Max New York Life SMART Invest Pension Super is not very flexible in terms of features. Investors can compare the plan with other similar ones
MAX New York Life SMART Invest Pension Super is a pension product launched in January 2010. The product offers varying premium payment options such as single, limited (5 pay) and regular option to investors. Apart from this, it also offers five investment options (funds) to investors having various equity and debt compositions. Investors who are capable of taking high risk and look to invest in equity can opt for growth super, whereas for risk-adverse investors growth, conservative and balanced are good funds. Those interested in 100% debt funds can opt for secure fund. This unit-linked pension product (ULPP) also offers dynamic fund, which splits the investment amount in various equity and debt fund depending on the market. For instance, if the market is expensive, then 80% of the money accumulated in the fund is shifted to debt fund. The only drawback of this fund is that investors do not have any option to switch to other funds.
COST STRUCTURE:
The cost of the product is a little high from the standpoint of the policy administration charges. Unlike other ULPP that charge hefty premium allocation charges (PAC) in the initial years, this plan does not charge any PAC to its investors. However, any additional premium paid towards investment purposes only (top ups) are charged at 2% as allocation charge.
The police administration charges for the initial three years are linked to annual premium and after f4th year they increase at 5% annually. Due to this, in a policy with a 20-year term administration charges will shoot up to Rs 2,000 by the end of 20th year. Almost 2.5% of the investment goes in policy administration charges, which is higher than 0.5% charged by LIC. Considering these charges, if the fund were to generate returns at 6% and 10 % as mandate by insurance regulator, the net yield in the hands of investors after factoring the above costs would be 4.55% and 8.4% (approx.), respectively per annum.
BENEFITS:
The policy provides varying premium payment options. For those looking for limited payment option can opt for single or limited premium payment option(which include payment of premium for five years). Apart from this, regular premium option is also available. Policyholders have an option of increasing premium by 5% yearly to fight inflation. The policy also gives loyalty units from 10th policy year as an incentive to policyholders. A few additional riders like critical illness and accidental death and disability benefit are also available on payment of extra charge. These charges are tending to be higher.
PERFORMANCE:
Since in ULPP the premium is invested in a fund that determines investors' return, it is important to choose products that suit your risk appetite and you should keep a track of the fund's performance. MNYL SMART Invest Pension Super is only six months old, but the funds have been in place for more than four years now. In the short term of 6 months, most of the funds have outperformed their benchmark (see table). The long-term record of its funds are, however, not very encouraging.
One of its funds, Growth Super Fund launched just before the 2008 market crash, gave negative returns despite being a 100% equity fund. However, it beat the market during the period by providing –0.94% returns as against a 4% fall in the Nifty. Investors looking for high exposure in equity can opt for this fund as its net asset is low right now and so allocation of units would be more.
PORTFOLIO REVIEW:
Max New York Life Insurance Company has a balanced portfolio with investments in both high beta sectors such as banking and infrastructure and at the same time low beta sectors such as FMCG and technology. Beta measures a portfolio or a stock sensitivity to market movement. However, the fund has under invested in healthcare and oil and gas ,the combined exposure is just about 7% in these two. ccording to the fund manager, the churning of the stocks is done on every 12 month period. And in contrast to many of its peers, the churning has never been 100% even at the peak of the market volatility.
DEATH/MATURITY BENEFITS:
This plan does offer death benefits. So in case of demise of the policyholder, the nominee receives only the accumulated fund, whereas upon maturity, 1/3rd of the fund is given to the investor as lumpsum, which is fully taxfree. The balance2/3rd has to be compulsorily invested in annuity plan. The amount invested in annuity grows with a certain fixed percentage and investors receive a series of payment on a periodic basis. For instance, say a 35-year-old healthy male invest Rs 50,000 a year in Growth Super Fund of Max New York Life SMART Invest Pension Super for a period of 20 years. Assuming the rate of return of 6% and 10%, the fund value will grow up to nearly Rs 16,52,732 and Rs 26,41,258, respectively, receivable at the maturity.
OUR VIEW:
Max New York Life SMART Invest Pension Super is a good plan but it is not very flexible in terms of features. It does not have many options like death benefits. Besides, most of the funds options are balanced in nature and their past returns don't evoke much confidence. The charges also seem to be on the higher side especially the policy administration charges.
