98,215 | 34,66,987 |
| 78 | 0 | – | 0 | – | 34,66,987 | 1,98,215 | 34,64,899 |
| 79 | 0 | – | 0 | – | 34,64,899 | 1,98,215 | 34,62,685 |
| 80 | 34,62,685 | 1,98,215 | 34,60,338 | ||||
| 81 | 34,60,338 | 2,10,108 | 34,45,244 | ||||
| 82 | 34,45,244 | 2,10,108 | 34,29,245 | ||||
| 83 | 34,29,245 | 2,10,108 | 34,12,285 | ||||
| 84 | 34,12,285 | 2,10,108 | 33,94,308 | ||||
| 85 | 33,94,308 | 2,10,108 | 33,75,252 | ||||
Annual withdrawals start at ₹1.66 Lakhs, equivalent to the annuity from the Canara HSBC Saral Pension Plan. To combat inflation, withdrawals increase by 6% every five years, with the debt portion replenished from equity as needed.
By age 71, the equity portion is fully shifted to debt for risk management. At age 85, the portfolio still leaves you with approximately ₹33 Lakhs, significantly exceeding the return of purchase price offered by the Canara HSBC Saral Pension Plan.
This strategy ensures inflation-adjusted income and allows your corpus to last throughout your lifetime and beyond. The 60:40 ratio and the shift to debt are illustrative and can be customised based on individual risk appetite and needs, providing flexibility to adapt as circumstances change.
Final Verdict on Canara HSBC Saral Pension Plan
The Canara HSBC Saral Pension Plan offers regular income, which may initially be sufficient to cover your expenses. However, as time passes, sustaining your lifestyle and managing emergencies effectively requires a step-up income.
Unfortunately, a basic pension plan cannot meet these evolving needs due to its limited features.
One of the key drawbacks of the Canara HSBC Saral Pension Plan is its lack of flexibility.
It provides a fixed annuity for life and restricts access to the corpus, making it challenging to address unforeseen expenses or emergencies that may arise over time and it also has a high agent commission.
To combat inflation and ensure long-term financial security, a diversified investment portfolio with periodic rebalancing is a more effective strategy. Combining equity and debt investments allows for customisation based on individual preferences, as there is no universal solution for everyone. This approach demonstrates how to make the most of your retirement savings.
Retirement planning is an essential part of a comprehensive financial plan. However, a standard pension or annuity plan may fall short of meeting the needs of all retirees.
Do Quora, Facebook, and Twitter have the final say when it comes to financial advice?
To design a personalised retirement plan tailored to your goals and circumstances, it’s advisable to consult a Certified Financial Planner who can guide you in building a strategy that aligns with your unique requirements.
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