Tata AIA Fortune Guarantee Pension Plan: Good or Bad? A Complete Review

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Retirement is a period in your life where you get time for yourself.

Retirement planning is essential to have a worry-free retirement.

Tata AIA Fortune Guarantee Pension Plan proclaims that it provides regular guaranteed income for life.

This in-depth IRR analysis gives an idea of whether to buy this plan for your post-retirement income or not in detail below.

1.)What is Tata AIA Fortune Guarantee Pension Plan?
2.)Features of the Tata AIA Fortune Guarantee Pension Plan
3.)Eligibility Criteria of the Tata AIA Fortune Guarantee Pension Plan
4.)Annuity Options of the Tata AIA Fortune Guarantee Pension Plan
5.)Benefits under the Tata AIA Fortune Guarantee Pension Plan

Immediate Life Annuity
Immediate Life Annuity with Return of Purchase Price
Deferred Life Annuity (GA-I) with Return of Purchase
Deferred Life Annuity (GA-II) with Return of Purchase Price

What is Tata AIA Fortune Guarantee Pension Plan?

It is a Non-Linked, Non-Participating, Annuity Plan. It helps you gain Financial Freedom during your second innings. The plan offers you a regular guaranteed income for life to help you manage your expenses post-retirement.

The Group version of this product helps Employer-Employee groups to purchase annuities in respect of annuity payments for their members.

Features of the Tata AIA Fortune Guarantee Pension Plan

Premium Paying term at your convenience – Single, or Regular or Limited
Option to increase annuity through Top-up premiums.
Multiple annuity options to suit your needs.
High purchase price benefit to encourage you to save more.

Eligibility Criteria of the Tata AIA Fortune Guarantee Pension Plan

Some of the basic information we need to know to enter this plan is given at a glance below;

		Minimum	Maximum
Entry Age		For PoS Option: 40 years Other than POS 30 years	For PoS Option: 70 years Other than POS Option 1 & 2: 85 years Option 3 & 4: 84 years
Premium Payment Term	Single Pay	1 year
Premium Payment Term	Regular / Limited Pay	5 years	12 years
Deferment Period	Single Pay	1 year	10 years
	Regular Pay	Equal to Premium Payment Term
	Limited Pay	Premium Payment Term + 1-year	Premium Payment Term + 5 years
Annuity Amount		Yearly in arrears: Rs. 12 (in ‘000s) Yearly in advance: Rs. 12 (in ‘000s) Half Yearly in arrears: Rs. 6 (in ‘000s) Quarterly in arrears: Rs. 3 (in ‘000s) Monthly in arrears: Rs. 1 (in ‘000s)	No limit
Purchase Price		Corresponding to the minimum annuity amount above	As per the maximum annuity chosen
Group size		5	No limit
Premium Paying Modes		Single, Annual, Half-Yearly, Quarterly, and Monthly

Annuity Options of the Tata AIA Fortune Guarantee Pension Plan

Immediate Life Annuity
Immediate Life Annuity with Return of Purchase Price
Deferred Life Annuity (GA-I) and with Return of Purchase Price
Deferred Life Annuity (GA-II) and with Return of Purchase Price

Plan Options 1 and 2 are available under the Single Pay & Single Life and Joint Life basis Plan.

Options 3 and 4 are available under the Single, Limited, and Regular Pay & Single Life and Joint Life basis Plan.

Benefits under the Tata AIA Fortune Guarantee Pension Plan

Let us look at the Annuity payment, Death benefit & Guaranteed Addition under each option;

Immediate Life Annuity

An annuity shall be paid till the annuitant(s) is/are alive. There is no death benefit payable under this option. Annuity payments commence immediately as per the frequency chosen. There is no Guaranteed addition under this option.

Immediate Life Annuity with Return of Purchase Price

An annuity is paid till the annuitant(s) is/are alive and annuity payments commence immediately as per the frequency chosen. The death benefit is the Total Premiums Paid to date. There is no Guaranteed addition under this option.

Deferred Life Annuity (GA-I) with Return of Purchase

An annuity is paid till the annuitant(s) is/are alive and annuity payments commence post the end of the Deferment Period as per the frequency chosen.

Death benefit payable within Deferment Period:

Death Benefit is higher of –

Total Premiums Paid up to date of death + Accrued Guaranteed Additions
105% of the Total Premiums Paid up to the date of death.

Death benefit payable Post Deferment Period:

Total Premiums Paid (excluding loading for modal premiums) up to date of death + Max (Accrued Guaranteed Additions − Total Annuity pay-outs till the date of death, 0).

Guaranteed Addition:

GA-I = 1/12th of the Yearly Annuity amount

Deferred Life Annuity (GA-II) with Return of Purchase Price

An annuity is paid till the annuitant(s) is/are alive and annuity payments commence post the end of the Deferment Period as per the frequency chosen.

Death benefit payable within Deferment Period:

Death Benefit is higher of –

Total Premiums Paid up to date of death + Accrued Guaranteed Additions
105% of Total Premiums Paid up to the date of death

Death benefit payable Post Deferment Period:

Total Premiums Paid (excluding loading for modal premiums) up to date of death + Max (Accrued Guaranteed Additions − Total Annuity pay-outs till the date of death, 0)

Guaranteed Addition

GA-II = 1/12th of 6% of Total Premiums Paid

There is no Maturity benefit under this plan. The death benefit under Single Life is payable on the death of the annuitant & for Joint Life, it is payable on later of the death of the two annuitants.

The Grace Period, Revival & Paid-up of the Tata AIA Fortune Guarantee Pension Plan

Grace period:

This plan has a grace period of 30 days for yearly, half-yearly, and quarterly frequencies from the premium due date. The grace period for the monthly frequency is 15 days from the premium due date.

Revival Period:

If a premium is in default beyond the Grace Period and subject to the Policy not having been surrendered, it may be reinstated/revived, within five years after the due date of the first unpaid premium and before the end of the deferment period.

Paid up Benefit:

If you have not paid at least two (2) full years of Premiums, the Policy will be converted to a lapsed Policy at the end of the grace period, and no benefit will be payable.

If you have paid at least two (2) full-year Premiums, and subsequent Premiums have not been paid, your Policy will be converted to a Paid-up Policy at the end of the grace period and the Annuity amount will be converted to Paid-up Annuity.

Paid-up Annuity = (t/n) * Original Annuity Amount

Where “t” is the total period for which premiums have already been paid “n” is the maximum period for which premiums were originally payable.

Free Look-Up Period of the Tata AIA Fortune Guarantee Pension Plan

If the Annuitant is not satisfied with the terms & conditions/ features of the Tata AIA Fortune Guarantee Pension Policy, he/she has the right to cancel the Policy within 15 days of receiving the Policy Document. The said period of 15 days shall stand extended to 30 days if the policy is sourced through electronic or distance marketing mode.

Surrendering the Tata AIA Fortune Guarantee Pension Plan

No surrender benefit is applicable for Option 1.

For Single Pay: The policy acquires surrender value at any time after Policy Commencement Date.

For Regular / Limited Pay: The policy acquires surrender value provided at least 2 full years’ premiums have been paid.

Advantages of the Tata AIA Fortune Guarantee Pension Plan

Joint Life option is available under all variants.
Guaranteed addition during the deferment period.
Guaranteed Income for life & the Annuity frequency can be chosen as per convenience.
There is an option (“Top-Up”) to increase the annuity by paying an additional Purchase Price/ Premium as a Single Pay.
Loan can be availed & the maximum loan amount is 80% of the surrender Value.

Disadvantages of the Tata AIA Fortune Guarantee Pension Plan

You receive the same annuity amount without adjusting to inflation during your entire lifetime.
The annuity can’t solely rely on post-retirement expenses.
Annuity is taxable as per your slab rate.

For further details, you can refer to the Tata AIA Fortune Guarantee Pension Policy Brochure.

Research Methodology

When it comes to retirement planning, utmost care should be given during the accumulation phase as well as the disbursement period.

For an Immediate annuity, there is only the disbursement phase & there are both phases under the Deferred Annuity.

Tata AIA Fortune Guarantee Pension has both variants with the return of purchase price & without the return of purchase price.

Let us analyze the cash flow under each variant & figure out the internal rate of return of the Tata AIA Fortune Guarantee Pension Plan. This will help you to estimate how far it is beneficial to you in the long run.

IRR Analysis of the Tata AIA Fortune Guarantee Pension Plan

The Assumptions for Comparison:

Option 1:

Age at Entry: 60 years

Premium Payment Term: Single Pay – Rs. 25 Lakhs

Annuity Payment Frequency: Annual

Return of Purchase Price: Nil

Option 2:

Age at Entry: 60 years

Premium Payment Term: Single Pay – Rs. 25 Lakhs

Annuity Payment Frequency: Annual

Return of Purchase Price: At Maturity/Death

Option 4:

Age at Entry: 60 years

Premium Payment Term: 5 years

Deferment Period: 5 years

Annual Premium: Rs. 1 Lakh

Annuity Payment Frequency: Annual

Return of Purchase Price: At Maturity/Death

Let us look at the IRR calculations of all the options in the below table;

Age	Option 1 Immediate Life Annuity	Option 2 Immediate Life Annuity with Return of Purchase Price	Option 4 Deferred Life Annuity (GA-II) with Return of Purchase Price
60	-25,00,000	-25,00,000	-1,00,000
61	2,00,550	1,54,550	-1,00,000
62	2,00,550	1,54,550	-1,00,000
63	2,00,550	1,54,550	-1,00,000
64	2,00,550	1,54,550	-1,00,000
65	2,00,550	1,54,550	–
66	2,00,550	1,54,550	38,350
67	2,00,550	1,54,550	38,350
68	2,00,550	1,54,550	38,350
69	2,00,550	1,54,550	38,350
70	2,00,550	1,54,550	38,350
71	2,00,550	1,54,550	38,350
72	2,00,550	1,54,550	38,350
73	2,00,550	1,54,550	38,350
74	2,00,550	1,54,550	38,350
75	2,00,550	1,54,550	38,350
76	2,00,550	1,54,550	38,350
77	2,00,550	1,54,550	38,350
78	2,00,550	1,54,550	38,350
79	2,00,550	1,54,550	38,350
80	–	25,00,000	5,00,000

IRR	4.62%	6.01%	5.54%

We have worked out the IRR for the given variants. By inferring the table, it is clear that if the return of purchase price is not chosen, then the annual annuity amount will be high.

By analyzing the various option, it is evident that the annuity rate is between 4.6% & 6%. This rate is below the inflation rate.

Considering the inflation during the post-retirement period & also the rising medical expenses, investing your hard-earned money at this level of low yield wouldn’t be beneficial in the long run.

Even the bank FD interest rate for senior citizens is better than the Tata AIA Fortune Guarantee Pension Plan’s return in the long run. Also, there is no liquidity, the funds get locked once the plan is purchased.

Tata AIA Fortune Guarantee Pension Plan Vs Other Investment Products

Now we can compare the Tata AIA Fortune Guarantee Pension Plan with other investments where you get regular income. For regular cash flow, you can opt for;

Fixed Deposits
Systematic Withdrawal Plan (Debt Mutual Funds)
Post office Saving schemes Viz Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Senior Citizen Savings Scheme (SCSS)
RBI Floating Rate Bond

Fixed Deposits: FDs are a low-risk investment option where the investor deposits a lump sum amount for a fixed period and receives regular interest payments on the investment. The interest rate offered on FDs is fixed at the time of investment, and the investor knows the exact amount of interest they will earn. The interest earned is taxable (Exempt up to Rs. 50000 for Senior citizens).

Systematic Withdrawal Plan (SWP): Through SWP, you can withdraw money at regular intervals from the initial investment made in the Mutual fund scheme. Debt Mutual funds are generally advisable for SWP. Debt mutual funds returns are taxable as per the investor’s tax slab. Debt mutual funds offer higher returns than FDs, but they are not as safe as FDs.

You can refer to the following table for other risk-free investments similar to Tata AIA Fortune Guarantee Pension.

	PMVVY	SCSS	RBI floating rate Bond
Interest Rate (As on Feb 2023)	7.4%	8%	7.35%
Tenure	10 years	5 years	7 years
Frequency of Pay-out	Yearly, half-yearly, quarterly, monthly	Quarterly	Half-yearly
Maximum Investment Amount	Rs. 15 Lakhs	Rs. 30 Lakhs	No Limit
Taxation	Fully Taxable	Exempt up to Rs. 50 K as Per Sec 80 TTB	Fully Taxable
Premature Withdrawal	Allowed	Allowed	Allowed (For Senior citizens)
Return on the Purchase price (Investment Amount)	Returned at the end of Tenure

The above products also offer fixed income. From a returns & liquidity perspective, they are superior to the Tata AIA Fortune Guarantee Pension Plan.

Final Verdict on the Tata AIA Fortune Guarantee Pension Plan

Tata AIA Fortune Guarantee Pension Plan provides a guaranteed regular income for the lifetime of the investor but offers lower returns compared to other investments.

In addition to that, annuities are perpetual. Thereby, the funds get locked at the prevailing interest rate. On the other hand, the cost of living & medical expenses is towering. It is difficult to cope with inflation in old age.

Divide your retirement corpus into different buckets or portfolios, each with a specific time horizon and risk profile. You can diversify your investment portfolio. The primary objective of the diversification strategy is to ensure a steady and reliable stream of income at the same time to provide growth opportunities to maintain the purchasing power of the retirement corpus over time.

By investing your retirement corpus as stated above, you can very well earn an inflation-adjusted income year after year.

Carefully consider the risks and returns of each investment option before making a decision or consult your Financial Advisor to avoid any pitfalls.

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Tata AIA Life Insurance Fortune Guarantee Pension Plan Review: Good or Bad?

Table of Contents:

What is Tata AIA Fortune Guarantee Pension Plan?

Features of the Tata AIA Fortune Guarantee Pension Plan

Eligibility Criteria of the Tata AIA Fortune Guarantee Pension Plan

Annuity Options of the Tata AIA Fortune Guarantee Pension Plan

Benefits under the Tata AIA Fortune Guarantee Pension Plan

The Grace Period, Revival & Paid-up of the Tata AIA Fortune Guarantee Pension Plan

Free Look-Up Period of the Tata AIA Fortune Guarantee Pension Plan

Surrendering the Tata AIA Fortune Guarantee Pension Plan

Advantages of the Tata AIA Fortune Guarantee Pension Plan

Disadvantages of the Tata AIA Fortune Guarantee Pension Plan

Research Methodology

IRR Analysis of the Tata AIA Fortune Guarantee Pension Plan

Tata AIA Fortune Guarantee Pension Plan Vs Other Investment Products

Final Verdict on the Tata AIA Fortune Guarantee Pension Plan

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Table of Contents:

What is Tata AIA Fortune Guarantee Pension Plan?

Features of the Tata AIA Fortune Guarantee Pension Plan

Eligibility Criteria of the Tata AIA Fortune Guarantee Pension Plan

Annuity Options of the Tata AIA Fortune Guarantee Pension Plan

Benefits under the Tata AIA Fortune Guarantee Pension Plan

The Grace Period, Revival & Paid-up of the Tata AIA Fortune Guarantee Pension Plan

Free Look-Up Period of the Tata AIA Fortune Guarantee Pension Plan

Surrendering the Tata AIA Fortune Guarantee Pension Plan

Advantages of the Tata AIA Fortune Guarantee Pension Plan

Disadvantages of the Tata AIA Fortune Guarantee Pension Plan

Research Methodology

IRR Analysis of the Tata AIA Fortune Guarantee Pension Plan

Tata AIA Fortune Guarantee Pension Plan Vs Other Investment Products

Final Verdict on the Tata AIA Fortune Guarantee Pension Plan

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