Financial Daily from THE HINDU group of publications
Sunday, Jun 08, 2003
Financial Daily from THE HINDU group of publications Sunday, Jun 08, 2003 |
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Investment World
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Pension Plans SBI Life's Pension Plan Nath Balakrishnan
How the plan works
The policyholder is required to make premium contributions over the chosen term. Premium contributions can either be paid in one shot, or over the entire plan duration. In all such plans, it is always advisable to commence premium payment at a younger age and pay them over longer periods to capitalise on the power of compounding. Additionally, SBI also guarantees a minimum rate of return of 4 per cent in the first seven years of the policy's duration (these rates will be in effect till March 31, 2010 after which new guaranteed rates will be announced). However, should SBI Life declare a higher bonus during this period on account of a good investment performance, the same will accrue to the policyholder. Subsequently, bonus rates will be a function of investment performance, and are not guaranteed. The minimum amount that needs to be brought into this plan under the regular premium payment plan is Rs 3,000; under the single premium plan, the amount is Rs 10,000. Moreover, additional contributions can also be made in those years where the policyholder has a surplus. This leads to a higher corpus on maturity, as the additional amounts brought in are also entitled to bonuses.
Life cover
Life cover is offered up to Rs 3 lakh for those under the age of 45. For those over 45, the cover is to the extent of Rs 1 lakh. The premiums for life cover need to be paid over and above the contributions to the pension fund. Life cover is available till age 65. Should the policyholder die during the premium paying term, the beneficiary will receive the life cover sum assured, apart from the balance in the pension fund. The beneficiary has the option to withdraw this amount completely or use it for an annuity plan.
Vesting benefits
On vesting, 25 per cent of the accumulated amount in the pension fund can be commuted, and an annuity purchased with the remaining amount. The amount that one receives as an annuity will depend on the kind of annuity plan chosen. SBI Life does provide an open market option in the sense that customers can opt for other insurance companies to pick an annuity.
Suitability
With increasing costs of living as also the prospects of higher life expectancy on account of improved health care, such pension plans will prove to be the ideal supplement to sustain one during old age.
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