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ICICI Pru Gold Pension Savings Plan: Good or Bad? A Detailed Review

ICICI Pru Gold Pension Savings Plan

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Could the ICICI Pru Gold Pension Savings (GPS) Plan serve as your compass to navigate the financial landscape of your retirement?

Can the ICICI Pru Gold Pension Savings (GPS) Plan ensure steady income and wealth creation for your golden years?

Can the ICICI Pru Gold Pension Savings (GPS) Plan strike the perfect balance between guaranteed returns and flexibility?

In this article, we’ll explore the features, benefits, and drawbacks of the ICICI Pru Gold Pension Savings Plan to help you decide.

What is the ICICI Pru Gold Pension Savings Plan?

ICICI Pru Gold Pension Savings Plan is a Participating Non-linked Pension Individual Savings Product. ICICI Pru Gold Pension Savings Plan is a savings-oriented participating pension plan. It helps you save in your working years to build a retirement corpus.

What are the features of the Gold Pension Savings Plan?

Build a Retirement Corpus: Enjoy an assured benefit of 105% of the total premiums paid, along with the potential for growth through declared bonuses.
Complimentary Health Check-ups: Access periodic complimentary health check-ups after completing 3 policy years or upon reaching 50 years of age, whichever is later.
Bonus Accumulation: Start accumulating bonuses from the first policy year to enhance your retirement savings.
Partial Withdrawals: Benefit from the flexibility to withdraw a portion of your retirement fund during major life events or medical emergencies.
Flexible Vesting Options: Defer receiving policy proceeds up to the age of 75 and allow your vesting corpus to grow at a reverse repo-linked rate.
Tax Benefits: Avail tax benefits on premiums paid and benefits received, as per prevailing tax laws.

Who is eligible for the ICICI Pru Gold Pension Savings Plan?

Premium payment term	Min/Max Policy term	Min/Max Age at entry	Min/Max Age at Vesting	Min/max Premium
Single pay: One year	10 years /40 years	18 years /70 years	40 years /80 years	Minimum – Single pay: ₹ 50,000 Limited/ Regular pay: ₹ 50,000 p.a. Maximum – Subject to internal company guidelines (Board Approved Underwriting Policy)
Limited pay: 2 years to 15 years
Regular pay: 10 to 40 years

What are the benefits of the ICICI Pru Gold Pension Savings Plan?

1. Vesting Benefit

On survival of the Life Assured till the end of the ICICI Pru Gold Pension Savings Plan policy term, you will get a Vesting Benefit, which will be equal to the sum of:

Assured Benefit on Vesting, which is equal to 105% of the sum of Total Premiums Paid, plus
Accumulating Cash Bonus (if any), less total amount of part encashment done using the Special Withdrawal feature, plus
Terminal Bonus (if declared)

Utilisation of Vesting Benefit

Utilise the entire Vesting Benefit to purchase an immediate annuity or deferred annuity from the insurer at the then prevailing annuity rate.
Commute/ withdraw up to 60% of the entire vesting benefit and utilise the balance amount to purchase an immediate annuity or deferred annuity from the insurer at the then prevailing annuity rate.
He shall have the option to purchase an immediate annuity or deferred annuity from another insurer at the then prevailing rate by utilizing not more than 50%, of the proceeds of the policy net of commutation

2. Death benefit

The death benefit payable will be equal to:

Assured Benefit on Death (i.e. equal to 105% of the sum of Total Premiums Paid), plus
Accumulating Cash Bonus (if any), less total amount of part encashment done using the Special Withdrawal feature, plus
Interim Bonus (if declared), plus
Terminal Bonus (if declared)

The nominee can receive this death benefit either as a lump sum or choose to annuitize the same.

Grace Period, Discontinuance and Revival of ICICI Pru Gold Pension Savings Plan

Grace period

A grace period of 15 days will be given for payment of monthly frequency, and 30 days will be given for any other frequency.

Discontinuance

If any premium remains unpaid after the expiry of the grace period and before the ICICI Pru Gold Pension Savings Plan policyholder has paid at least one full year’s premium, then the policy will lapse.

If you do not revive the lapsed policy by the end of the revival period, it will terminate, and no benefits will be payable.

If any premium remains unpaid after the expiry of the grace period and after the policyholder has paid at least one full year then the policy is said to have become “paid-up”. A Paid-up policy is one where you are entitled to get benefits, but the benefits will be lower than full benefits.

Revival

You can revive your ICICI Pru Gold Pension Savings Plan policy benefits for their full value within five years from the due date of the first unpaid premium.

Free Look Period of ICICI Pru Gold Pension Savings Plan

You have the option to review the policy terms and conditions, and if you are not satisfied or have any disagreement with the terms and conditions of the Policy, then you can return the policy within 30 days from the date of receipt of the Policy Document, whether received electronically or otherwise.

Surrendering the ICICI Pru Gold Pension Savings Plan

For limited and regular pay policies you can surrender the ICICI Pru Gold Pension Savings Plan policy any time after payment of at least one full policy year’s premium(s).

Prior to receipt of one full year’s premium, no surrender value is payable. For single-pay policies, you can Surrender the policy immediately from the date of commencement of risk.

On policy surrender, a Surrender Value equal to the higher of the following will be payable:

Guaranteed Surrender Value (GSV)

Special Surrender Value (SSV)

What are the advantages of the ICICI Pru Gold Pension Savings Plan?

Special Withdrawal Option: Withdraw up to 25% of the total premiums paid throughout the policy term.
Loan Facility: Access a loan of up to 80% of the surrender value when needed.
Flexible Vesting Date: Postpone the vesting date up to a maximum age of 75 years, as per your financial needs.
Silver Benefit: Enjoy periodic complimentary health check-ups as part of the plan’s benefits.

What are the disadvantages of the ICICI Pru Gold Pension Savings Plan?

No Maturity Benefit: The ICICI Pru Gold Pension Savings Plan provides only the vested benefit at the end of the policy term.
Low Sum Assured: The sum assured offered under the plan is relatively minimal.
Non-Guaranteed Benefits: The benefits depend on bonuses, making them subject to variability.

Research Methodology of ICICI Pru Gold Pension Savings Plan

A pension plan is designed to help you save for retirement, ensuring your accumulated savings provide a regular income during your post-retirement years.

The ICICI Pru Gold Pension Savings Plan enables regular saving for retirement. However, it does not include a provision for periodic payouts during the post-retirement phase. Let’s understand this with an example:

Benefit illustration – IRR Analysis of ICICI Pru Gold Savings Plan

A 40-year-old male invests ₹1 lakh annually in the ICICI Pru Gold Pension Savings Plan. The premium payment term is 10 years, while the policy term extends to 20 years, with a vesting age of 60. The death benefit under the plan is ₹10.50 lakhs.

Male	40 years
Sum Assured	₹ 10,50,000
Policy Term	20 years
Premium Paying Term	10 years
Annualised Premium	₹ 1,00,000

The individual pays premiums for the first 10 years, and the benefits, along with bonuses, vest at the age of 60. This vesting benefit, unlike a maturity benefit, cannot be directly encashed at the end of the policy term.

		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		16,70,112		29,42,058

	IRR	3.33%		7.08%

At an assumed return of 4% p.a., the vesting benefit is ₹16.70 lakhs, with an IRR of 3.33% as per the ICICI Pru Gold Pension Savings Plan maturity calculator.

At an assumed return of 8% p.a., the vesting benefit is ₹29.42 lakhs, with an IRR of 7.08% as per the ICICI Pru Gold Pension Savings Plan maturity calculator.

While the projected returns may appear attractive, these figures are notional, as the vesting benefit is not directly accessible.

The plan restricts you from using the accumulated corpus for personal goals or investing it at your discretion. Instead, you are mandated to purchase an annuity plan, with up to 60% of the corpus available for commutation.

The remaining corpus is then invested in an annuity plan at prevailing rates, which is separate from the ICICI Pru Gold Pension Savings Plan. This lack of flexibility makes the plan less appealing as an investment option.

ICICI Pru Gold Pension Savings Plan Vs. Other Investments

Retirement plans generally consist of two phases: the accumulation phase and the distribution phase. However, the ICICI Pru Gold Pension Savings Plan focuses only on the accumulation phase, leaving out the distribution phase.

Additionally, the final annuity payouts under this plan are non-guaranteed. Let’s explore an alternative approach that channels your savings more effectively, giving you full control over your retirement corpus.

ICICI Pru Gold Pension Savings Plan Vs. Pure-term + PPF / ELSS

Using the same metrics as the previous example, you can address life insurance needs separately with a pure-term life insurance policy.

A term plan with a sum assured of ₹10.50 lakhs costs ₹12,900 annually for a policy term of 20 years and a premium-paying term of 10 years. This leaves ₹87,100 from the ₹1 lakh annual budget to invest based on your risk tolerance.

Pure Term Life Insurance Policy
Sum Assured	₹ 10,50,000
Policy Term	20 years
Premium Paying Term	10 years
Annualised Premium	₹ 12,900
Investment	₹ 87,100

		Term Insurance + PPF		Term insurance + ELSS
Age	Year	Term Insurance premium + PPF	Death benefit	Term Insurance premium + ELSS	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		25,70,319		47,76,827

	IRR	6.18%		10.33%

Risk-averse investors can invest in the Public Provident Fund (PPF). By contributing to a PPF account with adjustments in the last few years(minimum investment ₹ 500 per year), the maturity value at the end of 20 years is ₹25.70 lakhs, with an IRR of 6.18%.

While this is lower than the 8% projected scenario of the ICICI Pru Gold Pension Savings Plan, the entire corpus is accessible to you without restrictions.

High-risk investors can invest in Equity-Linked Savings Schemes (ELSS). By investing in ELSS funds, the maturity proceeds amount to ₹53.16 lakhs after 20 years. After deducting capital gains tax, the post-tax corpus is ₹47.76 lakhs, with a post-tax IRR of 10.33%.

ELSS Tax Calculation
Maturity value after 20 years	53,16,946
Purchase price	8,71,000
Long-Term Capital Gains	44,45,946
Exemption limit	1,25,000
Taxable LTCG	43,20,946
Tax paid on LTCG	5,40,118
Maturity value after tax	47,76,827

This alternate strategy offers complete flexibility to use the accumulated funds as per your needs. The substantial corpus can be further invested in diversified asset classes to generate regular retirement income.

With proper portfolio rebalancing, you can ensure inflation-adjusted income during your golden years. This flexibility, which is crucial for effective retirement planning, is lacking in the ICICI Pru Gold Pension Savings Plan.

Final Verdict on the ICICI Pru Gold Pension Savings Plan

Traditional plans generally involve paying premiums in exchange for either a lump sum payout or periodic payments. However, the ICICI Pru Gold Pension Savings Plan works differently.

Here, you pay premiums to build a corpus, but the accumulated corpus isn’t fully available for your use. Instead, it must be used to purchase an annuity plan.

This limitation means you don’t fully enjoy the benefits of the ICICI Pru Gold Pension Savings Plan. Moreover, the plan lacks clarity on how the annuity works, leaving uncertainty about whether the regular income it provides can keep pace with rising expenses.

Additionally, the final corpus is not guaranteed, as it depends on bonuses, and the sum assured under the plan is relatively low and also it has a high agent commission.

These drawbacks make the ICICI Pru Gold Pension Savings Plan a less attractive option for retirement planning.

A better approach is to direct your savings toward building a substantial retirement corpus through more flexible investment strategies.

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For tailored advice on determining your ideal retirement corpus and selecting the right investments, consider consulting a Certified Financial Planner who can help you design a personalized retirement plan.