HDFC Life Smart Pension Plan Review- A Good or Bad Investment?

Everyone wants to ensure regular income and lead an independent life without compromising the standard of living after retirement. For this, you need a hefty retirement corpus.

HDFC Life Smart pension plan promises that they help you in accumulating your retirement corpus.

In this detailed analysis, we can figure out whether the HDFC Smart Pension plan could accumulate the required corpus that fetches regular income during your retirement period.

How does this plan differ from other retirement plans in the market? Let’s calculate the returns of this plan at various stages. So that, you can analyze whether this has something new to offer!

We are going to compare it with other reviews of HDFC pension plans and also against other tax-saving plans like ELSS & PPF. Will this plan fetch you more returns? Or is it just a glass of old wine in a new bottle?

Let’s get started!

Table of Contents:

1.)An Overview of HDFC Life Smart Pension Plan
2.)Features of HDFC Life Smart Pension Plan
3.)HDFC Life Smart Pension Plan – Eligibility Criteria
4.)HDFC Life Smart Pension Plan – Fund Choices & Investment Strategies – Review
5.)HDFC Life Smart Pension Plan – Investment Choices
6.)Benefits under HDFC Life Smart Pension
7.)What are the Other Benefits of HDFC Life Smart Pension?
8.)Various Charges under the HDFC Life Smart Pension Plan
9.)Grace period, Discontinuance & Revival of HDFC Life Smart Pension Plan
10.)Free Look Period – HDFC Life Smart Pension
11.)Surrendering HDFC Life Smart Pension
12.)Advantages of HDFC Life Smart Pension
13.)Disadvantages of HDFC Life Smart Pension
14.)Research Methodology
15.)Benefit Illustration – IRR Analysis
16.)Comparison of HDFC Life Smart Pension With Other Investment Plans
17.)HDFC Life Smart Pension Vs. PPF / ELSS
18.)Final Verdict on HDFC Life Smart Pension

An Overview of HDFC Life Smart Pension Plan

It is a Unit Linked, Non-Participating Individual Pension Plan. It provides life insurance and helps you to save during your working years and build a retirement corpus to prepare for your retirement.

You will need to choose a target vesting date, premium payment term, and fund options according to the number of years you expect to save and your risk appetite. Your fund performance and calculated returns vary according to your risk appetite and the chosen fund option.

On the date of vesting, you may utilize your retirement corpus to get regular annuity/pension payments or take part in it as a lump sum.

Features of HDFC Life Smart Pension Plan

• Life insurance cover to the extent of 105% of all premiums paid including top-up premium.
• Through Market return, helps to build the retirement corpus.
• Three fund options to choose from.
• Policy term, Premium paying term & Vesting date can be chosen as per convenience.
• Loyalty additions will boost your fund value.

HDFC Life Smart Pension Plan – Eligibility Criteria

Premium Payment Term (PPT)	Single Premium or Other than Single Premium: 5 to 30 years
Policy Term (PT)	Minimum: 5 years or PPT whichever is higher
	Maximum: 55 years
Minimum Age at Entry	25 years
Maximum Age at Entry	70 years
Minimum Age at Vesting Date	45 years (55 years for QROPS)
Maximum Age at Vesting Date	80 years
Premium Payment Frequency	Yearly, Half-yearly, Monthly
Minimum Premium (RS)	Single premium	₹2 lakh
	Non single premium	PT >=10 years	PT<=10 years
	Annual	50000	100000
	Half-yearly	30000	60000
	Monthly	5000	10000
Maximum Premium	No Limit

HDFC Life Smart Pension Plan – Fund Choices & Investment Strategies – Review

Funds

It offers 3 funds in which you can direct your premiums in the proportion of your choice which may be altered later through premium redirection.

The fund mix at any point in time can be altered by fund switches at the discretion of the Policyholder. The 3 funds available in this plan are as follows:

Fund Name	Investment Pattern			Risk
	Equity	Debt	Money Market
Individual Preserver Pension Fund	–	75 – 100%	0 – 25%	Low
Individual Prime Equity Pension Fund	90 -100%	0 – 10%	0 – 10%	High
Large Cap – Pension Fund	91 -100%	–	1 – 10%	High
		Govt Sect	Money Market
Discontinued Policy Fund Pension		60 – 100%	0 -40%	Low

HDFC Life Smart Pension Plan – Investment Choices

What is Automatic Asset Rebalancing Strategy? Is it good or bad?

This strategy reduces your equity proportion as your policy nears the vesting date to ensure that any downside in the equity market later in the policy term has minimal impact on your Vesting Benefit. This strategy rebalances the equity and debt ratio without your manual intervention of switching the funds.

Under this strategy, you can choose to allocate your money in a pre-decided ratio between our equity-oriented funds (Individual Prime Equity Pension Fund/Large Cap – Pension Fund) and our debt-oriented fund (Individual Preserver Pension Fund). The pre-decided ratio (as % of fund value) will be as given below:

Number of years to Vesting	Individual Prime Equity Pension Fund / Large Cap – Pension Fund	HDFC Life Preserver Pension Fund
20	90	10
15 to 19	80	20
10 to 14	60	40
5 to 9	40	60
0 to 4	20	80

What is a Systematic Transfer Strategy? Is it good or bad?

Systematic Transfer Strategy works on the principle of the rupee cost averaging method to safeguard your wealth against market volatility.

The premium received net of premium allocation charge shall be allocated first to the Individual Preserver Pension Fund to purchase units. Immediately thereafter and on each subsequent monthly anniversary, the fund value of [1/ (13-month number in the policy year)] of the units available at the beginning of the month shall be switched to Individual Prime Equity Pension Fund/Large Cap – Pension Fund.

This strategy is available only in policies with annual premium payment modes.

Benefits under HDFC Life Smart Pension

Death benefit

On the death of the life assured before the end of the policy term, the nominee will receive death benefits which shall be higher of the following:

• Fund value
• Sum Assured on Death

Here Sum Assured on Death will be 105% of total premiums including top-up premiums paid reduced to the extent of the partial withdrawals from the fund value.

Utilization of Death Benefit:

On the death of the life assured before the vesting date, the nominee will have the following options:

• Withdraw the entire death benefit under the policy
• To utilize the entire death benefit of the policy or part thereof for purchasing an immediate annuity or deferred annuity at the then prevailing annuity rate from the Company or purchase an annuity from any other insurer at the then prevailing annuity rate to the extent of 50%, of the entire death benefit.

Vesting Benefit

Vesting Benefit is the fund value as of the date of vesting, on survival of the life assured.

Utilization of Vesting Benefit:

The policyholder will have the following options:

• To utilize the entire vesting benefit to purchase an immediate annuity or deferred annuity or to commute up to 60% and utilize the balance amount to purchase an immediate annuity or deferred annuity from the Company at the then prevailing annuity rate.
• To purchase an immediate annuity or deferred annuity from another insurer at the then prevailing annuity rate to the extent of 50%, of the entire vesting benefit of the policy

Loyalty Additions

All ‘Single Premium’ policies and other than ‘Single Premium’ policies paying a premium of ₹ 1,00,000 or more in a year will be eligible for loyalty additions. They are a part of the Fund Value and are paid as part of the Vesting Benefit or Death Benefit or Surrender Benefit.

Policy year	Loyalty addition
10 – 19 years	0.25% of the average fund value of the last and current policy anniversary
Year 20 onwards	0.5% of the average fund value of the last 2 policy anniversaries.

What are the Other Benefits of HDFC Life Smart Pension?

Top-up premium

The plan allows you the option of paying additional unlimited Top-up amounts in addition to your premiums within the policy term thereby allowing you to increase your savings at your own pace.

Alter Premium Payment Term (for other than single premium policy)

The plan allows you the option of increasing or decreasing the premium payment term at any time before the end of the premium payment term chosen earlier.

Partial Withdrawal

This plan offers you the flexibility to use your fund for any interim financial goals or emergencies by allowing partial withdrawal.

Partial withdrawal can be made only after the completion of 5 policy years & it shall not exceed 25% of the fund value at the time of partial withdrawal.

The Minimum amount allowed is calculated at Rs. 6,000.

Redirection of premium

You have the option to redirect the future allocation of the net amount of premiums available for Investment in any desired proportion in the available Unit Linked Pension funds.

Unlimited free premium redirection requests are allowed during the vesting period.

Fund switching

The product gives the flexibility to switch Fund Value from one fund to another. Unlimited switches are allowed during the policy term.

It helps you to review the fund performance and switch accordingly to ensure good returns.

Various Charges under the HDFC Life Smart Pension Plan

Premium Allocation charges:

Premium Allocation charges for other than the ‘Single Premium’ Policy

Policy Year	Allocation charge (Annual Mode)	Allocation charge (Half-Yearly & Monthly Mode)
1st year	12%	9%
2nd year onwards	4%	3%

Premium Allocation charges for the ‘Single Premium’ Policy

Single Premium	Allocation charge
2,00,000 – 3,99,999	1.50%
3,50,000 – 4,99,999	1%
5,00,000 onwards	NIL

Policy Administration Charges

Policy Administration charge for other than the ‘Single Premium’ policy is 0.1% of annualized premium per month & for the ‘Single Premium’ Policy, it is 0.08% of the single premium per month. For a policy paying Rs. 10 lakhs and above as ‘Single Premium’, the Policy Administration charge will be nil throughout Policy Term.

Mortality Charges

Mortality Charge is the charge levied for providing the Death Benefit. It will vary based on Age, gender of Life Assured, and sum at risk. y. Annual mortality charges per Rs.1,000 Sum at Risk are mentioned below:

Age (Years)	25	35	45	55	65
Male	0.94	1.18	2.47	7.18	15.37
Female	0.94	1.03	1.9	5.26	12.4

Fund Management Charges

Fund Name	% of Fund Value p.a.
Individual Preserver Pension Fund	1%
Individual Prime Equity Pension Fund	1.35%
Large Cap – Pension Fund	0.85%
Discontinued Policy Fund Pension	0.50%

Charges on Partial Withdrawal / Fund Switching / Re-direction

Nil

Discontinuance Charge:

This charge depends on the year of discontinuance, the premium paying term, and your premium amount.

Inference from the charges

Some charges are inevitable to run the policy like Mortality charges & fund management charges. But other charges seem to be complicated like discontinuance charges & policy administration charges.

These kinds of charges are not levied under other investment products in the market, thus making it uncompetitive among its rivalries.

Grace period, Discontinuance & Revival of HDFC Life Smart Pension Plan

Grace period:

This plan has a grace period of 15 days for the monthly mode and 30 days for other modes.

Discontinuance:

Discontinuance of Policy during the lock-in-Period (5 years) –

For other than single premium policies, the fund value after deducting the applicable discontinuance charges, shall be credited to the discontinued policy fund, and the risk cover and rider cover, if any, shall cease.

Discontinuance of Policy after the lock-in-Period (5 years) –

The policy shall be converted into a reduced paid-up policy with the paid-up sum assured i.e., the original sum assured multiplied by the total number of premiums paid to the original number of premiums payable as per the terms and conditions of the policy.

Revival:

You have the option to revive a discontinued policy within three consecutive years from the date of the first unpaid premium.

Free Look Period – HDFC Life Smart Pension

In case you are not agreeable to any of the terms or conditions, you have the option of returning the policy, within 15 days from the date of receipt of the policy. The Free-Look period for policies purchased through distance marketing will be 30 days.

Surrendering HDFC Life Smart Pension

In the case of Single premium policies, the policyholder has the option to surrender at any time during the lock-in period.

Upon receipt of the request for surrender, the fund value, after deducting the applicable discontinuance charges will be credited to the discontinued policy fund.

On completion of the lock-in period (5 years), the fund value as of date shall be payable.

In case of other than single premium policies –

In case you Surrender the policy before the lock-in period – The policy shall continue to be invested in the discontinued policy fund and the proceeds from the discontinuance fund shall be paid at the end of the lock-in period (5 years)

Surrender of the policy after the lock-in period – The policyholder has the option to surrender the policy at any time after the lock-in period. Upon receipt of the request for surrender, the fund value as of the date of surrender shall be payable.

Advantages of HDFC Life Smart Pension

• The policyholder shall have the option to extend the accumulation period or deferment period within the same policy.
• There are three fund options & two investment strategies & redirections are allowed during the policy term.
• Partial withdrawals are allowed after the completion of 5 years
• There is no premium redirection charge, partial withdrawal charge & fund-switching charge.
• Top-up premiums are allowed, this will increase your fund value.
• The premium paying term can be altered before the end of the premium paying term.

Disadvantages of HDFC Life Smart Pension

• There is no loan facility available
• No riders are allowed under this plan.
• There is a lock-in period of 5 years for partial withdrawal or surrender.
• The plan levies charges which reduce your ultimate return on investment.
• The main drawback of this policy is that you can’t enjoy the maturity benefit fully, as there is a compulsion of buying an annuity plan.

Research Methodology

The details that we have discussed so far can give you only a basic idea about the plan. In order to decide whether this plan is worth to be placed in your retirement portfolio, we need to analyze the working of the policy with detailed cash flow. Analysis of benefit illustration aid you in your decision-making.

Benefit Illustration – IRR Analysis

Imagine that A 35-year-old opts for an HDFC Smart Pension plan with an annual premium of ₹ 1 Lakh. The premium paying term is 15 years & the policy term is 20 years.

The vesting benefit (at the end of 20 years) can be utilized wholly to purchase an immediate annuity or deferred annuity or to commute up to 60% and utilize the balance amount to purchase an immediate annuity or deferred annuity.

Male	35 years
Premium Payment Term	15 years
Policy Term	20 years
Annual premium	1,00,000

The illustration shows two different rates of assured future investment returns, 8% p.a. and 4% p.a. These assured rates of return are not guaranteed and they are not the upper and lower limits of what you might get back.

The value of your policy is dependent on several factors including future investment performance.

		Vesting Benefit		Annuity (paid Annually)
Premium Payment Term	Policy Term	4% Return	8% Return	4% Return	8% Return
15 years	20 years	24,35,945	41,48,587	2,27,274	3,89,137

If he pays premium regularly, the vesting benefit @4% is 24.35 Lakhs & @ 8% is 41.48 lakhs. This amount can’t be encashed. This can be utilised wholly or partially to buy annuity plans at the prevailing rates.

Here it is assumed that the whole vesting benefit is utilized to buy an annuity plan. In such case, in the 4% scenario, the annuity amount would be 2.27 lakhs per annum & in the 8% scenario, the annuity amount would be 3.89 lakhs per annum.

		At 4% p.a.		At 8% p.a.
Age	Year	Annualized premium / Maturity benefit	Death benefit	Annualized premium / Maturity benefit	Death benefit
35	1	-1,00,000	24,35,945	-1,00,000	24,35,945
36	2	-1,00,000	24,35,945	-1,00,000	24,35,945
37	3	-1,00,000	24,35,945	-1,00,000	24,35,945
38	4	-1,00,000	24,35,945	-1,00,000	24,35,945
39	5	-1,00,000	24,35,945	-1,00,000	24,35,945
40	6	-1,00,000	24,35,945	-1,00,000	24,35,945
41	7	-1,00,000	24,35,945	-1,00,000	24,35,945
42	8	-1,00,000	24,35,945	-1,00,000	24,35,945
43	9	-1,00,000	24,35,945	-1,00,000	24,35,945
44	10	-1,00,000	24,35,945	-1,00,000	24,35,945
45	11	-1,00,000	24,35,945	-1,00,000	24,35,945
46	12	-1,00,000	24,35,945	-1,00,000	24,35,945
47	13	-1,00,000	24,35,945	-1,00,000	24,35,945
48	14	-1,00,000	24,35,945	-1,00,000	24,35,945
49	15	-1,00,000	24,35,945	-1,00,000	24,35,945
50	16	0	24,35,945	0	24,35,945
51	17	0	24,35,945	0	24,35,945
52	18	0	24,35,945	0	24,35,945
53	19	0	24,35,945	0	24,35,945
54	20	0	24,35,945	0	24,35,945
55	21	24,35,945	24,35,945	41,48,587	24,35,945
	IRR	3.70%		7.72%

In the above table, we have calculated the IRR at 4% p.a and 8% p.a respectively.

This IRR is only for the first 20 years. The main feature of the HDFC Life Smart Pension plan is that you can’t withdraw the vesting benefit (Maturity benefit) fully. So, this IRR is notional.

You can’t enjoy the benefit or invest in any other investment of your choice. If you have any cash requirement then, this lump sum amount can’t be utilized which is a major setback of the HDFC Life Smart Pension plan.

Please click the below link to calculate the premium of your HDFC Life Term Life Insurance policies

HDFC Life Calculate Premium

Comparison of HDFC Life Smart Pension With Other Investment Plans

This ULIP product helps you during the accumulation phase & later annuity is received through the accumulated corpus. This plan doesn’t have any specific amount as a sum assured on death. In most cases, only the fund value is paid as a death benefit. Now, we can compare the returns of other investments which offer better liquidity.

Let us assume that the same annual of Rs. 1 Lakh as seen in the above illustration is invested in the equity or debt instrument of your choice. As the HDFC Life Smart Pension plan doesn’t have any specific sum assured, we don’t set aside any amount for life cover from ₹ 1 Lakh. In general, having adequate life cover is advisable before investing in life goals.

HDFC Life Smart Pension Vs HDFC Life Pension Guaranteed Plan – Review

HDFC Life Pension Guaranteed Plan is a non-participating and non-linked annuity plan with a single premium option. The HDFC Life Pension Guaranteed Plan is a single premium annuity that offers a lifetime of guaranteed income.

Check the below review of the HDFC Life Pension Guaranteed Plan

HDFC Life Pension Guaranteed Plan-Review (2023): Should you buy this plan?

HDFC Life Smart Pension Vs HDFC Life Systematic Retirement Plan – Review

HDFC Life Systematic Retirement Plan is an individual/ Group, Non-Participating, Non-linked, Savings Deferred Annuity Plan. In this plan, You have the option to choose the premium payment term and deferment period at your convenience.

To know more about HDFC Life Systematic Retirement Plan please check the below review.

Reading both the reviews and comparing the calculated returns will give you a comprehensive idea about the good and bad aspects of both plans.

HDFC Life Systematic Retirement Plan – Review (2023) – Should you buy?

HDFC Life Smart Pension Vs. PPF / ELSS

In the first 15 years, ₹ 1 lakh is invested in PPF / ELSS. In the next 5 years, the fund grows as such. At the end of 20 years, the maturity value can be utilized as per your requirement.

		Term Insurance + PPF		Term insurance + ELSS
Age	Year	Term Insurance premium + PPF	Death benefit	Term Insurance premium + ELSS	Death benefit
35	1	-1,00,000		-1,00,000
36	2	-1,00,000		-1,00,000
37	3	-1,00,000		-1,00,000
38	4	-1,00,000		-1,00,000
39	5	-1,00,000		-1,00,000
40	6	-1,00,000		-1,00,000
41	7	-1,00,000		-1,00,000
42	8	-1,00,000		-1,00,000
43	9	-1,00,000		-1,00,000
44	10	-1,00,000		-1,00,000
45	11	-1,00,000		-1,00,000
46	12	-1,00,000		-1,00,000
47	13	-1,00,000		-1,00,000
48	14	-1,00,000		-1,00,000
49	15	-1,00,000		-1,00,000
50	16	0		0
51	17	0		0
52	18	0		0
53	19	0		0
54	20	0		0
55	21	38,21,724		67,82,519
	IRR	7.10%		11.39%

ELSS investments are subject to capital gains tax at the time of redemption. Post-tax value is taken for IRR calculation. The tax calculation for ELSS is given below:

Maturity value after 20 years	73,58,355
Less
Purchase price	15,00,000
Long-term capital gains	58,58,355
Exemption limit	1,00,000
Taxable LTCG	57,58,355
Tax paid on LTCG	5,75,835
Maturity value after tax	67,82,519

The above calculation and comparison clearly show that the IRR is inflation beating one & also you enjoy the maturity benefit fully as per your choice.

Either you can invest this lump sum amount for your retirement or utilize it for other life goals. This feature is missing in the HDFC Life Smart Pension plan which makes the investor handicapped by a lack of investment opportunities.

HDFC Life Smart Pension vs Other Investments – Comparison Review

After a thorough review of all the other alternatives for HDFC Life Smart Pension, it seems that ELSS and PPF are far better options.

We should not fall for the glitz of new plans in the market. But, compare and review the new plan with the other sound investment options. This exercise in turn helps us to analyze whether the calculated returns are good or bad compared to ELSS and PPF.

Most of the time, PPF and ELSS seem to be good options after a thorough review.

Final Verdict on HDFC Life Smart Pension

HDFC Life Smart Pension plan involves regular contributions made by the policyholder which are invested in the fund of his choice.

The funds grow over time, and upon retirement, the policyholder can receive a pension or a part lump sum amount & pension, depending on your choice.

Though it invests in market-related products, the plan doesn’t offer good returns in terms of annuity amount.

The return & liquidity are important aspects of any investment. Here, in HDFC Life Smart Pension plan both return & liquidity is not beneficial for an investor.

The vesting benefit can either be utilized to buy an annuity or commute up to 60% & buy an annuity for the balance amount. There is also no proper life cover for this plan, only the fund value is paid as a death benefit.

You can invest directly in equity-related products & can yield better returns than the HDFC Life Pension plan.

Plan your investment according to your life goals, time horizon & risk appetite. Having an adequate life cover is also an essential aspect of financial planning.

Please don’t adhere to amateur bits of advice on social media platforms like Quora, Facebook, Twitter, etc. It is always wise to consult a professional planner before taking a decision that will affect your future in the long run.