SBI Life Retire Smart Plus: ULIP Review– Is it Good or Bad?

Have you started to save for retirement as early as you can to take advantage of the power of compounding?

What is the most challenging aspect of retirement planning?

It is creating a portfolio to achieve the retirement corpus. Rebalance the portfolio to reflect the changing market condition.

SBI Life Retire Smart Plus is a pension product where you can pay a single premium or limited & regular premium & hope to enjoy the annuity pay-outs.

In detail, let us look into the accumulation phase, vesting period, and distribution phase of the SBI
Life Retire Smart Plus plan.

Table of Contents

1.) An overview of SBI Life Retire Smart Plus

2.) Features of SBI Life Retire Smart Plus

3.) Eligibility Criteria for SBI Life Retire Smart Plus

4.) Benefits under SBI Life Retire Smart Plus

5.) Fund options of SBI Life Retire Smart Plus

6.) Various Charges under SBI Life Retire Smart Plus

7.) Surrender of SBI Life Retire Smart Plus

8.) Advantages of SBI Life Retire Smart Plus

9.) Disadvantages of SBI Life Retire Smart Plus

10.) Research Methodology on SBI Life Retire Smart Plus

11.) Benefit Illustration analysis on SBI Life Retire Smart Plus

12.) SBI Life Retire Smart Plus vs. Other Investments

13.) Final Verdict on SBI Life Retire Smart Plus

An overview of SBI Life Retire Smart Plus 

SBI Life Retire Smart Plus is an Individual, Unit-linked, non-participating Pension Savings Product. It enables you to build the corpus you need, through market-linked returns. 

This plan has 7 diversified fund options to choose from, which come with different risk-reward ratings to suit the requirements of a variety of investors. Benefits can be enjoyed in the form of annuities except to the extent of commutation of such benefits as allowed. 

Features of SBI Life Retire Smart Plus 

• 7 diversified fund options to choose from as per your risk appetite.

• Premium paying term – Single premium, Regular premium or for a limited period.

• Loyalty Additions are payable every year starting from the end of the 15 Policy years.

• A terminal Addition of 1.5% of the Fund Value helps to boost the fund value.

• After completion of the lock-in period (5 years), partial withdrawal is allowed to meet financial emergencies.

• Unlimited free switches are allowed during the policy term.

• Free Premium redirection is available from 2 policy years onwards.

Eligibility Criteria for SBI Life Retire Smart Plus:

Age at Entry	Minimum: 20 years	Maximum: 60 years
Age at Maturity/Vesting	Minimum: 30 years	Maximum: 70 years
Premium Payment Option	Regular Premium / Limited Premium / Single Premium
Premium Payment Term and Corresponding Policy Term	Premium Payment Option	Premium Payment Term (Years)	Policy Term (Years)
	Single Premium	Onetime (inception)	10 to 35 (both inclusive)
	Regular Premium	Same as the policy term	10 to 35 (both inclusive)
	Limited Premium	5 to 8(both inclusive)	10 to 35 (both inclusive)
		10	15 to 35 (both inclusive)
		15	20 to 35 (both inclusive)
Premium Range (in `) (in multiples of ` 100)	Premium Payment Option	Minimum	Maximum
	Single Premium	1,00,000	No Limit, as per board-approved underwriting policy
	Regular Premium	Yearly – 30,000 Half Yearly – 15,000 Monthly- 3,000
	Limited Premium	Yearly – 40,000 Half Yearly – 20,000 Monthly – 5,000
Premium Frequency	Single / Yearly / Half-yearly / Monthly

Benefits under SBI Life Retire Smart Plus:

Death benefit:

If the policyholder passes away, unfortunately, then the nominee or the legal heir will get the death benefit claim as the higher of the following is payable

• Fund Value as on the date of intimation of death claim Plus Terminal Addition. 

• 105% of the total premiums received up to the date of death less Applicable Partial Withdrawal if any.

Maturity benefit / Vesting benefit:

On survival of the life assured till the end of the policy term, provided the policy is in force, you will receive the: Fund Value as on the date of maturity/vesting Plus Terminal Addition.

The utilisation of the corpus (Maturity benefit)

1. To utilize the entire proceeds to purchase an immediate or deferred annuity at the then prevailing annuity rates from SBI Life Insurance or another Insurer (subject to 50% of the entire proceeds of the policy net of commutation).
2. To commute up to 60% and utilize the balance amount to purchase an immediate or deferred annuity at the then prevailing annuity rates from SBI Life Insurance or another Insurer (subject to 50% of entire proceeds of the policy net of commutation).
3. To extend the accumulation period or deferment period within the same policy with the same terms and conditions as the original policy provided the policyholder is below the age of 60 years.

Other benefits

Loyalty Addition:

Loyalty additions are 0.30% of the average of the fund value as of the first day of the policy month over the last 12 policy months and would be added to fund value at the end of every policy year starting from the end of the 15th policy year.

Terminal Addition:

1.5% of the fund value as of the date of intimation of death claim/ vesting date will be paid as Terminal Addition. It will be paid only for in-force policies at maturity/vesting of the policy or earlier death.

Partial Withdrawal:

Partial Withdrawals are allowed only after the lock-in period (5 Years) is completed. 

Fund options of SBI Life Retire Smart Plus:

Option to choose any one or a combination of the below 7 funds available under the product.

Investment options	Asset Allocation			Risk
Fund	Equity & Related instruments	Debt related instruments	Money market & Cash equivalent
Equity pension fund	80-100%	0-20%	0-20%	High
Equity optimiser pension	60-100 %	0 – 40%	0 – 40%	High
Growth pension fund	40 – 90 %	10-60%	0 – 40%	Medium to high
Bond pension fund	0-0%	60-100%	0-40%	Low to medium
Money market pension fund	0-0%	0-20%	80-100%	Low
Top 300 pension fund	60-100 %	0-0%	0-40%	High
Balanced pension fund	40-60%	20-60%	0-40%	Medium
		Govt Securities	Money market
Discontinued policy pension fund		60-100%	0-40%	Low

Various Charges under SBI Life Retire Smart Plus:

Premium Allocation charge:

	Allocation Charge (% of premium)
Policy Year	Regular/Limited Premium	Single Premium
Year 1	6.00%	3%
Year 2	4.75%	NA
Years 3 to 10	4.00%	NA
Year 11 & onwards	2.50%	NA

Policy Administration Charge: 

Policy Year	Policy Administration Charge
Years 1 to 5	45 per month
Year 6 & onwards	70 per month

Fund Management Charges:

Fund	Fund Management Charges
Equity pension fund	1.35% p.a.
Equity optimiser pension	1.35% p.a.
Growth pension fund	1.35% p.a.
Bond pension fund	1.35% p.a.
Money market pension fund	1.25% p.a.
Top 300 pension fund	1.00% p.a.
Balanced pension fund	0.25% p.a.
Discontinued policy pension fund	0.50% p.a.

Discontinuance charge:

It depends on the year of discontinuance, annualised premium amount & mode of premium. There is no discontinuance charge from the 5th policy year.

Switching Charge: 

There are no charges applicable for the Switching of funds.

Premium Redirection charges: 

No charges are applicable for Premium redirection.

Partial Withdrawal Charges: 

A partial withdrawal charge is not applicable.

Mortality Charges: 

 Mortality charges are recovered monthly, on the first working day of each policy month by the way of cancellation of an appropriate number of units. Mortality charges will be based on your age and Sum at Risk at the time of charge deduction.

Miscellaneous Charges: 

For an increase in the policy term, increase in premium payment term or converting limited premium payment term to Regular premium payment term options, a charge of INR 500 each will apply. The charges will be recovered by way of the cancellation of the units.

Insight on charges:

Only Fund Management Charges and Mortality charges are justifiable charges. The rest of the charges seems unjustifiable. It is interesting to note that, there are no such unwanted charges in mutual funds.

In the end, even if the plan gives you 4-8% of the return, we will get less after deducting these charges.

The grace period, Revival & Discontinuance

Grace period:

The grace period for this plan is 15 days for the monthly mode and 30 days for all other modes. The policy will lapse if the policy premium remains unpaid.

Revival:

You have 3 consecutive policy years from the date of the first unpaid premium during which you can revive your policy, which was discontinued due to non-payment of the premium.

Discontinuance:

Discontinuance of policy during the lock-in period

For other than Single premium policies: Upon expiry of the grace period, in case of discontinuance of a policy due to non-payment of premium, the fund value after deducting the applicable discontinuance charges shall be credited to the discontinued policy pension fund and the risk cover, if any, shall cease.

In the case of Single premium policies: Option to surrender at any time during the lock-in period. The fund value, after deducting the applicable discontinuance charges, shall be credited to the discontinued policy Pension fund. It shall continue to be invested there till the lock-in of 5 years.

Discontinuance of policy after the Lock-in period

For other than single premium policies: Upon expiry of the grace period, in case of discontinuance of a policy due to non-payment of the premium, after the lock-in period, the policy will be converted into a reduced paid-up policy. 

For Single Premium Policies: Option to surrender the policy at any time. Upon receipt of the request for surrender, the fund value as of the date of surrender shall be payable.

Surrender of SBI Life Retire Smart Plus:

Option to surrender the policy anytime and proceeds of the discontinued policy shall be payable at the end of the lock-in period or date of surrender whichever is later.

The maturity benefit at the time of surrender can be annuitized wholly or partially as described under the vesting benefit.

Advantages of SBI Life Retire Smart Plus:

• Premium paying mode can be chosen based on convenience.

• This plan helps to save systematically for retirement.

• Option to select from 7 fund options & flexibility to switch to other funds.

• There is no premium redirection charge, partial withdrawal charge & switching charge.

Disadvantages of SBI Life Retire Smart Plus:

• The lock-in period is 5 years.

• The maturity benefit can only be annuitized. The fund value cannot be redeemed & utilised for other life goals. 

• Various charges are deducted from the premium before it gets invested.

• There is no guarantee in the maturity benefit (vesting benefit) which decides the future annuity amount.

Research Methodology on SBI Life Retire Smart Plus:

Now, we have seen all the important details like the features, advantages, disadvantages, and charges of the SBI Life Retire Smart Plus plan.

Though the details are important, it does not help us to decide whether we should buy this plan or not.

That’s why now we are going to do a research methodology on the IRR of SBI Life Retire Smart Plus.

To do the research, first, we will calculate the IRR of SBI Life Retire Smart Plus by using the SBI Life Retire Smart Plus Online Calculator.

Then, we will calculate and compare the IRR of other investments to see which investment option gives us a better return.

This can help us to decide whether you should buy this plan or not.

Benefit Illustration analysis on SBI Life Retire Smart Plus:

The following benefit illustration is for a 30-year-old male. He invests Rs. 1 lakh for 15 years & the policy term is 25 years. There is no defined sum assured, in most cases the fund value is payable on death.

		At 4% p.a.	At 8% p.a.
Age	Year	Annualised premium / Maturity benefit	Annualised premium / Maturity benefit
31	1	-1,00,000	-1,00,000
32	2	-1,00,000	-1,00,000
33	3	-1,00,000	-1,00,000
34	4	-1,00,000	-1,00,000
35	5	-1,00,000	-1,00,000
36	6	-1,00,000	-1,00,000
37	7	-1,00,000	-1,00,000
38	8	-1,00,000	-1,00,000
39	9	-1,00,000	-1,00,000
40	10	-1,00,000	-1,00,000
41	11	-1,00,000	-1,00,000
42	12	-1,00,000	-1,00,000
43	13	-1,00,000	-1,00,000
44	14	-1,00,000	-1,00,000
45	15	-1,00,000	-1,00,000
46	16	0	0
47	17	0	0
48	18	0	0
49	19	0	0
50	20	0	0
51	21	0	0
52	22	0	0
53	23	0	0
54	24	0	0
55	25	0	0
		22,62,172	45,96,020
	IRR	2.28%	6.22%

The above-mentioned assumed rates of returns @4% and @8% p. a. are only illustrative scenarios. They are not guaranteed, and they are not higher or lower limits of returns. 

Moreover, the fund value cannot be redeemed fully. It can be annuitized wholly or partially depending on the then prevailing rate of the annuity. So, the IRR that we see here is during the accumulation phase of retirement. There is no guarantee in the annuity which you may receive in the future. The maturity benefit / Vesting benefit cannot be encashed wholly. This makes the policyholder paralysed with the limited option.

SBI Life Retire Smart Plus vs. Other Investments:

Since there is limited option to utilise the maturity proceeds with the SBI Life Retire Smart Plus plan, let us probe into other options where there is no restriction in redemption & utilisation of accumulated funds.

In the above illustration, there is no specified death benefit, only the fund value accumulated till the date of death is payable to the nominee. So, we can consider the total annual cash flow used for corpus accumulation. 

SBI Life Retire Smart Plus Vs. PPF Vs. ELSS

If a person invests the same Rs. 1 lakh per annum for 10 years & waits till the maturity at the end of the 25th year the corpus can be utilised as he wishes. The investment vehicle can be equity or debt depending on the risk appetite. 

		PPF	ELSS
Age	Year	PPF	ELSS
31	1	-1,00,000	-1,00,000
32	2	-1,00,000	-1,00,000
33	3	-1,00,000	-1,00,000
34	4	-1,00,000	-1,00,000
35	5	-1,00,000	-1,00,000
36	6	-1,00,000	-1,00,000
37	7	-1,00,000	-1,00,000
38	8	-1,00,000	-1,00,000
39	9	-1,00,000	-1,00,000
40	10	-1,00,000	-1,00,000
41	11	-1,00,000	-1,00,000
42	12	-1,00,000	-1,00,000
43	13	-1,00,000	-1,00,000
44	14	-1,00,000	-1,00,000
45	15	-1,00,000	-1,00,000
46	16	0	0
47	17	0	0
48	18	0	0
49	19	0	0
50	20	0	0
51	21	0	0
52	22	0	0
53	23	0	0
54	24	0	0
55	25	0	0
		53,85,261	1,18,31,142
	IRR	7.10%	11.49%

The accumulated corpus under PPF is Rs. 53.85 lakhs & under the ELSS option (post-tax) is Rs. 1.18 crores. There is no restriction in the redemption/liquidation of these maturity proceeds which is the greatest negative point in SBI Life Retire Smart Plus. 

This accumulated corpus can be invested in a combination of fixed income & equity products & enjoy a happy retirement life with a step up in the annual income as well. 

Final Verdict on SBI Life Retire Smart Plus:

The negative side is, the corpus accumulated through this plan cannot be encashed by the policyholder. It can only be annuitized (part commutation allowed). There is no other option left with the policyholder.

Any investment plan should be chosen based on the risk (safety), return & liquidity. Here, SBI Life Retire Smart Plus lacks a liquidity feature. Also, the return is not proportionate to the risk. The premium gets invested after the deduction of various charges. 

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So, choose an appropriate investment product during the accumulation phase as well as in the distribution phase of retirement to have stress-free golden days.