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What kind of investment product makes you feel good about your Financial Future?
Which sort of Investment Product would be the right choice for your future needs and requirements?
Financial Freedom means complete freedom to indulge in life’s necessities without any compromises.
Never in life, money should be an obstacle, irrespective of all life stages. Just imagine if you have accumulated the required retirement corpus, then you need not compromise on your lifestyle, your independence, or even your annual family vacation.
To fulfill all these aspirations, you need a regular stream of income even during your post-retirement period.
SBI Life Smart Annuity Plus promises you an opportunity to maintain your standard of living. In this article let us do a Detailed Analysis and Review the plan’s Advantages (Pros) and Disadvantages (Cons).
These critical insights that you get from this research will help you make a well-informed investment decision.
Table of Contents
1. What is the SBI Life Smart Annuity Plus Plan?
2. What are the Features of the SBI Life Smart Annuity Plus Plan?
3. Who is Eligible to invest in the SBI Life Smart Annuity Plus Plan?
4. What are the Various Annuity Options under the SBI Life Smart Annuity Plus Plan?
5. Surrendering SBI Life Smart Annuity Plus Plan.
6. Free Look Period in SBI Life Smart Annuity Plus Plan
7. Advantages of SBI Life Smart Annuity Plus Plan.
8. Disadvantages of SBI Life Smart Annuity Plus Plan.
9. SBI Life Smart Annuity Plus Plan Research Methodology.
- SBI Life Smart Annuity Plus Plan Benefit Illustration – IRR Analysis
10. SBI Life Smart Annuity Plus Plan VS Other Investments
- i) SBI Life Smart Annuity Plus Plan VS SBI Life Saral Swadhan Plus Plan
- ii) SBI Life Smart Annuity Plus Plan VS SBI Life Smart Humsafar Plan
11. SBI Life Smart Annuity Plus Plan VS Other Investments Review Conclusion
12. Final Verdict on SBI Life Smart Annuity Plus Plan
1. What is the SBI Life Smart Annuity Plus Plan?
SBI Life Smart Annuity Plus is an Individual, Non-linked, Non-participating, general annuity plan.
It enables you to choose from immediate or deferred annuity options with inbuilt flexibility. It provides a lifelong annuity in the mode chosen by the policyholder.
2. What are the Features of the SBI Life Smart Annuity Plus Plan?
- Guaranteed Lifelong Regular Income.
- Option to receive Immediate or Deferred Annuity.
- Option to avail annuity benefits at a Compound Increasing Rate.
- Option to choose the frequency of annuity payouts – Monthly, Quarterly, Half-Yearly, and Yearly.
- Option of Return of Purchase Price or Balance Purchase Price available only under certain annuity options
3. Who is Eligible to invest in the SBI Life Smart Annuity Plus Plan?
| Minimum | Maximum | |
| Age at Entry | 0 years for product conversion 30 years for all other cases 45 years for deferred annuity options; |
75 years for deferred annuity options 95 years for all other options. |
| Premium | Such that the minimum annuity installment can be paid as per annuity payout mode. | No limit |
| Annuity Payout | Monthly: 1,000 Quarterly: 3,000 Half-yearly: 6,000 Yearly: 12,000 |
No limit |
| Deferment Period | 1 year to 10 years | |
| Premium Payment Frequency | Single Premium | |
| Annuity Payout Mode | Monthly or Quarterly or Half-Yearly or Yearly | |
4. What are the Various Annuity Options under the SBI Life Smart Annuity Plus Plan?
The annuity payout amount will be in accordance with the chosen Annuity option:
i. Single Life – Annuity Options:
The annuity payout will continue at a guaranteed rate, throughout the life of the annuitant. As an annuitant, you have the flexibility to choose from the following life annuity options:
- Life Annuity
- Life Annuity with return of purchase price
- Life Annuity with return balance of purchase price
- Life Annuity with an annual simple increase of 3%
- Life Annuity with an annual simple increase of 5%
- Life Annuity with a certain period of 10 years
- Life Annuity with a certain period of 20 years
- Life Annuity with a compound increase of 3%
- Life Annuity with a compound increase of 5%
- Deferred Life annuity with return of purchase price
ii. Joint Life – Annuity Options:
The annuity payout will continue at a guaranteed rate, throughout the life of the annuitants. As an annuitant, you can choose an annuity option from the following life annuity options.
- Life and Last Survivor 100% annuity
- Life and Last Survivor 100% Annuity with Return of Purchase Price
- Deferred Life and Last Survivor Annuity with Return of Purchase Price
- NPS – Family Income
5. Free Look Period in SBI Life Smart Annuity Plus Plan
In the unlikely event that the policyholder is not satisfied with the terms and conditions of the policy and wishes to cancel the policy, then he/she can do so by returning the policy to the company within 15 days (30 days in case the policy is sold through distance mode) of receipt of the policy.
If you are keen on knowing more about the plan you can refer to the SBI Life Annuity Plus Plan Policy Brochure.
Surrender Value (SV) is only applicable for Deferred Annuity Options and Annuity Options with a Refund of Full Purchase Price.
The higher of Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV) will be given as surrender value to the policyholder.
7. Advantages of the SBI Life Smart Annuity Plus Plan
- Incentive for higher purchase price.
- Advancing your Annuity Payouts under immediate annuity options.
- Wide range of annuity options to choose from.
- Return of purchase under select variant.
8. Disadvantages of the SBI Life Smart Annuity Plus Plan
- Surrender of policy is applicable only under selected variants. In other variants, your funds get locked.
- The Annuity here is fully taxable.
9. SBI Life Smart Annuity Plus Plan Research Methodology
Now let us move on to the next step in our review which is returns analysis. This will guide you, on whether you should buy the plan or not.
We have worked out the internal rate of return of SBI Life Smart Annuity Plus using the figures given in the policy brochure.
SBI Life Smart Annuity Plus Plan Benefit Illustration – IRR Analysis
The following table depicts the annuity amount receivable under different plan options.
This is worked out based on the purchase price of ₹ 10 Lakhs for a healthy male aged 60 years. The deferment period is 10 years (wherever applicable).
Annual Annuity Payouts @ Age 60 Years for Purchase Price of Rs.10 Lakh
| Option No. | Annuity Option | Annual Annuity Amount | Annuity amount as a % age of Purchase Price | Death Benefit (assuming death of single or both annuitants at the end of 10 years) |
| 1.1 | Life Annuity | 81,207 | 8.12% | Nil |
| 1.2 | Life Annuity with Return of Purchase Price | 68,096 | 6.81% | 10,00,000 |
| 1.3 | Life Annuity with Return of Balance Purchase Price | 79,100 | 7.91% | Purchase Price less sum total of annuity paid till the death of the annuitant |
| 1.4 | Life Annuity with Annual Simple Increase of 3% p.a. | 62,549 | 6.25% | Nil |
| 1.5 | Life Annuity with Annual Simple Increase of 5% p.a. | 54,267 | 5.43% | Nil |
| 1.6 | Life Annuity with a Certain Period of 10 years | 80,231 | 8.02% | Nil |
| 1.7 | Life Annuity with a Certain Period of 20 years | 77,888 | 7.79% | Nil |
| 1.8 | Life Annuity with Annual Compound Increase of 3% p.a. | 58,111 | 5.81% | Nil |
| 1.9 | Life Annuity with Annual Compound Increase of 5% p.a. | 44,456 | 4.45% | Nil |
| 2.1 | Life and Last Survivor 100% Annuity | 74,066 | 7.41% | Nil |
| 2.2 | Life and Last Survivor 100% Annuity with Return of Purchase | 67,736 | 6.77% | 10,00,000 |
| 1. 10 | Deferred Life Annuity with Return of Purchase Price | 1,33,804 | 13.38% | 10,00,000 |
| 2.3 | Deferred Life and Last Survivor Annuity with Return of Purchase Price | 1,29,571 | 12.96% | 10,00,000 |
For the given purchase price, the annuity amount differs based on the option chosen.
The percentage given here is not the “Returns” from the policy, rather it denotes the percentage of the purchase price which is given as an annuity. Now, let us calculate the internal rate of return for some of the plan options.
Assumptions for calculation:
- Since it is a lifelong annuity plan, the life expectancy is assumed as 85 years
- The deferment period is 10 years for the deferred annuity option.
- Return of purchase price is exercised wherever applicable.
| S.no | Plan option | IRR |
| 1.1 | Life Annuity | 6.4% |
| 1.2 | Life Annuity with Return of Purchase Price | 6.81% |
| 1.5 | Life Annuity with Annual Simple Increase of 5% p.a. | 6.08% |
| 1.9 | Life Annuity with Annual Compound Increase of 5% p.a. | 5.46% |
| 1. 10 | Deferred Life Annuity with Return of Purchase Price | 6.19% |
| Age | Year | Plan option 1.1 | Plan option 1.2 | Plan Option 1.5 | Plan option 1.9 | Plan option 1.10 |
| 60 | 1 | -10,00,000 | -10,00,000 | -10,00,000 | -10,00,000 | -10,00,000 |
| 61 | 2 | 81,207 | 68,096 | 54,267 | 44,456 | 0 |
| 62 | 3 | 81,207 | 68,096 | 56,980 | 46,679 | 0 |
| 63 | 4 | 81,207 | 68,096 | 59,694 | 49,013 | 0 |
| 64 | 5 | 81,207 | 68,096 | 62,407 | 51,463 | 0 |
| 65 | 6 | 81,207 | 68,096 | 65,120 | 54,037 | 0 |
| 66 | 7 | 81,207 | 68,096 | 67,834 | 56,738 | 0 |
| 67 | 8 | 81,207 | 68,096 | 70,547 | 59,575 | 0 |
| 68 | 9 | 81,207 | 68,096 | 73,260 | 62,554 | 0 |
| 69 | 10 | 81,207 | 68,096 | 75,974 | 65,682 | 0 |
| 70 | 11 | 81,207 | 68,096 | 78,687 | 68,966 | 1,33,804 |
| 71 | 12 | 81,207 | 68,096 | 81,401 | 72,414 | 1,33,804 |
| 72 | 13 | 81,207 | 68,096 | 84,114 | 76,035 | 1,33,804 |
| 73 | 14 | 81,207 | 68,096 | 86,827 | 79,837 | 1,33,804 |
| 74 | 15 | 81,207 | 68,096 | 89,541 | 83,828 | 1,33,804 |
| 75 | 16 | 81,207 | 68,096 | 92,254 | 88,020 | 1,33,804 |
| 76 | 17 | 81,207 | 68,096 | 94,967 | 92,421 | 1,33,804 |
| 77 | 18 | 81,207 | 68,096 | 97,681 | 97,042 | 1,33,804 |
| 78 | 19 | 81,207 | 68,096 | 1,00,394 | 1,01,894 | 1,33,804 |
| 79 | 20 | 81,207 | 68,096 | 1,03,107 | 1,06,989 | 1,33,804 |
| 80 | 21 | 81,207 | 68,096 | 1,05,821 | 1,12,338 | 1,33,804 |
| 81 | 22 | 81,207 | 68,096 | 1,08,534 | 1,17,955 | 1,33,804 |
| 82 | 23 | 81,207 | 68,096 | 1,11,247 | 1,23,853 | 1,33,804 |
| 83 | 24 | 81,207 | 68,096 | 1,13,961 | 1,30,045 | 1,33,804 |
| 84 | 25 | 81,207 | 68,096 | 1,16,674 | 1,36,548 | 1,33,804 |
| 85 | 26 | 81,207 | 10,68,096 | 1,19,387 | 1,43,375 | 11,33,804 |
| IRR | 6.40% | 6.81% | 6.08% | 5.46% | 6.19% |
While analysing the various plan options, we could infer the following:
- Under the annual compound increase option, the annuity amount and the IRR are the least among the given options. The second least is the annual simple Increase annuity option.
- Under the deferred annuity option, though you get a better annuity amount (the highest), the returns are not satisfactory.
- Under the return of purchase price option, the annual amount would be less but the IRR is slightly higher.
- The Internal Rate of Return under various scenarios hovers around 6%.
This IRR analysis shows that in the long run investing in annuity plans will lock your money.
So always consider your Investment Goals, Risk Appetite, and Time Horizon before choosing your investment product.
The returns from SBI Life Smart Annuity Plus are poor and you miss the opportunity to invest in an increasing interest rate scenario or utilise the fund for any other purpose.
10. SBI Life Smart Annuity Plus Plan VS Other Investments
Now, let us consider some alternative Investment options for your retirement corpus.
The following instruments provide you with a regular stream of income similar to annuity plans. At the same time, you can utilize it as you wish throughout your lifetime.
| Alternate Investment option | Interest Rate |
| Senior Citizen Savings Scheme (SCSS) | 8.20% |
| Bank FD | 7% – 8% |
| RBI Floating Rate Bonds | 8.05% (Floating) |
Bank FDs and SCSS both investment options offer fixed returns throughout the tenure. However, the interest rate of RBI floating bonds varies.
All these options mentioned here will provide a fixed interest. The return and liquidity are better in these alternate options when compared to SBI Life Smart Annuity Plus.
The above options miss a point called inflation. You need to have equity in your portfolio to receive inflation-adjusted regular income.
Now we are going to see in the above illustration, how we get an inflation-adjusted return just by rebalancing your portfolio every 6 years. Here we have taken an initial annuity similar to plan option 1.2 – ₹ 68,096.
Inflation-adjusted regular income from Other Investments
Let us assume that 60% of ₹ 10 Lakhs is invested in Equity for wealth creation and the balance in Debt for regular needs.
Equity return is assumed as 12% and debt return as 6%. The debt part is refilled from equity every six years. Also, every 6 years, your annual withdrawal increases by 6% to combat inflation.
| Age | Equity Portion | The Shift from Equity to Debt | Debt Portion | ||||
| Opening Balance | Yearly withdrawal | Closing Balance | Opening Balance | Yearly withdrawal | Closing Balance | ||
| 60 | 6,00,000 | – | 6,72,000 | – | 4,00,000 | 68,096 | 3,51,818 |
| 61 | 6,72,000 | – | 7,52,640 | – | 3,51,818 | 68,096 | 3,00,746 |
| 62 | 7,52,640 | – | 8,42,957 | – | 3,00,746 | 68,096 | 2,46,609 |
| 63 | 8,42,957 | – | 9,44,112 | – | 2,46,609 | 68,096 | 1,89,223 |
| 64 | 9,44,112 | – | 10,57,405 | – | 1,89,223 | 68,096 | 1,28,395 |
| 65 | 10,57,405 | – | 11,84,294 | – | 1,28,395 | 68,096 | 63,917 |
| 66 | 11,84,294 | 4,00,000 | 8,78,409 | 5,00,000 | 5,63,917 | 72,182 | 5,21,239 |
| 67 | 8,78,409 | – | 9,83,818 | – | 5,21,239 | 72,182 | 4,76,001 |
| 68 | 9,83,818 | – | 11,01,876 | – | 4,76,001 | 72,182 | 4,28,048 |
| 69 | 11,01,876 | – | 12,34,101 | – | 4,28,048 | 72,182 | 3,77,219 |
| 70 | 12,34,101 | – | 13,82,193 | – | 3,77,219 | 72,182 | 3,23,339 |
| 71 | 13,82,193 | – | 15,48,057 | – | 3,23,339 | 72,182 | 2,66,227 |
| 72 | 15,48,057 | 5,00,000 | 11,73,823 | 5,00,000 | 7,66,227 | 76,513 | 7,31,097 |
| 73 | 11,73,823 | – | 13,14,682 | – | 7,31,097 | 76,513 | 6,93,859 |
| 74 | 13,14,682 | – | 14,72,444 | – | 6,93,859 | 76,513 | 6,54,387 |
| 75 | 14,72,444 | – | 16,49,137 | – | 6,54,387 | 76,513 | 6,12,547 |
| 76 | 16,49,137 | – | 18,47,034 | – | 6,12,547 | 76,513 | 5,68,197 |
| 77 | 18,47,034 | – | 20,68,678 | – | 5,68,197 | 76,513 | 5,21,185 |
| 78 | 20,68,678 | 20,68,678 | -0 | 20,68,678 | 25,89,863 | 81,103 | 26,59,285 |
| 79 | 26,59,285 | 81,103 | 27,32,872 | ||||
| 80 | 27,32,872 | 81,103 | 28,10,875 | ||||
| 81 | 28,10,875 | 81,103 | 28,93,558 | ||||
| 82 | 28,93,558 | 81,103 | 29,81,202 | ||||
| 83 | 29,81,202 | 81,103 | 30,74,104 | ||||
| 84 | 30,74,104 | 81,103 | 31,72,581 | ||||
| 85 | 31,72,581 | 81,103 | 32,76,966 | ||||
This strategy will be helpful for you in coping with inflation during your post-retirement period. Here, at the age of 78 equity portion is fully shifted to debt.
This can be done according to your risk-taking capacity. Even when the entire corpus shifts to debt in the process, you can be assured that the corpus outlives you.
The corpus that you receive from the SBI Life Smart Annuity Plus Plan will not be adequate for your post-retired life.
i) SBI Life Smart Annuity Plus Plan VS SBI Life Saral Swadhan Plus Plan
To have a clear understanding of the SBI Life Swadhan Plus Plan let’s see some of its features.
- Affordable premium based on your age and sum assured.
- You can choose a policy term either 10 or 15 years.
- At maturity, you will get a guaranteed benefit of 100% or 115% of the total premiums paid.
If you wish to read more and are willing to know the plan better then you can read our article on SBI Life Saral Swadhan + Review: An Insightful Analysis
ii) SBI Life Smart Annuity Plus Plan VS SBI Life Smart Humsafar Plan
Let’s just gaze upon the SBI Life Smart Humsafar Plan key features to know it better.
- It is joint life insurance covering you and your spouse under a single policy.
- Premium waiver benefit in case of death of any one of the lives assured.
- Provides financial protection in the event of death of both lives assured.
To have a broader perspective on this SBI Life Smart Humsafar Plan. We recommend you read this article.
11. SBI Life Smart Annuity Plus Plan VS Other Investments Review Conclusion
Irrespective of the plan option chosen SBI Life Smart Annuity Plus Plan won’t help you combat inflation and achieve your goals.
The above analysis clearly shows that investing in alternative investments offers better liquidity and returns as well.
Along with this, some portion of your investments should be invested in equity as well. So that you get a regular stream of income. It will assist you to cope with the inflated rate of your goals.
12. Final Verdict on SBI Life Smart Annuity Plus Plan
SBI Life Smart Annuity Plus is a hassle-free single premium investment plan where your investment yields regular returns. Though you get a regular income, you can’t sit back and relax.
Because slowly inflation will erode the purchasing power of annuities down the lane.
Getting a regular source of income shouldn’t be the criteria for picking this plan. The returns analysis clearly shows that the return on investment hovers around 6% which is less than inflation. High Agent commission in this policy reduces the overall return.
To generate inflation-adjusted income during your post-retirement period, it is advisable to invest in a diversified portfolio. In the long run, this strategy will make your retirement kitty serve all your needs and also withstand beyond it.
Any ready-made annuity/pension plan should be avoided. For retirement planning consulting a finance professional is advisable.
Don’t let your Investment choice or decision get influenced by Social Media such as Quora, Facebook, Twitter, etc. Instead of this consulting a Financial Planner would help you do wonders in your Financial Journey.
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