HDFC Life Systematic Retirement Plan – Review (2024) – Should you buy ?

“The question isn’t at what age I want to retire; it’s at what income”

                                     George Foreman

To enjoy a long comfortable retirement, you work hard all your life & save money.
This hard-earned money should be invested prudently.

So that a steady stream of income during the retirement period is assured.

HDFC’s Systematic retirement plan is a deferred annuity plan, which plans to accumulate the retirement corpus gradually & pay a lifelong annuity.

Will this deferred annuity plan aid you to have a comfortable lifestyle in the post-retirement period?

Let us look into the features & the working of the plan in detail.

Table of Contents:

1.) What is the HDFC Systematic Retirement Plan?

2.) Features of the HDFC Systematic Retirement Plan

3.) HDFC Systematic Retirement Plan at a glance

4.) Benefits of the HDFC Systematic Retirement Plan

• • Death Benefit
  • Survival Benefit
  • Maturity Benefit

5.) Other Benefits of the HDFC Life Systematic Retirement Plan

6.) The grace period, Lapse, Paid-up, Revival of the HDFC Life Systematic Retirement Plan

7.) Free Look-up period of the HDFC Life Systematic Retirement Plan

8.) Surrendering your HDFC Life Systematic Retirement Plan

9.) Advantages of the HDFC Life Systematic Retirement Plan

10.) Disadvantages of the HDFC Life Systematic Retirement Plan

11.) Research Methodology

12.) IRR of the HDFC Life Systematic Retirement Plan

13.) HDFC Life Systematic Retirement Plan Vs Other Investments

14.) HDFC Life Systematic Retirement Plan Vs PPF Vs ELSS

15.) Final Verdict

What is the HDFC Systematic Retirement Plan?

HDFC Life Systematic Retirement Plan is an individual/ Group, Non-Participating, Non-linked, Savings Deferred Annuity Plan.

This plan allows you to gradually build your retirement corpus with the flexibility to choose the deferment period so that you can enjoy your desired lifestyle.

Planning on time and saving systematically to & enjoy retirement on your terms is the motto of this plan.

Features of the HDFC Life Systematic Retirement Plan:

• You have the option to choose the premium payment term and deferment period at your convenience.

• Annuity pay-out frequency– monthly, quarterly, half-yearly, yearly, or any date of your choice.

• The premium amount can either be based on the premium you wish to pay to buy the annuity plan or on the annuity payout you wish to receive in the future.

• Guaranteed annuity for your whole lifetime by paying premiums for a limited payment term.

• Two annuity options – a) Life Annuity and b) Life Annuity with Return of Premiums.

HDFC Life Systematic Retirement Plan at a glance:

Let us look at the eligibility criteria for this plan to better understand the working of this plan at a glance below;

Particulars	Minimum	Maximum
Entry Age	45 years	75 years
Annuity Pay-out (in Rs) Per instalment	Annual: 12,000	No limit
	Half Yearly: 6,000
	Quarterly: 3,000
	Monthly: 1,000
Premium (in Rs) Per instalment	Annual: 30,000	No limit
	Half Yearly: 15,300
	Quarterly: 7,800
	Monthly: 2,625
Group Size (For Group Policies)	10	No limit
Premium Paying term	5 years	15 years
Deferment Period	Premium Payment Term chosen	15 years
Policy Term	Whole Life

PREMIUM CONVERSION RATES:

The premium payable at other than Annual frequency = Annual premium * Premium conversion factor

Frequency	Premium Conversion factor
Half-yearly	0.51
Quarterly	0.26
Monthly	0.0875

Benefits of the HDFC Life Systematic Retirement Plan:

Death benefit:

A. Death during deferment period:

The death benefit shall be the higher of;

• Total Premiums paid accumulated at the compounding interest of 6% p.a. till the date of death

• 105% of Total Premiums paid up to the date of death

B. Death after deferment period:

For the Life Annuity option, no death benefit shall be payable.

For the Life Annuity with Return of Premiums option, the death benefit shall be the higher of;

• Total Premiums paid accumulated at the compounding interest of 6% p.a. till the end of deferment period less Total Annuity Pay-outs made till the date of death

• 105% of all Total Premiums paid up to the date of death

Survival Benefit:

A. During Deferment Period;

No Benefits shall be payable upon survival during the deferment period.

B. After Deferment Period;

On survival after completion of the deferment period, payouts shall be made in arrears as per the annuity payment frequency chosen for as long as the annuitant is alive.

Maturity Benefit:

There is no maturity benefit payable under this plan.

Other Benefits of the HDFC Life Systematic Retirement Plan:

Higher Premium Benefit:

Benefits in the form of an additional annuity as a percentage of the annuity rates would be paid for the higher annualized premiums as specified below;

Premium Payment Term\ Annualized Premium	<=1.5 lakhs	< 3 lakhs	< 5 lakhs	>= 5 lakhs
5-7 yrs.	0	0.50%	0.75%	0.90%
8-10 yrs.	0	0.40%	0.60%	0.70%
> 10 yrs.	0	0.30%	0.45%	0.50%

Annuity Payout Frequency:

For non-annual modes, annuity rates are calculated as the annual annuity rate multiplied by an annuity conversion factor.

Frequency	Annuity Instalment (per frequency)
Half-yearly	98.19% x Annual Annuity x 1/2
Quarterly	97.30% x Annual Annuity x 1/4
Monthly	96.72% x Annual Annuity x 1/12

Annuity Payout Date:

By default, the annuity shall be payable on your policy anniversary.

Alternatively, you can also choose to receive an annuity on any one date as per your choice.

This option needs to be selected at the time of your policy inception and cannot be changed during your policy tenure.

The grace period, Lapse, Paid-up, Revival of the HDFC Life Systematic Retirement Plan:

Grace period:

You get a grace period of 15 days if you have opted for the monthly frequency of premium payment and 30 days for the annual, half-yearly, and quarterly to pay your premium without any charge or penalty.

Lapse:

If you have paid your premiums for at least 2 years, then your policy will acquire a Guaranteed Surrender Value.

If a due premium is unpaid upon the expiry of your grace period, then your HDFC Life Systematic

Retirement policy shall lapse, if it has not acquired a Guaranteed Surrender Value (GSV).

No benefits shall be payable.

Paid-up:

If a due premium is unpaid upon the expiry of your grace period, then your policy shall become a paid-up policy if it has acquired a Guaranteed Surrender Value (GSV).

Paid- up: Annuity rate= Annuity rate × (Total Premiums Paid)/ (Total Premiums Payable)

Paid-up:

You can revive the HDFC Life Systematic Retirement Policy within five years from the due date of the first unpaid premium.

By paying all outstanding premiums together with interest and/or late fees, the policy can be revived.
Once the policy has been revived, all benefits will be restored to their full value.

Free look-up period of the HDFC Life Systematic Retirement Plan:

If the policyholder is not satisfied with the terms & conditions of the HDFC Life Systematic Retirement Plan, then it can be returned/cancelled.

The policyholder will get a refund of the premium after the charges get deducted.

The free look period is 15 dayThe policy can be revived by paying all outstanding premiums together with interest and/or late fees to 30 days in case it was purchased in distance mode.

Surrendering your HDFC Life Systematic Retirement Plan:

On surrendering the policy during the deferment period:

The surrender value payable will be higher than the Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV).

On surrendering the policy after the deferment period:

(a) GSV shall not be available for both options.

(b) SSV shall not be available for the Life Annuity Option.

(c) Only SSV shall be payable under Life Annuity with Return of Premiums option.

GSV = GSV Factor * Total Premiums Paid

SSV = Present Value (PV) of expected future benefits subject to a maximum of Total Premiums Paid.

Advantages of the HDFC Life Systematic Retirement Plan:

• An annuity is lifelong guaranteed.

• Return of the premium on death is an added advantage if opted.

• The frequency of annuity can be chosen based on your requirement.

• The deferment period allows the corpus to grow. The higher the deferment period, the better the annuity is.

Disadvantages of the HDFC Life Systematic Retirement Plan

• The annuity amount is fixed throughout your lifetime. It will not get adjusted to inflation over time.

• The loan option is not available.

• The Annuity is taxable as per slab rate.

You can read the HDFC Life Systematic Retirement Plan’s brochure for further details.

Research Methodology:

Now, we have seen all the necessary details that we need to know about the HDFC Life Systematic Retirement Plan.

Let us do an in-depth analysis to determine whether this plan can act as a long-term sustainable investment for your retirement or not by calculating the IRR of the HDFC Life Systematic Retirement Plan.

Then let us compare HDFC Life Systematic Retirement Plan with other alternate investments to see which gives us a better return in the long term.

IRR of the HDFC Life Systematic Retirement Plan:

Let us assume that the investor mentioned below has chosen the life annuity option without the return of premium.

Our assumed life expectancy of his is 85 years.

Male	45
Annual premium	1,50,000
Premium paying term	15 years
Deferment period	15 years

Age	Year	Annualised premium / Annuity benefit
45	1	-1,50,000
46	2	-1,50,000
47	3	-1,50,000
48	4	-1,50,000
49	5	-1,50,000
50	6	-1,50,000
51	7	-1,50,000
52	8	-1,50,000
53	9	-1,50,000
54	10	-1,50,000
55	11	-1,50,000
56	12	-1,50,000
57	13	-1,50,000
58	14	-1,50,000
59	15	-1,50,000
60	16	0
61	17	2,94,216
62	18	2,94,216
63	19	2,94,216
64	20	2,94,216
65	21	2,94,216
66	22	2,94,216
67	23	2,94,216
68	24	2,94,216
69	25	2,94,216
70	26	2,94,216
71	27	2,94,216
72	28	2,94,216
73	29	2,94,216
74	30	2,94,216
75	31	2,94,216
76	32	2,94,216
77	33	2,94,216
78	34	2,94,216
79	35	2,94,216
80	36	2,94,216
81	37	2,94,216
82	38	2,94,216
83	39	2,94,216
84	40	2,94,216
85	41	2,94,216
	IRR	6.09%

The policyholder pays an annual premium of Rs. 1,50,000 for 15 years which makes the IRR work out to be 6.09% in its deferment period which is similar to Bank FD rates of interest.

Locking your funds at this rate for a longer period is not advisable.

Also as the annuity is fixed throughout life, the chances of its returns beating inflation are far less.

As it’s clear that the IRR of the HDFC Life Systematic Retirement Plan is not an inflation-beating return, let us see what more options we have.

HDFC Life Systematic Retirement Plan Vs Other Investments:

As an alternative to the HDFC Life Systematic Retirement Plan, you can invest your money in other alternate investments that can give you a better investment return which will help you in your retirement period.

If you are not a risk-tolerant investor, you can choose PPF for the long term. If you feel that your risk tolerance is higher, then you can choose ELSS as a long-term investment option.

There are also many other options available for sustainable investments in the long run.

Let us explore the alternates and compare their IRR with the HDFC Life Systematic Retirement Plan in a detailed analysis.

HDFC Life Systematic Retirement Plan Vs PPF Vs ELSS:

A well-planned financial investment is crucial for a peaceful retirement period.

Due to inflation, the cost of living will keep on increasing over time.

Only with a proper choice of investment, you can avoid financial crunches in your post-retirement period.

Instead of buying the HDFC Life Systematic Retirement plan, the same premium can be invested in other investment options which will help you to accumulate your retirement corpus & withdraw the required post-retirement income.

Since there is no proper sum assured in this deferred annuity plan, only the premiums paid are given back as 105% or at 6% p.a. CAGR (There is no defined Sum Assured).

Similarly, in the comparison also the focus is only on wealth accumulation instead of life cover.

The annual cash outflow is Rs. 1.5 lakh which is invested in PPF /Equity Mutual funds for the next 15 years (same as in the HDFC deferred annuity plan).

The annuity starts after that.

Age	Year	PPF	ELSS
45	1	-1,50,000	-1,50,000
46	2	-1,50,000	-1,50,000
47	3	-1,50,000	-1,50,000
48	4	-1,50,000	-1,50,000
49	5	-1,50,000	-1,50,000
50	6	-1,50,000	-1,50,000
51	7	-1,50,000	-1,50,000
52	8	-1,50,000	-1,50,000
53	9	-1,50,000	-1,50,000
54	10	-1,50,000	-1,50,000
55	11	-1,50,000	-1,50,000
56	12	-1,50,000	-1,50,000
57	13	-1,50,000	-1,50,000
58	14	-1,50,000	-1,50,000
59	15	-1,50,000	-1,50,000
60	16	0	0
61	17	3,00,000	3,00,000
62	18	3,00,000	3,00,000
63	19	3,00,000	3,00,000
64	20	3,00,000	3,00,000
65	21	3,00,000	3,00,000
66	22	3,00,000	3,00,000
67	23	3,18,000	3,18,000
68	24	3,18,000	3,18,000
69	25	3,18,000	3,18,000
70	26	3,18,000	3,18,000
71	27	3,18,000	3,18,000
72	28	3,18,000	3,18,000
73	29	3,37,080	3,37,080
74	30	3,37,080	3,37,080
75	31	3,37,080	3,37,080
76	32	3,37,080	3,37,080
77	33	3,37,080	3,37,080
78	34	3,37,080	3,37,080
79	35	3,57,305	3,57,305
80	36	3,57,305	3,57,305
81	37	3,57,305	3,57,305
82	38	3,57,305	3,57,305
83	39	3,57,305	3,57,305
84	40	3,57,305	3,57,305
85	41	3,78,743	3,78,743
		42,70,743	1,84,10,387
	IRR	7.50%	9.24%

Each year Rs. 1.5 lakhs is invested in PPF /Equity Mutual funds for 15 years. We can refer to this as the accumulation phase.

The accumulated corpus for PPF is Rs. 40.68 & for ELSS is Rs. 65.48 lakhs (post-tax).

During the annuity phase, the corpus is invested in Equity & Debt in the ratio of 30:70 respectively.
The weighted average return of Equity & debt is 7.8%.

If this corpus is used for annual withdrawal at the rate of 7.8% starting with Rs. 3 lakhs per annum with the inflated rate of 6%, then at the end of 85 years of age the retirement corpus would be Rs. 42.70 lakhs (PPF) & Rs. 1.84 crores (ELSS).

Every six years the post-retirement income increases at the rate of 6%, which is the greatest advantage that is missing in the HDFC deferred annuity plan.

The IRR for the above calculation is 9.24%, which is an inflation-beating return, which will be helpful to you in your post-retirement period.

Final Verdict:

Post-retirement is a period in your life where your primary source of income stops and you would have to rely on your savings & investments.

Due to medical advancement, life expectancy has increased including the cost of living, which has also increased due to inflation.

So, your investment choices should be designed in such a way that they should outlive you.

The HDFC Systematic retirement plan does not take inflation into account which is a major downside of this deferred annuity plan.

Choosing a proper investment product with inflation-beating returns can ensure financial stability in your retirement life.

Building a retirement portfolio with various asset classes is the key to having a peaceful retirement.

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