ICICI Pru Lifelink Pension Plan is a cost-effective scheme with guaranteed returns
ICICI Pru Lifelink Pension plan is the first unit-linked pension plan launched by any private insurer after the rollout of new Ulip guidelines. This is a single premium plan that comes with pension guarantee funds which provides a minimum guaranteed net asset value (NAV) of 19.1 at maturity. This guarantee is quite captivating, since it is much higher than that proposed by the regulators under the guidelines.
COST STRUCTURE
Lifelink Pension has a reasonable cost structure. Though the premium allocation charges are pretty high, low policy administration charges and no mortality charge (since death cover is not attached) compensate this, keeping the overall cost structure fairly balanced. The policy does not have surrender charges, however, one has to compulsorily remain invested for five policy years.
BENEFITS
The key distinctive benefit of Lifelink Pension is a guarantee attached to the product. The guarantee generates at least 6.7% interest per annum. So, one doesn't have to bother much about the cost structure of the product. Further, the policy award loyalty additions on maturity, however these additions vary on the single premium (SP) invested. So, for instance on SP of 40,000 no loyalty addition is given, while on SP of 2.5 lakh almost 2% of the fund value is rewarded as loyalty additions.
CAVEAT
The guaranteed NAV does not apply on surrender or death benefit payout. In both cases, the existing fund value is returned to the policyholder. Also, on early withdrawal or at maturity, two-third of the accumulated corpus has to compulsorily be utilised for purchasing annuity. Hence even on surrender, after the lock-in period of five years, an investor has to purchase annuity. Besides, the policy tenure is limited to 10 years, leaving the policy an undesired investment avenue for those interested in long-term pension options.
PERFORMANCE & PORTFOLIO REVIEW
ICICI Pru Lifelink Pension offers just one fund namely Pension Return Guarantee Fund, which is predominately debt-oriented due to the requirement of guarantee returns. The fund provides a minimum guaranteed NAV of 19.1 at maturity. As far as the portfolio of this fund is a concerned, corporate bond and government bond are the securities in which the asset under management is predominately invested. Government bonds of long tenure form the core of the portfolio.
DEATH/MATURITY BENEFIT
ICICI Pru Lifelink Pension does not offer death benefits. So in the case of demise of the policyholder, the nominee receives only the accumulated fund, whereas upon maturity, one third of the fund is given to the investor as lumpsum, which is fully tax-free. The balance two-third is invested in annuity plan from either the same company or any other insurer (see the table for the annuity plans). 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 2 lakh in Pension Return Guarantee Fund for 10 year. Assuming that the fund do not perform well. It will surely grow to nearly 3,64,748 receivable at maturity.
OUR VIEW
ICICI Pru Lifelink Pension is a cost-effective plan with guaranteed returns, but it may not suit investors with high-risk appetite. Those who wish to invest money for their retirement and are ready to buy annuity on maturity or withdrawal may opt for this plan. However, young people should try to have relatively more exposure in equity market or equity funds, and use debt funds barely to hedge returns.
