Kotak Assured Pension Plan: Good or Bad? An Insightful Review

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Are you worried about running out of money in retirement?

Can Kotak Assured Pension Plan afford financial security in retirement and provide a worry-free retirement?

Could investing in the Kotak Assured Pension Plan be a valuable strategy to achieve this goal?

This article reviews the Kotak Assured Pension Plan, examining its features, advantages, disadvantages, and potential returns through IRR analysis. By providing detailed insights, this review helps you determine the plan’s suitability for your retirement planning needs.

What is the Kotak Assured Pension Plan?

Kotak Assured Pension Plan is a non-linked and nonparticipating, annuity plan. Kotak Assured Pension Plan gives you the assurance of a regular stream of income throughout your lifetime, basis your requirements. It pays you on an immediate basis or post-deferment period.

What are the features of the Kotak Assured Pension Plan?

10 Annuity options to choose from
Flexibility to avail payout through Top Up additional annuity
Issued annuity rates are for lifetime guaranteed for a lifetime
Higher annuity rates for Higher Premium
Flexibility to choose a Deferment Period between 1 – 10 years based on your annuity requirement
Accrued during the Deferment Period

Who is eligible for Kotak Assured Pension Plan

What are the annuity options and the benefits receivable in Kotak Assured Pension Plan?

Option 1: Lifetime Income

Option 2: Lifetime Income with Term Guarantee of 5 / 10 / 15 / 20 years

Option 3: Lifetime Income with Annual Increase of 3% or 5%

Option 4: Lifetime Income with Balance Cash-Back

Option 5: Lifetime Income with Cash-Back in parts

Option 6: Lifetime Income with Cash-Back

6a. Lifetime Income with Cash-Back on Death

6b. Lifetime Income with Cash-Back on Death or Critical Illness

Option 7: Deferred Income with Cash-Back (Single / Limited / Regular premium payment mode)

Option 8: Last survivor Lifetime Income with 100%/50% Annuity to Secondary Annuitant

8a. Last survivor Lifetime Income with 100% Annuity to Secondary Annuitant

8b. Last survivor Lifetime Income with 50% annuity to Secondary Annuitant

Option 9: Last survivor Lifetime Income with 100%/50% annuity to Secondary Annuitant and cash-back on the death of Surviving Annuitant

9a. Last survivor Lifetime Income with 100% annuity to Secondary Annuitant and cash-back on death of Surviving Annuitant

9b. Last survivor Lifetime Income with 50% annuity to Secondary Annuitant and cash-back on death of Surviving Annuitant

Option 10: Deferred Income with 100% / 50% Annuity to Secondary Annuitant and Cash-Back on death of Surviving Annuitant

10a. Deferred Income with 100% Annuity to Secondary Annuitant and Cash-Back on death of Surviving Annuitant

10b. Deferred Income with 50% Annuity to Secondary Annuitant and Cash-Back on death of Surviving Annuitant

Survival Benefit:

Based on the annuity options selected by you, the annuity payout shall continue throughout the

Annuitant’s lifetime (in case of Single Life Options) or
Primary / Secondary Annuitant’s lifetime (in case of Joint Life Options)

Death Benefit:

Death Benefit shall be payable as per the Annuity Option opted by you. The benefits shall vary based on the Annuity Option as mentioned below:

ANNUITY OPTIONS	WHEN IS THE DEATH BENEFIT PAYABLE	DEATH BENEFIT
Option 2: Lifetime Income with Term Guarantee of 5/10/15/20 years	On the death of the Annuitant	During Guarantee Period: Annuity continues and payable to Nominee After Guaranteed Period: Not applicable. Annuity terminates
Option 4: Lifetime Income with Balance Cash-Back		A lump-sum amount equal to the Total Premium paid less the Annuity amount already paid. In case the total annuity payments made exceed the Total Premium, no Death Benefit will be payable
Option 5: Lifetime Income with Cash-Back in parts		Death within 7 years from the date of commencement of the policy: 100% of the Total Premium will be payable to the Nominee Death beyond 7 years from the date of commencement of the policy: 70% of the Total Premium will be payable to the Nominee
Option 6a: Lifetime Income with Cash-Back on Death		A lump-sum amount equal to the Total Premium paid will be payable to the Nominee
Option 6b: Lifetime Income with Cash-Back on Death or Critical Illness	On the death of the Annuitant or upon diagnosis of specified CI under Option 6 before attainment of 86 years, whichever is earlier	A lump-sum amount equal to the Total Premium paid will be payable to the Nominee
Option 7: Deferred Income with Cash-Back	On the death of the Annuitant	Higher of Total Premium paid PLUS Guaranteed Additions LESS Total Annuity Paid till date of Death OR 110 % of Total Premium paid.
Option 9: Last survivor Lifetime Income with 100% / 50% annuity to Secondary Annuitant and cash-back on the death of Surviving Annuitant	On the death of the Surviving Annuitant	A lump-sum amount equal to the Total Premium paid will be payable to the Nominee
Option 10: Deferred Income with 100% / 50% Annuity to Secondary Annuitant and – cash-back on death of Surviving Annuitant	On the death of the Surviving Annuitant	Higher of Total Premium paid PLUS Guaranteed Additions LESS Total Annuity Paid till date of Death OR 110 % of Total Premium paid.

Death Benefit shall not be payable under the following Annuity Options:

Option 1: Lifetime Income

Option 3: Lifetime Income with Annual Increase of 3% or 5%

Option 8a.: Last survivor Lifetime Income with 100% Annuity to Secondary Annuitant

Option 8b.: Last survivor Lifetime Income with 50% Annuity to Secondary Annuitant

Grace period, Lapsed, Reduced Paid-up Policy, and Revival of Kotak Assured Pension Plan

Grace period

There is a grace period of 30 days from the due date for payment of premium for the yearly, half-yearly, and quarterly modes, and 15 days for the monthly mode.

Lapsed and Reduced Paid-up Policy

Under a Regular / Limited Premium Policy, if you have not paid the due premium within a continuous period of the first two policy years, the Kotak Assured Pension Plan policy shall lapse, at the end of the Grace Period.

After the policy acquires Surrender Value (by paying premium for the first two policy years), and if the subsequent premiums are not paid within the grace period the Kotak Assured Pension Plan policy will be converted into a Reduced Paid-Up policy by default.

Revival

A Lapsed / Reduced Paid Up policy can be revived within a maximum period of five policy years or an outstanding premium payment term (whichever is lower), from the due date of the first unpaid premium.

Free Look Period of Kotak Assured Pension Plan

In case the Policyholder is not agreeable to any terms and conditions of the Kotak Assured Pension Plan Policy or otherwise, the Policyholder may choose to return the Policy within 30 days (except for policies having a policy term of less than a year) beginning from the date of receiving the Policy Document either electronically or otherwise.

Surrendering Kotak Assured Pension Plan

The Kotak Assured Pension Plan policy can be surrendered only if you have opted for one of the below-mentioned annuity options.

You can surrender the policy anytime during the lifetime and the surrender benefit shall be equal to the higher Guaranteed Surrender Value or Special Surrender Value

Option 5: Lifetime Income with Cash-Back in parts

Option 6a: Lifetime Income with Cash-Back on Death

Option 6b: Lifetime Income with Cash-Back on Death or Critical Illness

Option 7: Deferred Income with Cash-Back

Option 9a: Last survivor Lifetime Income with 100% Annuity to the Secondary Annuitant and Cash-Back on death of Surviving Annuitant

Option 9b: Last survivor Lifetime Income with 50% Annuity to the Secondary Annuitant and Cash-Back on death of Surviving Annuitant

Option 10: Deferred Income with 100% / 50% Annuity to Secondary Annuitant with Cash-Back on death of Surviving Annuitant

What are the advantages of the Kotak Assured Pension Plan?

Flexibility to choose a Deferment Period between 1 – 10 years on inception in plan options 7 and 10.
Option to avail Loan only during the Deferment Period under Deferred Annuity Options (applicable for Option 7 & Option 10)
Guaranteed additions accrue during the deferment period
An annuitant, who has availed of an immediate annuity, can subsequently make an additional annuity purchase to increase the annuity payout

What are the disadvantages of the Kotak Assured Pension Plan?

The Kotak Assured Pension Plan has too many variants. This may lead to confusion during selection.
Surrender benefits and loan facilities are available under select variants
An annuity is taxed as per slab rate

Research Methodology of Kotak Assured Pension Plan

The Kotak Assured Pension Plan offers a variety of options with different benefits, including Single and Joint Life, Immediate and Deferred annuity, with or without return of purchase price. Regardless of the chosen option, the annuity amount is fixed at the time of purchase.

To provide a clearer analysis, we use the Internal Rate of Return (IRR) calculation to compare it with other investment returns.

Benefit Illustration – IRR Analysis of Kotak Assured Pension Plan

Consider a scenario where a 60-year-old man pays a premium of ₹25,00,000 and selects Plan option 9a, “Last survivor Lifetime Income with 100% annuity to Secondary Annuitant and cash-back on the death of Surviving Annuitant.”

He designates his 60-year-old spouse as the Secondary Annuitant and opts for an annual annuity frequency. He will receive an annuity of ₹1,55,750 per year.

Male	60 years
Purchase Price	₹ 25,00,000
Annuity	1,55,750
Annuity Option	Option 9a
Returns	6.13%

Upon the death of the Primary Annuitant, the Surviving Annuitant will continue to receive the full annuity amount throughout her lifetime.

If the Surviving Annuitant passes away, the Nominee will receive the original purchase price. Assuming the last surviving annuitant lives to 85 years, the nominee would receive ₹25 lakhs after 25 years.

For this cash flow, the IRR is calculated to be 6.13% as per the Kotak Assured Pension Plan maturity calculator. A bank Fixed Deposit (FD) can offer a similar or higher rate of return. Thus, the Kotak Assured Pension Plan does not provide additional value in terms of yield and liquidity.

There are better alternatives that offer higher yields and better liquidity, which we will discuss in the next segment.

Kotak Assured Pension Plan Vs. Other Investment Products

This section will highlight how to effectively utilize your accumulated corpus to generate a regular stream of income, providing better control over your investment options.

Kotak Assured Pension Plan Vs. Other Fixed Income Investments

Fixed-income products, provide regular payouts and can be used to meet your income needs. Here are some fixed-income investment options and their expected rates of return as of June 2024:

Investment Option	Expected Returns
Bank Fixed Deposit (FD)	6-7% p.a.
Senior Citizen Savings Scheme (SCSS)	8.20% p.a.
RBI Floating Rate Savings Bond	8.05% p.a.

– Bank Fixed Deposit: A secure investment where retirees can park their corpus to earn a fixed interest rate, providing regular and predictable income.

– Senior Citizen Savings Scheme: A government-backed scheme offering higher interest rates specifically for seniors, ensuring regular income with a relatively low risk.

– RBI Floating Rate Bond: A government bond with interest rates that adjust with market rates, offering the potential for higher returns and regular income, but with some interest rate risk.

These products offer liquidity, allowing you to utilize your retirement corpus as needed. In a rising interest rate environment, you can move your funds to other investments. However, these options may not keep pace with inflation.

Kotak Assured Pension Plan Vs. Inflation – Adjusted Income

Let’s consider an alternative strategy using the same figures as the Kotak Assured Pension Plan, with a retirement corpus of ₹25 lakhs and an initial annual withdrawal (annuity) of ₹1.55 lakhs.

Assume that 60% of the ₹25 lakhs, i.e., ₹15 lakhs, is invested in equity for wealth creation, while the remaining ₹10 lakhs is allocated to debt instruments for regular income needs. The equity investment is expected to generate a return of 12%, while the debt investment yields 6%.

Age	Equity Portion			Shift from Equity to Debt	Debt Portion
Age	Opening Balance	Yearly withdrawal	Closing Balance	Shift from Equity to Debt	Opening Balance	Yearly withdrawal	Closing Balance
60	15,00,000	–	16,80,000	–	10,00,000	1,55,750	8,94,905
61	16,80,000	–	18,81,600	–	8,94,905	1,55,750	7,83,504
62	18,81,600	–	21,07,392	–	7,83,504	1,55,750	6,65,420
63	21,07,392	–	23,60,279	–	6,65,420	1,55,750	5,40,250
64	23,60,279	–	26,43,513	–	5,40,250	1,55,750	4,07,570
65	26,43,513	–	29,60,734	–	4,07,570	1,55,750	2,66,929
66	29,60,734	15,00,000	16,36,022	15,00,000	17,66,929	1,65,095	16,97,944
67	16,36,022	–	18,32,345	–	16,97,944	1,65,095	16,24,820
68	18,32,345	–	20,52,226	–	16,24,820	1,65,095	15,47,308
69	20,52,226	–	22,98,493	–	15,47,308	1,65,095	14,65,146
70	22,98,493	–	25,74,312	–	14,65,146	1,65,095	13,78,054
71	25,74,312	–	28,83,230	–	13,78,054	1,65,095	12,85,737
72	28,83,230	15,00,000	15,49,218	15,00,000	27,85,737	1,75,001	27,67,380
73	15,49,218	–	17,35,124	–	27,67,380	1,75,001	27,47,922
74	17,35,124	–	19,43,339	–	27,47,922	1,75,001	27,27,297
75	19,43,339	–	21,76,539	–	27,27,297	1,75,001	27,05,434
76	21,76,539	–	24,37,724	–	27,05,434	1,75,001	26,82,259
77	24,37,724	–	27,30,251	–	26,82,259	1,75,001	26,57,694
78	27,30,251	27,30,251	-0	27,30,251	53,87,945	1,85,501	55,14,591
79					55,14,591	1,85,501	56,48,835
80					56,48,835	1,85,501	57,91,135
81					57,91,135	1,85,501	59,41,972
82					59,41,972	1,85,501	61,01,859
83					61,01,859	1,85,501	62,71,340
84					62,71,340	1,85,501	64,50,990
85					64,50,990	1,85,501	66,41,419

Every 6 years, the debt portion is replenished from the equity portion, and the annual withdrawal amount increases by 6% to combat inflation. This strategy ensures that the equity portion helps counteract inflation and maintain your lifestyle post-retirement, while the debt portion covers your regular needs.

The allocation ratio is set at 60:40 between equity and debt, with rebalancing every 6 years. The final transfer from equity to debt occurs at the age of 78. This example illustrates one way to balance assets, though it can be adjusted based on individual preferences and risk tolerance.

The IRR for this cash flow is 8.39%, which is significantly higher than that of the Kotak Assured Pension Plan, even after accounting for the increased annual withdrawals.

With this strategy:

– You receive regular income.

– You combat inflation and maintain your lifestyle.

– Your retirement corpus outlives you.

Final Verdict on Kotak Assured Pension Plan

The Kotak Assured Pension is an annuity plan designed to provide a regular income stream either immediately or after a deferment period, for life.

The Kotak Assured Pension Plan offers a wide range of options, including 8 Immediate Annuity and 2 Deferred Annuity choices. Additionally, you can select the annuity frequency that best suits your needs.

Despite these features, the returns analysis shows that the plan performs poorly due to many reasons including high agent commissions. Relying on the Kotak Assured Pension Plan for your post-retirement income may leave you with insufficient funds in the long run

Instead of opting for pre-packaged annuity or pension plans, consider a diversified asset allocation for retirement planning.

This approach ensures you receive a regular, increasing income while preserving your retirement corpus. Adjust your asset allocation based on your risk tolerance and goals.

Do Quora, Facebook, and Twitter have the final say when it comes to financial advice?

For personalized retirement planning, consult a Certified Retirement Planner who can tailor a plan to your current financial situation, risk tolerance, and life goals.

Kotak Assured Pension Plan: Good or Bad? An Insightful Review

Table of Contents:

What is the Kotak Assured Pension Plan?

What are the features of the Kotak Assured Pension Plan?

Who is eligible for Kotak Assured Pension Plan