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!
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
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.
| 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 | 18 years | ||
| Maximum Age at Entry | 70 years | ||
| Minimum Age at Vesting Date | 40 years (55 years for QROPS) | ||
| Maximum Age at Vesting Date | 80 years | ||
| Premium Payment Frequency | Yearly, Half-yearly, Monthly | ||
| Minimum Premium (RS) | Single premium | ₹ 1 Lakh | |
| Non single premium | 5 Pay | Other | |
| Annual | 1,00,000 | 30,000 | |
| Half-yearly | 50,000 | 15,000 | |
| Monthly | 10,000 | 3,000 | |
| Maximum Premium | No Limit | ||
Funds
It offers 6 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 |
| Flexi Cap Pension Fund | 80-100% | 0-20% | 0-20% | Very High |
| Top 500 Momentum 50 Pension Fund | 90 -100% | 0 – 10% | 0 – 10% | High |
| HDFC Life Dynamic Advantage Pension Fund | 50-100% | 0-50% | 0-50% | Medium |
| Govt Sect | Money Market | |||
| Discontinued Policy Fund Pension | 60 – 100% | 0 -40% | Low | |
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.
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:
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:
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:
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. |
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.
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 – 3,49,999 | 1.50% |
| 3,50,000 – 4,99,999 | 1% |
| 5,00,000 onwards | NIL |
Policy Administration Charges
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% |
| Flexi Cap Pension Fund | 1.35% |
| Top 500 Momentum 50 Pension Fund | 1.35% |
| HDFC Life Dynamic Advantage Pension Fund | 1.35% |
| 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:
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.
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.
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.
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.
Imagine that A 35-year-old opts for an HDFC Smart Pension plan with an annual premium of ₹ 1.20 Lakh. The premium paying term is 20 years & the policy term is 10 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 |
| Death benefit | ₹ 12,60,000 |
| Policy Term | 20 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 1,20,000 |
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 |
| 10 years | 20 years | 17,59,623 | 31,69,203 | 1,52,559 | 2,76,355 |
If he pays premium regularly, the vesting benefit @4% is 17.59 Lakhs & @ 8% is 31.69 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 (this annuity plan does not come under the purview of HDFC Life Smart Pension Plan). In such case, in the 4% scenario, the annuity amount would be 1.52 lakhs per annum & in the 8% scenario, the annuity amount would be 2.76 lakhs per annum.
| At 4% p.a. | At 8% p.a. | ||||
| Age | Year | Annualised premium / Maturity benefit | Death benefit | Annualised premium / Maturity benefit | Death benefit |
| 35 | 1 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 36 | 2 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 37 | 3 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 38 | 4 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 39 | 5 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 40 | 6 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 41 | 7 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 42 | 8 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 43 | 9 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 44 | 10 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 45 | 11 | 0 | 12,60,000 | 0 | 12,60,000 |
| 46 | 12 | 0 | 12,60,000 | 0 | 12,60,000 |
| 47 | 13 | 0 | 12,60,000 | 0 | 12,60,000 |
| 48 | 14 | 0 | 12,60,000 | 0 | 12,60,000 |
| 49 | 15 | 0 | 12,60,000 | 0 | 12,60,000 |
| 50 | 16 | 0 | 12,60,000 | 0 | 12,60,000 |
| 51 | 17 | 0 | 12,60,000 | 0 | 12,60,000 |
| 52 | 18 | 0 | 12,60,000 | 0 | 12,60,000 |
| 53 | 19 | 0 | 12,60,000 | 0 | 12,60,000 |
| 54 | 20 | 0 | 12,60,000 | 0 | 12,60,000 |
| 55 | 17,59,623 | 31,69,203 | |||
| IRR | 2.48% | 6.36% | |||
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
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. 1.20 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 (105% of the premium paid or fund value is paid as death benefit), we will assume a life cover of 12.60 Lakhs. 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?
Premium for life cover of ₹ 12.60 Lakhs is ₹ 11,500. The balance of ₹ 1,08,500 is utilised for investment.
| Pure Term Life Insurance Policy | |
| Sum Assured | ₹ 12,60,000 |
| Policy Term | 20 years |
| Premium Paying Term | 10 years |
| Annualised Premium | ₹ 11,500 |
| Investment | ₹ 1,08,500 |
In the first 10 years, the balance amount is invested in PPF / ELSS. In the next 10 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 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 36 | 2 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 37 | 3 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 38 | 4 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 39 | 5 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 40 | 6 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 41 | 7 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 42 | 8 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 43 | 9 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 44 | 10 | -1,20,000 | 12,60,000 | -1,20,000 | 12,60,000 |
| 45 | 11 | 0 | 12,60,000 | 0 | 12,60,000 |
| 46 | 12 | 0 | 12,60,000 | 0 | 12,60,000 |
| 47 | 13 | 0 | 12,60,000 | 0 | 12,60,000 |
| 48 | 14 | 0 | 12,60,000 | 0 | 12,60,000 |
| 49 | 15 | 0 | 12,60,000 | 0 | 12,60,000 |
| 50 | 16 | 0 | 12,60,000 | 0 | 12,60,000 |
| 51 | 17 | 0 | 12,60,000 | 0 | 12,60,000 |
| 52 | 18 | 0 | 12,60,000 | 0 | 12,60,000 |
| 53 | 19 | 0 | 12,60,000 | 0 | 12,60,000 |
| 54 | 20 | 0 | 12,60,000 | 0 | 12,60,000 |
| 55 | 32,02,070 | 59,46,629 | |||
| IRR | 6.43% | 10.58% | |||
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:
| ELSS Tax Calculation | |
| Maturity value after 20 years | 66,23,291 |
| Purchase price | 10,85,000 |
| Long-Term Capital Gains | 55,38,291 |
| Exemption limit | 1,25,000 |
| Taxable LTCG | 54,13,291 |
| Tax paid on LTCG | 6,76,661 |
| Maturity value after tax | 59,46,629 |
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.
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.
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