Your brief guide to pension plans

Your brief guide to pension plans

Pension plans ensure that you are financially secure during your golden years. Take a look at the important aspects that you must keep in mind while opting for one...

Manoj Kumar Joshi

    Gone are the days when a leading criterion for choosing an employer was the type of pension plan that came with your salary package. Today, more important issues like matching of skill sets to job requirements, scope for personal and financial growth, etc. have come to the forefront. However, this has left individuals with the responsibility of financially planning for their golden years. And it’s all for the best as there are a variety of pension plans available in the market to suit different individuals and their specific needs.
WHAT ARE PENSION PLANS?
    In a pension plan, you are required to pay premiums for a certain number of years and once you reach the retirement age, the insurer returns a lump sum amount that can be then used to purchase an annuity or stream of income for the rest of your life. As in the case of other insurance products, pension plans allow you to choose between unit linked and non-unit linked plans.
CHOOSING A PENSION PLAN
    Here are some thumb rules you could consider while choosing a pension plan that is most suitable for you:
    Decide on your retirement age: The premium paying tenure and the premium amount will depend upon the number of years to retirement, in addition to how much you would like to receive on retirement. The earlier you begin to subscribe to a pension plan, the lower your premium payable will be, other things being the same. Alternatively, with a longer tenure, the accumulated amount at the time of maturity would be high, resulting in a higher annuity.
    Don’t only consider tax benefits: Don’t subscribe to a pension plan solely for its tax benefits. Rather it should form an integral part of the overall retirement planning, taking into account the financial needs of your family members as well.
    Think ahead: Decide on the amount of premium that you will pay after taking into account your present as well as future financial commitments.
    Check out the lock-in period: Generally pension plans have a lock-in period but those plans which offer flexibility of withdrawing a part of the accumulated amount before maturity are helpful in times of financial emergency.
    Be aware of your risk-return preferences: Insurance companies invest premium amounts in varying proportions in different financial instruments across equity and debt. The returns from such investments are subject to market risks.
    Add-ons: There are pension plans which also offer life cover, accident cover, health cover, guarantee of capital, etc. Other plans share profit and also give bonus. However, additional features embedded in a pension plan come at an additional premium.
SUMMING UP Today many individuals are left with the responsibility of financially planning for their golden years. Pension plans are available to facilitate retirement planning. Choosing a pension plan carefully can ensure that it suits your needs. 

 This article sourced from times of India :-http://timesofindia.indiatimes.com/

ULIPs – Revamped for the better

ULIPs – Revamped for the better

With the new guidelines, ULIPs have become more investorfriendly than before. Read to know ‘why’….

Rahul Mantri

    The Insurance Regulation and Development Authority (IRDA) have made some critical changes with respect to Unit Linked Insurance Plans (ULIPs), making these instruments more attractive than earlier…
CHANGES 1. Lock-in period increased to five years: By implementing this change the IRDA has ensured that investors’ commitment to stay with ULIPs is higher and they enter these products with a long term view only.
2. Difference between the net yield and gross yield capped: As per the IRDA, the difference between the gross yield (actual return earned by the fund) and the net yield (yield after deducting the actual expenses incurred by the fund) should not be more than 3 per cent in case of products with a tenure of less than 10 years and 2.25 per cent in case of products over 10 years. With this cap, unwanted expenses and extremely high agent commissions will be kept under control.
3. Surrender charges capped at much lower levels: Now, the insurance company can recover only the client acquisition cost and not earn huge amounts under the tag of ‘surrender
charges’. This will ensure that the policy holder will receive a higher sum in case of premature surrender as compared to earlier.
4. Minimum annualised guarantee of 4.5 per cent return on pension funds mandatory: This means that the policy holders (especially senior citizens) will be protected from market volatility. This will also ensure that the insurance companies will take limited risk while managing pension funds.
5. Loan up to 40 per cent of the market value of ULIPs can be sanctioned: With a loan facility available on ULIPs, investors can arrange for the funds without having to surrender the policy.
6. Minimum insurance cover prescribed for regular and top-ups: With this guideline, IRDA aims to ensure, to a certain extent, that insurance products will not be viewed as only an investment product.
TO CONCLUDE With these new guidelines, the IRDA has made a good attempt to make ULIPs more consumer-friendly. The step is certainly in the right direction…
SUMMING UP
ULIPs have emerged as suitable long-term insurance-cum-investment solutions for all.
The benefits will make them appropriatefor long-term investing, enable access to better liquidity and offer scope for better returns. 

This article sourced from times of India :-http://timesofindia.indiatimes.com/

Advantages of Life Insurance

Advantages of Life Insurance
Life Insurance provides the dual benefits of savings and security.
The following benefits explain why this investment tool should be an
integral part of your financial plans.Advantages of Life Insurance•
Risk Cover - Life today is full of uncertainties; in this scenario
Life Insurance ensures that your loved ones continue to enjoy a good
quality of life against any unforeseen event.
• Planning for life stage needs - Life Insurance not only provides
for financial support in the event of untimely death but also acts as
a long term investment. You can meet your goals, be it your children's
education, their marriage, building your dream home or planning a
relaxed retired life, according to your life stage and risk appetite.
Traditional life insurance policies i.e. traditional endowment plans,
offer in-built guarantees and defined maturity benefits through
variety of product options such as Money Back, Guaranteed Cash Values,
Guaranteed Maturity Values.
• Protection against rising health expenses - Life Insurers through
riders or stand alone health insurance plans offer the benefits of
protection against critical diseases and hospitalization expenses.
This benefit has assumed critical importance given the increasing
incidence of lifestyle diseases and escalating medical costs.
• Builds the habit of thrift - Life Insurance is a long-term contract
where as policyholder, you have to pay a fixed amount at a defined
periodicity. This builds the habit of long-term savings. Regular
savings over a long period ensures that a decent corpus is built to
meet financial needs at various life stages.
• Safe and profitable long-term investment - Life Insurance is a
highly regulated sector. IRDA, the regulatory body, through various
rules and regulations ensures that the safety of the policyholder's
money is the primary responsibility of all stakeholders. Life
Insurance being a long-term savings instrument, also ensures that the
life insurers focus on returns over a long-term and do not take risky
investment decisions for short term gains.
• Assured income through annuities - Life Insurance is one of the best
instruments for retirement planning. The money saved during the
earning life span is utilized to provide a steady source of income
during the retired phase of life.
• Protection plus savings over a long term - Since traditional
policies are viewed both by the distributors as well as the customers
as a long term commitment; these policies help the policyholders meet
the dual need of protection and long term wealth creation efficiently.
• Growth through dividends - Traditional policies offer an opportunity
to participate in the economic growth without taking the investment
risk. The investment income is distributed among the policyholders
through annual announcement of dividends/bonus.
• Facility of loans without affecting the policy benefits -
Policyholders have the option of taking loan against the policy. This
helps you meet your unplanned life stage needs without adversely
affecting the benefits of the policy they have bought.
• Tax Benefits-Insurance plans provide attractive tax-benefits for
both at the time of entry and exit under most of the plans.
• Mortgage Redemption- Insurance acts as an effective tool to cover
mortgages and loans taken by the policyholders so that, in case of any
unforeseen event, the burden of repayment does not fall on the
bereaved family.

What is insurance

What is insurance? Life Insurance is the key to good financial
planning. On one hand, it safeguards your money and on the other,
ensures its growth, thus providing you with complete financial well
being. Life Insurance can be termed as an agreement between the policy
owner and the insurer, where the insurer for a consideration agrees to
pay a sum of money upon the occurrence of the insured individual's or
individuals' death or other event, such as terminal illness, critical
illness or maturity of the policy. Life insurance plans, unlike mutual
funds, are beneficial when you look at them as a long term avenue of
investment which also offers protection through life cover. Life
insurance policies are broadly categorized into 2 types; Traditional
Plans and Unit Linked Insurance Plans (ULIPs). Traditional
policies offer in-built guarantees and define maturity benefits
through variety of products such as guaranteed maturity value. The
investment risk in traditional life insurance policies is borne by
life insurance companies. Additionally, the investment decisions are
regulated to a large extent by IRDA rules and regulations, ensuring
stable returns with minimal risk. Investment income is distributed
amongst the policy holders through annual bonus. These policies are
ideal for policy holders who are not market savvy and do not wish to
take investment risks.ULIPs, on the other hand provide a combination
of risk cover and investment. More importantly they offer a
flexibility to decide your risk taking profile. Here's a list of
the investment plans you can benefit from: Term Plan Term
Insurance helps the customers in safeguarding their families from
financial worries that arise due to unfortunate circumstances. Term
plans are pure risk cover plans with or without maturity benefits.
These pure risk plans cover your life at a nominal costTerm plans also
let you avail the benefit to cover your outstanding debts like
mortgage, home loan etc. In case of something happens to you, the
financial burden is borne by the insurance company and not your loved
ones.Term Plan offers you the following benefits: • High insurance
Cover at lower costs • Financial security against loans and mortgages,
• Single premium payment option available • Available with host of
Additional rider benefits Health Insurance Endowment Plans
Whole Life Insurance Group Insurance Retirement Plans
Children's Plans Wealth Plans

Benefits of ULIPs

Benefits of ULIPs
Unit Linked Plans offer unique opportunity to combine protection with
investments. Some special features of Unit Linked Life Insurance
Policies (ULIPs) are: •
Provides flexibility in investmentsULIPs offer a complete selection of
high, medium and low risk investment options under the same policy.
You can choose an appropriate policy according to your risk taking
appetite, coupled with the opportunity to switch between fund options
without any additional expense. ULIPs provide the flexibility to
choose the sum assured and investment ratio in the annual targeted
premium. It also offers the flexibility of one time increase in
investment portfolio, through top-ups to avail investment opportunity
offered by external environment or own income flows.
• Transparency
The charge structure, value of investment and expected IRR based on 6%
and 10% rate of returns, for the complete tenure of the policy are
shared with you before you buy a product. Similarly, the annual
account statement, quarterly investment portfolio and daily NAV
reporting, ensures that you are aware of the status of your investment
portfolio at all times. Most companies publish latest NAVs on their
respective websites.
• Liquidity
To cope with unforeseen circumstances, ULIPs offer the benefit of
partial withdrawal; wherein after 3 years you can withdraw funds from
our Unit Linked account, retaining only the stipulated minimum amount.
• Disciplined and regular savings
ULIPs help you inculcate a regular saving habit. Also, the average
unit costs tend to be lower than one time investment.
• Multiple benefits bundled in one product
ULIP is an outstanding solution for risk cover, long term investments
with the benefit of various investment opportunities, coupled with tax
benefits.
• Spread of risk
ULIPS are ideal for those investors who wish to avail the benefit of
market linked growth without actually participating in the stock

Now, buying ULIPS will cost less

MUMBAI: Insurance sector regulator IRDA on Monday came out with a set
of guidelines directing life insurers to offer unit-linked insurance
plans (Ulips) at a much lower cost to buyers, while simultaneously
offering higher life cover though with a longer lock-in period.
While life insurance customers will benefit, the new rules could lead
to a substantial cut in commission for insurance agents and force life
insurance companies to drastically cut costs, leading to lower sales,
industry players said.
Interestingly, IRDA's decision to change rules governing Ulips came
within three months of stock market regulator Sebi saying that Ulips
were investment products as well (on which Sebi is the sole authority)
and banning 14 life insurers from selling Ulips without its
permission.
IRDA, on Monday, said that insurers will now be allowed to charge up
to 4% on annual premium paid on Ulips for the first five years, and
thereafter charges will be reduced during the tenure of the policy.
For plans of 15 years and above, the charges will be restricted at
2.25% of the yearly premium.
These cut in charges would make Ulips more attractive to the buyers
since they will have to pay lower charges for the same premium they
paid earlier. In the long run, this will add to the Ulip buyers'
funds. "Lower charges will benefit the customers," said GV Nageswara
Rao, MD & CEO, IDBI Fortis Life Insurance. However, this could mean
lower commission to insurance agents which in turn might affect sales
of ULIPs, Rao added.
The life insurers will also have to cut their expenses and becuase of
lower sales, it may affect their topline as well as bottomline. "The
capping of expenses guidelines have been made very stringent, this
will have quite farreaching consequences for the industry," said
Kamesh Goyal, country manager & CEO, Bajaj Allianz Life Insurance.
"Small regular premium policies will become unviable, thus a large
proportion of people who were paying premium of less than Rs 15,000 or
so a year will suffer badly," Goyal added. There is also fear in the
insurance industry that the new commission structure might not be able
to sustain an insurance agent's income and this channel could suffer.
IRDA has also increased the lock-in period for all Ulips from three
years to five years now, including the top-up premiums.
The decision is expected to make these products more like long-term
financial instruments that can provide risk protection. Longer lock-in
would also discourage those insurance buyers who often entered Ulips,
which are market-linked products, for short term gains. The regulator
also increased the insurance cover on such products to 10 times of the
first-year premium compared to five times now. In its Monday circular
IRDA also said that all pension products should have a guaranteed
return of 4.5% per annum. However industry players feel this could be
difficult to offer. "Providing a fixed guaranteed interest rate could
be a challenge. The returns here should be linked to market-related
rates," said Rao of IDBI Fortis

SBI Life - Scholar II

Introduction:

As a caring parent you would always want your child to get the very best. Is there a way to protect your children against life’s risks? Is there a way to make tomorrow safe for them? Therefore this is the time when careful financial planning can help you fulfill the aspirations that you have for your children’s.

We at SBI Life can help you ensure that your children’s future is secure and prosperous.
SBI Life - Scholar II is designed to protect your child’s future educational needs.


Key Features:
Twin benefit of saving for your child’s education and securing a bright future despite the uncertainties of life.
Full risk cover throughout the policy term irrespective of payment of survival benefits installments.
Option to receive the installments in lump sum at the due date of first installment of Survival benefit.
Attractive rider options
Attractive rebate for Female lives and High Sum Assured.
15 days Free Look Period.

Product type:
It is a traditional participating plan.

Benefits
Guaranteed payment at regular intervals
When the child attains 18 years of age, the parent has an option of:
Receiving the Sum Assured in 4 installments:

Please click on the snapshot for a better view

Receiving the Survival Benefits in a single installment along with the Vested Bonus* (Policy terminates thereafter) * Vested bonus is the total amount of bonus accrued till date, under the policy.

DEATH BENEFIT :In the event of unfortunate incident of your early death during the term of the plan, your child’s future remains secured in 3 ways:
Child future educational needs: 25% of Sum Assured is payable in 4 equal installments when the child attains the age 18 years to 21 years. This ensures the child’s higher educational needs are met.
Immediate Payment: The nominee receives the Sum Assured along with the bonus declared until that date.
All future basic premiums need not be paid: Ensuring that your family is not financially burdened in your absence.

Other Optional Benefits:
SBI Life - Accidental Death and Accidental Total Permanent Disability Rider
In case of death due to an accident, the nominee gets the additional rider Sum Assured.
If the policyholder is involved in an accident, resulting in total permanent disability, he/she will get Sum Assured under this rider in 10 equal annual installments; He/she will exit from all the rider covers thereafter, but continue to be covered for basic cover on receipt of further premium due, if any.
SBI Life - Premium Waiver Benefit Rider: Under this rider the policy holder need not pay future premiums for the base product, if he/she suffers from total and permanent disability due to an accident after the rider is opted for.
SBI Life - Critical Illness Rider:
On diagnosis of any of the 6 critical illnesses and you survive for more than 30 days from diagnosis; the Critical Illness Cover Amount is paid in a lump sum. No more claims will be admitted under this cover. The Basic policy remains in force for all the other benefits.

Tax Benefits
Tax benefit u/s 80 C and 10 (10 D) of IT Act*
Premiums paid for Critical Illness Benefit qualify for tax exemption under Sec 80D*

What is the policy term?
The premium payment term depends on the age of the child and ends when the child attains the age 18 years. You are covered till the child attains the age 21 years.

Who can buy this product?
Anyone between 18 to 60 years of age(as on last birthday) with a child between 0 to 15 years..

What is the sum assured?
Minimum Maximum
Rs. 50,000 Rs. 1 Crore



Riders available
SBI Life - Premium Waiver Benefit Rider
SBI Life - Accidental Death and total permanent disability rider
SBI Life - Critical Illness Rider