1. Basics of personal finance
Assignment 3
Submitted to: Mr. Manish
Submitted by: Priya Rishi
Roll no. : RSE122A38
2. Retirement corpus:
Corpus is the principal amount or capital sum as opposed to interest or
income. Iam suggesting for those who are less risk taker and want regular
returns.
E.g. A 65 yrs old, retired and have paid all loans, need Rs 40,000 as monthly
expenses. The person has never invested in mutual funds but want to do so
now. He has saved Rs 8 lakh. The targets of the subject seems unachievable.
Even if he invest the entire savings in equity diversified funds (risky) that
provide high returns against debt instruments, he will fall short of the target.
Conservatively assuming equity yields 10-12 per cent yearly, the person gets
only Rs 6700-8000 a month.
The better option is to invest in monthly income plans (MIPs) - Reliance MIP,
DBS Chola MIP - that give income by investing in debt schemes (80 per cent)
and rest in equity. They are risky and the returns can be irregular. Invest in
Senior Citizen Savings Scheme (SCSS) that give an assured annual return of 9
per cent.
Analysing the retirement plans of ICICI PRUDENTIAL
(forever life) and LIC (jeevan suraksha/jeevan dhara)
ICICI prudential :
Forever life plan is a traditional plan without risk. It should give you a return of
about 6-7 % on your investment. On maturity, you will have to buy annuity
(pension) on minimum 67% of the collected corpus in any pension plan.
Annuity rate is not very good in india & so the pension you receive is also not
good. The pension is taxable.
Advantages of ForeverLife :
• Protection to your family, with the life insurance cover. In case of an
unfortunate event of death, the Sum Assured along with guaranteed additions
and vested bonuses (if any), will be paid to your nominee.
3. • Choice of a retirement date to decide when you want to start receiving
pension.
• 5 flexible options to receive your retirement benefits.
• Applicable tax benefits on premium paid for tax-effective accumulation.
The pension plan works in two phases:
1) The first phase is the Accumulation Phase when you pay premium into
the policy and accumulate savings for your retirement.
2) The second phase is the Annuity(Pension) Phase when you start
receiving pension from the accumulated amount via your chosen
annuity option.
What are the benefits during the Accumulation Phase?
Protection through life cover benefits ForeverLife provides life cover
during the deferment phase. In the unfortunate event of your death,
your spouse has the option to receive the Sum Assured with guaranteed
additions and vested bonuses(if any) or get an annuity that would
provide a regular income for life.
Add-on Riders:
We offer you a choice of riders, along with the death benefits, to ensure
that you remain protected in any eventuality.
• Critical Illness Rider: In the event of the Life Assured contracting a
critical illness, an additional payment equivalent to the Sum Assured
under the rider would be made. This cover is available up to a maximum
of 65 years of age.
Accident and Disability Benefit
Rider: In case of accidental death, the nominee gets an additional Sum
Assured.
4. Your accumulated value would start paying you a regular income in the
form of an annuity (pension), at a frequency chosen by you - monthly,
quarterly, half-yearly or annually. The annuity amount will be
calculated based on the prevailing annuity rates on the vesting date.
You can select a Guaranteed Annuity Rate period of either 5 or 7 years.
The amount of annuity will be re-calculated at intervals of every
guaranteed period, based on the then prevailing annuity rates.
LIC (jeevan suraksha/jeevan dhara):
is a unique plan designed to provide pension from a chosen retirement
date. The plan can be taken by anyone who wishes to set apart an
amount as pension.
Salient Features
• It is a pure pension plan where in one pays single premium or regular
premium over the deferment period to secure a pension starting at a
future date.
• Policyholder can add a term assurance rider by paying additional
premium. By the virtue of this rider, in the event of death of the
policyholder during the deferment period, sum assured selected under
term assurance rider would be paid.
• Annuity rates on the vesting date will be equal to that available under
the New Jeevan Akshaya plan on the date of vesting.
• Bonus is payable under the policy.
• Contribution under Jeevan Suraksha up to Rs.10,000/- per annum will be
eligible for Tax exemption under Sec 80 CCC1 of IT Act, 1961. However
this is not available to a Hindu Undivided family.
5. • Premium paying period is between 2 and 35 years.
• Policyholder has the option to pay a single premium or pay regular
premium annually, half yearly, quarter or monthly
• New jeevan dhara is suitable for professionals who do not have any
pension scheme. Jeevan Dhara allows you to make provision for regular
income after your retirement.
• On death of the Life Assured during the term of the policy the basic
premiums paid, excluding any rider premiums or extra premiums, up to
the date of death accumulated with interest at such rates as decided by
the Corporation will be payable to the nominee. Currently, the interest
rate is 3%, 4% or 5 % if the death occurs within the first 10 years, 20
years or thereafter respectively.
• At maturity the policyholder can encash up to a maximum 25% of the
maturity proceeds as a tax-free lump sum. The balance should be
compulsorily converted to an annuity at the rates applicable at the time
of maturity of the policy.
Pension plan comparison table
ICICI PRUDENTIAL LIC
PRODUCT TYPE Regular pension plan Regular pension plan
MINIMUM ANNUAL 6,000 2,5oo
PREMIUM(Rs.)
MINIMUM COVER(Rs.) 50,000 50,000
MIN-MAX TENURE(Yrs) 5-30 yrs 2-35 yrs
MIN-MAX AGE AT 20-60 18-65
ENTRY
MIN-MAX VESTING 50-70 50-79
AGE(YRS)
RIDER AVAILABLE Critical illness rider, Term assurance rider,
Accident and disability Critical illness rider
benefit rider
