During your active prime years, you strive hard to provide the best lifestyle for your family.
Maintaining the same lifestyle after Retirement is also important.
Max Life Insurance offers a plan called the Forever Young Pension Plan to take care of your post-retirement corpus. You can even use our Retirement Planning Calculator to help you customize this analysis according to your financial circumstances.
Now let us see if this plan will allow you & your family to live life on your terms.
In this detailed review, let us find out how the Max Life Forever Young Pension Plan works.
Table of Contents:
1.)What is Max Life Forever Young Pension Plan?
2.)Features of the Max Life Forever Young Pension Plan
3.)Eligibility Criteria for the Max Life Forever Young Pension Plan
4.)Benefits under the Max Life Forever Young Pension Plan
- Vesting Benefit
- Death Benefit
- Loyalty Benefit
5.)Investment Options of the Max Life Forever Young Pension Plan
6.)Various Charges under the Max Life Forever Young Pension Plan
7.)A Grace Period, Paid-up & Revival of the Max Life Forever Young Pension Plan
8.)Free Look-Up Period of the Max Life Forever Young Pension Plan
9.)Surrendering the Max Life Forever Young Pension Plan
10.)Advantages of the Max Life Forever Young Pension Plan
11.)Disadvantages of the Max Life Forever Young Pension Plan
12.) Research Methodology
13.)IRR Analysis of the Max Life Forever Young Pension Plan
14.)Max Life Forever Young Pension Plan Vs. Other Investment Products
15.)Final verdict on the Max Life Forever Young Pension Plan
What is Max Life Forever Young Pension Plan?
It is a Unit-Linked, Non-Participating, Individual, Pension Plan.
It provides the benefits of equity participation to build a large retirement corpus and, at the same time, offers a guarantee to protect your savings from market downturns.
It also offers additional benefits to safeguard your family against unforeseen eventualities.
Features of the Max Life Forever Young Pension Plan
- You have the option to choose from any one of the investment options: Pension Maximiser & Pension Preserver.
- Choose the vesting age as per your requirements.
- Guaranteed Loyalty Additions added to the fund, starting from the end of the 10th year.
- A Top-Up Premium option is available.
- Guaranteed retirement income for you and your wife for life.
Eligibility Criteria for the Max Life Forever Young Pension Plan
Take a glance below to understand the basic workings of the Max Life Forever Young Pension Plan;
|Minimum and Maximum Entry Age||30-65 Years|
|Minimum and Maximum Vesting Age||50-75 Years|
|Premium Payment Modes||Regular Pay: Annual, Semi-Annual, Quarterly, and Monthly
|Minimum & Maximum Premium||Minimum Regular Pay: 25,000 p.a.; Single Pay: 1,00,000
Maximum Regular Pay: No limit
|Policy Term||Vesting age less than entry age, subject to the following conditions:
The Maximum allowed Policy Term is 75 years, less than the entry age
Minimum Policy Term is 10 years.
Benefits under the Max Life Forever Young Pension Plan
Higher of Fund Value or Guaranteed Vesting Benefit.
Guaranteed Vesting Benefit is defined as follows: –
- 101% of Total premiums and Top-up premium paid (exclusive of rider charges, if any) if you have opted for the Pension Maximiser Option
- 110% of Total premiums and Top-up premium paid (exclusive of rider charges, if any) if you have opted for the Pension Preserver Option
On Vesting (utilisation of vesting proceeds)
- To commute up to 60% of the fund value and to utilize the balance amount to purchase an immediate annuity or Deferred Annuity from Max Life, at the then prevailing annuity rates of the company, or from another insurer (to the extent of 50% of the entire proceeds of the policy net of commutation, or
- To extend the accumulation period or deferment period within the same policy with the same terms & conditions as the original policy is subject to the age of the Life Insured being less than 60 years (last birthday), or
- To utilize the entire proceeds to purchase an immediate annuity or deferred annuity from the company at the then prevailing annuity rate or from other insurers (to the extent of 50% of the entire proceeds of the policy net of commutation as stipulated by IRDAI time to time)
Death during the premium payment phase
Higher of the Fund Value or 105% of the Cumulative premiums paid including Top-Up premiums
On choosing Max Life Partner Care Rider – All future premiums till the entire Policy Term subject to a maximum age of 60 years along with an amount equal to a higher of 105% of all premiums paid or Fund Value will be paid by the Company to the nominee.
The utilisation of Death Benefit
The nominee shall have the option to utilize the death benefit in one of the following ways:
- Utilize the entire proceeds of the policy or part thereof for purchasing an Immediate or Deferred annuity at the then the prevailing rate of the Company, or from another insurer (to the extent of 50% of the entire proceeds of the policy net of commutation, or
- Withdraw the entire proceeds of the policy. A settlement option will not be provided.
Guaranteed Loyalty Additions at 0.50% of Fund Value added to the fund, from the end of the 10th policy year.
These additions increase by 0.02% (absolute) every year, from the end of the 11th policy year.
Investment Options of the Max Life Forever Young Pension Plan
Pension Maximiser Option – 100% of your premiums (including Top-Up premiums, if any) shall be invested in the Pension Maximiser Fund (SFIN: ULIF01715/02/13PENSMAXIMI104). The risk profile of the investment option is medium.
Pension Preserver Option – 100% of your premiums (including Top-Up premiums, if any) shall be invested in the Pension Preserver Fund (SFIN: ULIF01815/02/13PENSPRESER104). The risk profile of the investment option is low.
|Fund Name||Government Securities & Corporate Bonds||Money Market & Cash Instrument||Equity & Equity related securities||Potential Risk / Reward|
|Pension Maximiser Fund||40-80%||0-40%||20-60%||Medium|
|Pension Preserver Fund||60-90%||0-40%||10-35%||Low|
Various Charges under the Max Life Forever Young Pension Plan
Premium Allocation Charge
|Single Pay (as a % of Single Premium)||NIL|
|Regular Pay (as a % of Annualised Premium)||Year 1 to 10 – 2% p.a. for Annual mode
Year 1 to 10 – 1.25% p.a. for non-annual modes
Year 11 onwards – Nil for all modes
|Allocation Charge on Top-up Premium||1% of Top Up Premium|
Fund Management Charge
The annual rate for the Fund Management Charge is 1.25% for the Pension Maximiser Fund and the Pension Preserver Fund.
An additional charge for offering guaranteed benefits will apply to the Pension Preserver Fund and Pension Maximiser Fund at 0.20% per annum and 0.40% per annum respectively.
Policy Administration Charge
|Year||Policy Administration Charge|
|Single Pay (as a % of Single Premium)||0.08% of the Single Premium per month increasing @ 4% p.a. starting year 2.|
|Regular Pay (as a % of Annualised Premium)||Year 1 to 5: 0.36% of the Annualised Premium per month.
Year 6 onwards: 0.46% of the Annualised Premium per month increasing @ 5% p.a. starting year 7
The charge will not exceed Rs. 400 p.m. in any year.
This charge is unisex and is levied on the attained age of the Life Insured on the Sum at Risk and these charges are guaranteed for the entire Policy Term.
|Age (in years)||Mortality charge (per₹ 1,000 Sum at Risk)|
No switches are allowed.
Premium Redirection is not allowed.
Partial withdrawal charge
After the completion of the lock-in period, Partial withdrawal can be made up to a maximum of 3 times during the entire policy term.
Surrender or Discontinuance charge
It depends on the year of discontinuance/surrender & also on the premium amount. There is no surrender / Discontinuance charge from the 5th policy year onwards.
The charge will be deducted for any alternations made to the policy such as a change in vesting age. A fee of ₹ 250 per transaction will be applicable.
A Grace Period, Paid-up & Revival of the Max Life Forever Young Pension Plan
In case the premium due is not paid by the premium due date, a grace period of 30 days from the due date of the first unpaid premium will be allowed. The grace period will be Fifteen days in case the policyholder has opted for the monthly mode.
Discontinuance & Paid-up:
Discontinuance of payment of premium during first five policy years (Lock-in Period) – Upon the expiry of the grace period, the Fund Value, by the creation of units, will be credited into the Discontinued Policy Fund after deducting applicable Discontinuance Charges.
The risk cover under the policy will stop and no further charges will be levied other than the Fund Management Charge.
Discontinuance of payment of premium post first five policy years (i.e., after the expiry of the Lock-in Period) – the policy shall be converted into a reduced paid-up policy with the paid-up sum assured i.e., the current 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.
You will have the Revival Period of three years from the Date of Discontinuance to revive your policy.
Free Look-Up Period of the Max Life Forever Young Pension Plan
If you disagree with the terms of the policy, you can return the policy to the corporation within a period of 15 days.
The Free Look-Up Period will be extended up to 30 days if the policy is sourced through the distance mode from the date of receipt of the policy.
Surrendering the Max Life Forever Young Pension Plan
You have the right to surrender the policy at any time during the Policy Term. The surrender benefit is equal to Fund Value less applicable surrender/discontinuance charges.
Surrender within five years of the policy’s Effective Date (i.e., within the Lock-in Period) – the Fund Value will be credited to the Discontinuance Policy Fund after deducting applicable Surrender / Discontinuance Charges.
At the expiry of five years from the effective date of the policy (i.e., at the expiry of the Lock-in Period), you will receive the value of units in the Discontinuance Policy Fund.
Surrender after five years of the Effective Date of the policy (i.e., after the completion of the Lock-in Period) – Surrender Value which is equal to the Fund Value of the Units in the Segregated Fund(s) is receivable.
The utilisation of the Surrender amount
In case of Surrender/Discontinuance, you cannot withdraw the accumulated corpus.
You will need to buy an annuity for the entire proceeds or commute 60% & utilise the balance amount to buy an annuity.
Advantages of the Max Life Forever Young Pension Plan
- Deferment period can be extended as per your requirement.
- Flexibility in premium paying mode & annuity mode.
- Loyalty additions can boost your fund value.
Disadvantages of the Max Life Forever Young Pension Plan
- Compulsion of utilising the maturity proceeds to buy annuity plans.
- Locking of funds in the first 5 years. Even if you surrender after 5 years, you have to buy annuity plans.
- There is no loan facility to meet emergencies.
- Only 25% of the fund value can be partially withdrawn after the completion of 5 years. It is allowed only against stipulated reasons
- The investment option once selected can’t be changed during the policy term. Switching & premium redirection are not allowed.
You can read the Max Life Forever Young Pension Policy Brochure for further details.
Max Life Forever Young Pension Plan is an insurance cum savings product. The savings are invested in ULIP & finally, the corpus is utilised for purchasing annuity plans.
To get an idea of how the plan works, let us explore the illustration benefit given in the sales brochure.
IRR Analysis of the Max Life Forever Young Pension Plan
Mr A chooses to invest in the Max Life Forever Young Pension Plan and after 20 years chooses to invest the entire corpus in the Max Life Guaranteed Lifetime Income Plan with Joint Life with Return of Purchase Price option.
He chooses to invest ₹ 10,000 monthly for a period of 20 years to get a regular income after his retirement.
The fund Option chosen by him is the Max Life Pension Preserver Fund. Let’s see how the Max Life Forever Young Pension Plan works for him.
|At 4%||At 8%|
|Total amount invested in Max Life Forever Young Pension Plan – 10,000 x 12 x 20||24,00,000||24,00,000|
|Vesting Amount: Retirement corpus from Max Life Forever Young Pension Plan||30,03,623||46,26,551|
|Guaranteed Monthly Pension from Max Life Guaranteed Lifetime Income Plan||14,271||21,982|
|Return of retirement corpus to the nominee upon the death of the last Annuitant from Max Life Guaranteed Lifetime Income Plan||29,50,514||45,44,746|
|IRR – Till the age of 75 years||3.91%||5.98%|
If he invests Rs. 10,000 monthly for the next 20 years, the accumulated corpus at the assumed investment rate of 4% is ₹30.03 lakhs & at 8% is ₹46.26 lakhs. This amount can’t be withdrawn fully. The amount is utilised for the purchase of an annuity at the then prevailing rate.
If we work out the IRR for the accumulated corpus at the end of 20 years, then at 4% investment return, the IRR is 2.18% & at 8% investment return the IRR is 6.14%.
Based on the assumption, the annuity amount would be Rs. 14,271 per month & Rs. 21,982 per month for the corpus ₹ 30.03 lakhs & ₹ 46.26 lakhs respectively. Here we have assumed a life expectancy of 75 years. So, till that age, the annuity is received & after that, the purchase price is returned to the nominee.
If we work out the IRR for this cash flow for 20 years of accumulation period & then continued by 15 years of disbursement period (annuity pay-out), the IRR works out to be 3.91% & 5.98% under the two scenarios.
The assumed rates of return are @4% and @8% p.a. for the Max Life Pension Preserver Fund. These are not guaranteed and are not the upper or lower limits of returns of the Funds selected in your policy, as the performance of the Funds is dependent on several factors including future investment performance.
Also, the annuity amount is not guaranteed. It depends on the annuity rate prevailing at the time of vesting.
Inference from the IRR analysis
- During the accumulation phase, your funds get locked. There is no liquidity in the investment.
- Even after the maturity of the Max Life Forever Young Pension Plan, the amount can’t be entirely withdrawn. Either you can commute 60% & utilise the balance to buy an annuity plan or utilise the full amount to buy an annuity plan.
- The annuity plans are not part of the Max Life Forever Young Pension Plan. You have to buy the annuity plans at the then prevailing rate which is 15 or 20 years from now.
- The annuity amount is fixed throughout the life term. The purchase price is returned to the nominee only if the option has been opted for.
- The annuity is taxable as income from other sources.
- You can’t rely on this annuity amount during your post-retirement period, as this is not adjusted to inflation.
Max Life Forever Young Pension Plan Vs. Other Investment Products
Now let us look at other investment options with similar cash flow. You can route your investment to other investment avenues where you enjoy liquidity. Also, at the end of the accumulation phase, the entire maturity proceeds can be utilised as you wish.
We have compared the plan with other investment options only till the accumulation phase. An annuity is not covered under the Max Life Forever Young Pension Plan, so we have not considered the annuity pay-out period for our comparison.
Max Life Forever Young Pension Plan Vs. PPF / ELSS
If we invest ₹ 10,000 per month in the Public Provident Fund (PPF), the maturity value at the end of 20 years is ₹ 51.64 lakhs (PPF matures after 15 years & it can be extended in a block of 5 years). The entire maturity proceeds are tax-free & they can be utilised for your retirement or for any other financial goals as you wish.
If we invest ₹ 10,000 per month in ELSS Mutual Fund, the fund value at the end of 20 years is ₹ 91.98 crores. This is the pre-tax value. The post-tax maturity value would be ₹ 85.28 lakhs.
The ELSS tax calculation is given below.
|ELSS tax Calculation|
|Maturity value after 20 years||91,98,573.56|
|Long-term capital gains||67,98,573.56|
|Tax paid on LTCG||6,69,857.36|
|Maturity value after tax||85,28,716.20|
Since in earlier illustration of the Max Life Forever Young Pension Plan does not have a specific sum assured (only the fund value is returned at the time of eventuality), and we also didn’t assume a life insurance cover. The entire amount is utilised for investment. In general, have an adequate life cover before starting your investment journey.
The IRR for PPF is 7.1% & for ELSS (post-tax) is 11.37%. This rate of return is higher than the inflation rate & also you have the freedom to utilise the maturity proceeds to meet any of your financial goals.
The Max Life Forever Young Pension Plan does not have an inflation-beating return & purchasing an annuity plan from the maturity proceeds are a serious handicap to your retirement plan.
|Max Life Forever Young Pension Plan @ 4%||30,03,623||2.18%|
|Max Life Pension Preserver||46,26,551||6.14%|
|ELSS (post tax)||85,28,716||11.37%|
The maturity proceeds can be invested to get inflation-adjusted regular income during your post-retirement period.
Final Verdict on the Max Life Forever Young Pension Plan
Max Life Forever Young Pension Plan as an investment product allows you to invest in a market-linked product. But the IRR for the accumulated corpus is not even matching a debt instrument.
Also, the maturity proceeds could be utilised fully to buy an annuity plan/partially commuted & buy an annuity plan for the balance or it can be deferred. This leaves you with a limited option at the end of the policy term.
You lose the opportunity cost of investing in other products at the time of maturity. This point makes the Max Life Forever Young Pension Plan an unfavourable option to the investor.
During your earning period, you work hard to save money. So, that you can live comfortably in your retirement years.
The hard-earned money that you saved should be invested properly, otherwise, all the efforts go in vain. Consult your Financial Advisor before making any investment decision.