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ICICI Pru Guaranteed Pension Plan Flexi-Review (2023): Should you buy this plan or not?

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Table of Content:

Introduction

Features of ICICI Pru Guaranteed Pension Plan Flexi

What is ICICI Pru Guaranteed Pension Plan Flexi?

Additional Benefits of ICICI Pru Guaranteed Pension Plan Flexi

Death Benefit

ICICI Pru Guaranteed Pension Plan Flexi Parameters

What is Annuity in ICICI Pru Guaranteed Pension Plan Flexi?

Accumulation phase
The annuitization phase / Vesting Phase
Annuity Option

Different annuity options of ICICI Pru Guaranteed Pension Plan Flexi

IRR of ICICI Pru Guaranteed Pension Plan Flexi

IRR of ICICI Pru Guaranteed Pension Plan Flexi vs. Other Investments

ICICI Pru Guaranteed Pension Plan Flexi vs. ELSS + Term Insurance

Inferences from the analysis & example

Advantages of ICICI Pru Guaranteed Pension Plan Flexi

Disadvantages of ICICI Pru Guaranteed Pension Plan Flexi

What if you stopped paying your premium payment?

Surrender/Cancel ICICI Pru Guaranteed Pension Plan Flexi

Surrender/Cancel during the free look period

Final Verdict of ICICI Pru Guaranteed Pension Plan Flexi

ICICI Pru Guaranteed Pension Plan Flexi claims to give its customer a peaceful mind after their retirement by providing a guaranteed regular income.

But, how promising is this guaranteed income?

Can this guaranteed income financially help you during your golden days?

ICICI Pru Guaranteed Pension Plan Flexi claims to give its customer a peaceful mind after their retirement by providing a guaranteed regular income. 

But, how promising is this guaranteed income?

Can this guaranteed income financially help you during your golden days?

Let’s discover the answer in this article.

In the forthcoming article, we are going to see the review of ICICI Pru Guaranteed Pension Plan Flexi. It can help you to decide whether this ICICI Pru Guaranteed Pension Plan Flexi is Good or not!

Features of ICICI Pru Guaranteed Pension Plan Flexi:

  • Guaranteed Annuity for the rest of your life with the possibility of receiving premiums paid.
  • Option to receive Annuity on a monthly, quarterly, half-yearly, and annual basis.
  • Variety of Annuity options to choose from for your retirement.
  • Option to receive your Annuity on any date you choose by using the “Save the Date” feature.
  • Option to choose how long you want to pay your premium.
  • Option to choose “top-up” plans.

What is ICICI Pru Guaranteed Pension Plan Flexi?

The ICICI Pru Guaranteed Pension Plan Flexi is designed to create your lifelong income after your retirement without any worries.

ICICI Pru Guaranteed Pension Plan Flexi gives you the flexibility to choose your premium payment term, deferment period, and frequency of annuity. 

This ICICI Pru Guaranteed Pension Plan Flexi gives you 9 different Annuity options to choose from.

Additional Benefits of ICICI Pru Guaranteed Pension Plan Flexi:

High Premium Benefit

For higher premiums, benefits in the form of extra annuities as a percentage of the annuity rates would be paid, as described below:

Option to avail waiver premium benefits:

You can avail the waiver premium option with Life Joint Options. Such as Life Joint with Return of Premium and the Life Joint without Return of Premium. The premiums will be paid off along with the applicable benefit to the secondary policyholder in case the primary policyholder passes away during the premium payment term.

This benefit is applicable only if the primary holder passes away unfortunately or if the premium payment term is fully paid.

Option to top up the annuity amount:

Your annuity amount can be increased by increasing or by topping-up your premium. The additional annuity will be calculated based on the annuity rate, and age of the primary policyholder during the time of the payment of the additional premium payment.

This option can be chosen during any time of the deferment period only.  

Save the date:

When you purchase the policy, you can choose the option to decide at what date you want to receive the annuity.

Death Benefit:

If the policyholder passes away unfortunately during the deferment period, then the highest of the following will be paid as a death benefit.

  1. Total Premiums Paid by you + Accrued Guaranteed Additions
  2. 105% of Total Premiums Paid by you

In case, if the policyholder passes away after the deferment period, then

  • For Single Life with Return of Premium and Joint Life with Return of Premium – Death Benefits will be higher of:
  1. Total Premiums Paid by you + Accrued Guaranteed Additions – Total annuity paid out till date of intimation of death
  2. Total Premiums Paid by you
  • For Single Life with Booster Pay-outs and Single Life with Accelerated Health Boosters – Death benefits will be higher:
  1. Total Premiums Paid by you + Accrued Guaranteed Additions – Total annuity paid out till date of intimation of death – Additional pay-out, if any
  2. Total Premiums Paid by you – Additional pay-out, if any

ICICI Pru Guaranteed Pension Plan Flexi Parameters:

What is Annuity in ICICI Pru Guaranteed Pension Plan Flexi?

Annuities are financial products provided by insurance companies in which a policyholder pays the premium term in a regular period or as a lumpsum and receives the regular guaranteed income either immediately or later.

Types of annuities:

These products can be classified into immediate and deferred annuities and may be structured as fixed or variable.

Deferred Annuity – Your investment is made into a fund (of your choice) that keeps growing for a chosen period of time (Accumulation phase). You can choose the time when to start the pension (vesting period). Such a waiting period is called a Deferment period.

Immediate Annuity – After the premium payment is invested in the funds, immediately you will start receiving a regular income.

Guaranteed (or Fixed) Annuities: You will get a fixed regular income till the period of your annuity plan or till the death.

Variable Annuities: In this type of annuity option, you can choose to invest your premium on multiple fund options. Variable annuities have the potential to lose principal as it carries some market risk due to market volatility.

Annuitant: Annuitant is an investor or a pension plan beneficiary who is entitled to receive the regular payments of a pension.

Primary Annuitant: Primary Annuitant means the first individual entitled to receive payment. The Primary Annuitant means the individual, the events in the life who are of primary importance in affecting the timing or amount of the payout under the contract.

Secondary Annuitant: In the case of Joint Life, the secondary annuitant will be entitled to receive the annuity pay-outs in the event of the death of the primary annuitant. The secondary annuitant can only be the spouse/child/parent or sibling of the primary annuitant.

Accumulation phase: The accumulation phase always comes first. Here, all your premium (monthly/yearly) funds are invested.

The annuitization phase / Vesting Phase: Follows the accumulation period. It is when the insurance company begins making payments to the investor.

Annuity options:

  1. Life Annuity – Guaranteed pension to the annuitant till the end of his/her life. 
  1. Life Annuity with Return of Corpus/premium (or Purchase Price) – Guaranteed pension to the annuitant till the end of his/her life, finally the Corpus (initial investment made) is returned to a nominee.
  1. Joint life survivor annuity: This type of annuity covers you (primary annuitant) and secondary annuitant. The pay-outs continue till either primary or secondary annuitant is alive. If both die, the annuity plan ceases.
  1. Joint life survivor annuity with return of purchase price: This type of annuity covers you (primary annuitant) and secondary annuitant. The pay-outs continue till either one is alive. If both die, the annuity plan may entitle the nominee to receive the purchase price, i.e., the initial amount invested by you to buy the annuity.
  1. Inflation-Indexed annuity / Increasing annuity: People who want to maintain their lifestyle at par with the increasing expenses and market inflation must take this to avoid any financial hassle.
  1. Annuity payable for guaranteed time (5/10/15/20 years): In this, the annuity is to be paid for a defined period regardless of whether or not the individual dies during that specific period.
  1. Life Annuity with Booster pay-outs: This annuity option pays an annuity to the Annuitant for his entire life after the end of the deferment period chosen and also gives Booster pay-outs every 5 years (generally) on the policy anniversary after the deferment period.

Different annuity options of ICICI Pru Guaranteed Pension Plan Flexi:

The plan provides seven alternatives for you to select from based on your retirement needs:

Single Life without Return of Premium:

Annuity begins after the deferral term selected by you, and the amount is paid for the Annuitant’s whole life.

Joint Life without Return of Premium: 

The annuity is paid not only for the Primary Annuitant’s whole life, but it also continues to be paid to the Joint Life (known as the Secondary Annuitant) chosen by you after the Primary Annuitant dies.

Single Life with Return of Premium:

Similar to the first plan choice, the annuity begins after the deferral time selected by you, and the sum is paid throughout the Annuitant’s whole life. If the annuitant dies, the Death Benefit is paid to the nominee and the policy is canceled.

Joint Life with Return of Premium: 

Similar to the second plan choice, the annuity begins after the deferral time you select, and the sum is paid throughout the Primary Annuitant’s whole life. The annuity sum continues to be paid to the Secondary Annuitant after the death of the Primary Annuitant. The Death Benefit is payable to the nominee upon the death of the Secondary Annuitant. Following that, no more benefits would be payable, and the policy would be terminated.

 Single Life with Return of Premium (ROP) on Critical Illness (CI) or Permanent Disability due to Accident (PD) or Death: 

An annuity will be paid for life until the first diagnosis of any of the seven listed CI or PD before the age of 80, or until death, whichever comes first. The Death Benefit shall be paid upon the death or occurrence of any of the 7 Specified CI or PD based on the Annuitant’s age.

Single Life with Booster Pay-outs: 

 After the end of the deferral term chosen by you, this annuity option provides an annuity to the Annuitant for his whole life and also offers him Booster pay-outs – 10% of the total premium (excluding top-up premium) – every 5 years – maximum of 5 such pay-outs. The amount of the Death Benefit due will be lowered by the amount of Booster payments already made.

Single Life with Accelerated Health Boosters: 

Annuity payments begin throughout the Annuitant’s whole life, and if the Annuitant is diagnosed with the need for daily living support, the annuity amount rises by an extra amount (“Accelerated Health Boosters”). The annual annuity payout will rise by 10% of the total premiums paid by you (excluding top-up premium).

Example:

Male: 45 years old.

Premium paying term: 15 years

Amount: Rs 3 lakh per annum

As the name implies, there is flexibility in choosing:

  • Premium amount
  • Premium paying frequency
  • Premium paying term
  • Annuity frequency

The above is just an example showing different (popular) annuity options either monthly or yearly annuity for premium paying term of 15 years & premium amount of Rs. 3lakh per year.

Similarly, n-number of options available to choose from in the calculator. Check this link: ICICI Retirement Pension Plans Calculator

IRR of ICICI Pru Guaranteed Pension Plan Flexi:

Now, let’s calculate the IRR of ICICI Pru Guaranteed Pension Plan Flexi by using the online return calculator.

The Primary annuitant is 45 years old. 

The Premium paying term is 15 years

The Premium amount is Rs. 3 lakh per annum.

Annuity amount – receivable annually.

Life expectant – In single life – 85 years (primary annuitant)

In joint life, the secondary annuitant lives 25 years of the annuitisation phase

IRR of ICICI Pru Guaranteed Pension Plan Flexi vs. Other Investments:

Here compare to ICICI Pru Guaranteed Pension Plan Flexi, other investment options can give you better investment return in the long term.

ICICI Pru Guaranteed Pension Plan Flexi vs. ELSS + Term Insurance:

Now let’s compare ICICI Pru Guaranteed Pension Plan Flexi with ELSS and see how much return it can give us in the long term.

Here Annual Contribution is Rs. 300000

Pure term insurance:

Sum Assured: Rs. 10000000

Annual Premium: Rs. 14500

Tenure: 15 years

ELSS Contribution: Rs. 285000

Then after 15 years, you will get Rs. 1, 06, 43, 359 as investment return, and the IRR will be 10.17%.

Now, in the ICICI Pru Guaranteed Pension Plan Flexi, we invest for 15 years and we will get an annuity for the remaining 25 years.

So, here in ELSS investment from the 16th year onwards, you can move 70% of your portfolio which works out to Rs. 74, 50, 351 to fixed investment products for a regular income. And you can hold 30% of the investment in ELSS without any additional contribution.

So, if you hold the remaining 30% which is Rs. 31, 93, 008 for 25 years without investing additional contribution, then at the 25 years, you will have Rs. 5, 42, 81, 342.

So, if you invest in ELSS, you can get the benefit to earn a higher return compare to ICICI Pru Guaranteed Pension Plan Flexi for the long term.

Inferences from the analysis & example:

  1. The yearly payout will be more in single life when compared to Joint life.
  2. The yearly payout will be less if the return of the premium option is chosen (both single and joint life).
  3. During the annuitisation phase, you could choose the without return of premium option if you want a higher pay-out.
  4. Though the yearly payout seems to be less in return for the premium, the IRR works out more when compared to without the return of premium. The return of premium will act as a legacy. Those who wish to leave a legacy to their heirs can choose this option.
  5. The annual payout will be the least booster pay-out option.

Advantages of ICICI Pru Guaranteed Pension Plan Flexi:

  • Monthly payment in the form of a pension gives a lifetime guarantee of a consistent income.
  • This plan provides tax exemption under applicable Sections 80C and 10(10D) of the Income Tax Act (during the accumulation phase)

Disadvantages of ICICI Pru Guaranteed Pension Plan Flexi:

  • It does not allow for partial or premature withdrawals.
  • When compared to the investment returns given by other market-linked products, the fixed annuity sum is lesser.
  • Our country’s soaring inflation rate is a reality, and it will burn a hole in your purse after retirement.
  • Even if the donation is tax-deductible, the annuity is treated as salary and is taxed accordingly.

What if you stopped paying your premium payment?

If you stopped paying your premium, then the policy will give you 2 years of grace period to revive your policy. If you didn’t revive within two years, then the policy will be terminated after paying the surrender value.

Surrender/Cancel ICICI Pru Guaranteed Pension Plan Flexi:

You will get no surrender value if you decide to surrender the policy without completing 2 policy years. 

However, if you decide to surrender the policy during the deferred period, then the surrender value will be higher than the Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV).

There will be no surrender value will be payable after the deferment period for the following annuity options.

  1. Single life without return of premium
  2. Joint Life without Return of Premium

For the following annuity options, the surrender value will be equal to the Special Surrender Value (SSV), after the deferment period.

  1. Single Life with Return of Premium
  2. Joint Life with Return of Premium
  3. Single Life with Return of Premium on Critical illness (CI) or Permanent Disability due to accident (PD) or Death
  4. Single Life with Booster Payouts
  5. Single Life with Accelerated Health Boosters

Surrender/Cancel during free look period:

If you are not satisfied with the term and conditions of the ICICI Pru Guaranteed Pension Plan Flexi, then you can return the policy during the free look period. 

The free look period will be 15 days if you purchase the policy offline and 30 days if you purchase the policy online. The stamp duty and other charges if any would be deducted from your refund amount.

For more details, you can download the “ICICI Pru Guaranteed Pension Plan Flexi” brochure here!

Final Verdict of ICICI Pru Guaranteed Pension Plan Flexi:

To sum up, the ICICI Pru Guaranteed Pension Plan Flexi annuities provide an assured regular income, tax benefit, and a potential death benefit (with the return of premium). 

The drawback would be how it can only be used as your post-retirement income. But as it is not adjusted to inflation we cannot simply rely only on an annuity for the post-retirement income. 

With rising prices, increasing healthcare costs, and higher life expectancy, it is imperative to make an informed decision. So, it is better to choose an investment option that gives you a liquidity option, and an inflation-beating return.

If you have any comments or questions, write them in the comment box below.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

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