Bhushan Sheth

Immediate Annuity : Invest One time, Pension from next year

Pros : Fixed Pension Rate (Currently 7.4%) Cons : Taxable Annuity

Deferred Annuity : Invest for 20 Years, Commutation and Pension after 20 Years
Pros : Deferment allows building of corpus Cons : Pension Rate applicable will be market rate applicable 20 years hence; Taxable Annuity

This is Indias one and only Deferred Pension Plan with a Guaranteed Pension rate Pre Tax Pension rate works out to be as high as 9% (depending on age and amount of investment), but it is fixed for lifetime Best suited for HNIs in age group of 35-45 looking to invest for 15-20 years Plans offer commutation, Lifetime Pension, Lifetime Insurance and further variable benefits (Lifetime = Up to age 100)

Age 40, Face value of plan : 5 Crores Premium : 24.11 Lacs payable annually for 20 years Lets understand the following three points:

Maturity and Pension Insurance Benefits Exit Clause

1.

After 20 Years : Commutation of 5 Crores (Variable and Tax Free) PLUS

2.

From 21st Year : Lifetime Pension of 27,50,000 p.a. (Guaranteed and Tax Free) PLUS
From 21st Year : Lifetime Insurance Cover of 5 Crores (Guaranteed and Tax Free) PLUS From 21st Year : Increase in Lifetime Insurance Cover of 10% every 10 years (Variable and Tax Free) Consider the scenario where if you re-invest 5Crores from Point1 and earn additional pension of at least 20Lacs p.a. : will mean your total pension will be about 48Lacs p.a. i.e. 4Lacs per month (Assumed Pension Rate of 4%)

3.

4.

5.

During the premium payment phase:

5 Crores (Guaranteed and Tax Free) PLUS Annualized Portion of Point 1 (i.e. 25Lacs p.a.) (Variable and Tax Free)

During the pension phase : As per point 3 & 4 of previous slide

Exit during Premium payment phase:

1st to 3rd Year : Zero Value 4th to 7th Year : Loss Making Value From 8th Year : Approximate Proportionate Value From 4th Year : Either liquidate OR Reduce Face value

Exit During Pension Phase:

Relinquish benefits under point 2, 3 & 4 of Pension and Insurance Benefits Get a Settlement Value of 4.5 Crores (Guaranteed and Tax Free) Partial Exit possible

Investment : 24.11 Lacs p.a. for 20 Years = 4.82Cr. Returns (assuming human life as 90):
After 20Yrs : 5 Crores Pension for 30Yrs : 8.25 Crores Insurance at age 90 : 6.5 Crores Total : 19.75 Crores

Yield : Min 6.2% Tax Free Thus a pre tax rate of 9% is achieved