I am not sure if this is a coincidence that when equity markets don’t perform insurance companies bring new concepts. You must be remembering the Highest NAV Guaranteed plans like LIC Wealth Plus & how bad was clients experience.
These days the insurance industry is offering Guaranteed Return plans & one which is getting the most attention is HDFC Life Sanchay Plus.
This post is written by Parminder Singh – our Financial Planner.
HDFC Life Sanchay Plus
Retirement Planning investment varies with each individual depending on their needs and risk capacity. In India, it is not an easy job at all. Falling interest rates, slowing economic growth, and of course, too many financial products do not make life easy.
Setting aside some amount or investing in some assets for the purpose of generating income at old age sounds very simple but be frank it’s very complex. While planning for retirement, consider other expenses such as medical expenses and emergency needs after retirement. Other investment such as children’s education and marriage should be taken care and is not to be mixed with retirement options.
In this article, we will be talking about HDFC life sanchay plus and through light on point if it suits to our retirement portfolio or not.
Overview of HDFC life sanchay plus: Life-Long income option
Note – Rates have reduced from 1st August 2019
(below illustration was added before that)
There are many options in this policy but we are just focussing on Life Long Income – which is most interesting.
This policy comes with two variants, 5 years premium payment option or 10-year premium payment option.
In 5-year premium option, you will get life cover for six years and start getting 33% of the annualized premium from the end of the seventh year till the time you attain the age of 99. At the end of 99 age, the insurance company will pay the total premium you already paid.
In 10-year premium option, you will get life cover for eleven years and start getting 95% of the annualized premium from the end of twelveth year till the time you attain the age of 99. At the end of 99 age, the insurance company will repay the total premium you already paid.
Illustration:
| Age | Years | Low Premiums paid | High Premiums Paid |
| 50 | 01-08-2019 | -52250 | -522500 |
| 51 | 01-08-2020 | -51250 | -512500 |
| 52 | 01-08-2021 | -51250 | -512500 |
| 53 | 01-08-2022 | -51250 | -512500 |
| 54 | 01-08-2023 | -51250 | -512500 |
| 55 | 01-08-2024 | -51250 | -512500 |
| 56 | 01-08-2025 | -51250 | -512500 |
| 57 | 01-08-2026 | -51250 | -512500 |
| 58 | 01-08-2027 | -51250 | -512500 |
| 59 | 01-08-2028 | -51250 | -512500 |
| 60 | 01-08-2029 | 0 | 0 |
| 61 | 31-07-2030 | 48925 | 502125 |
| 62 | 31-07-2031 | 48925 | 502125 |
| 63 | 31-07-2032 | 48925 | 502125 |
| 64 | 31-07-2033 | 48925 | 502125 |
| 65 | 31-07-2034 | 48925 | 502125 |
| 66 | 31-07-2035 | 48925 | 502125 |
| 67 | 31-07-2036 | 48925 | 502125 |
| 68 | 31-07-2037 | 48925 | 502125 |
| 69 | 31-07-2038 | 48925 | 502125 |
| 70 | 31-07-2039 | 48925 | 502125 |
| 71 | 31-07-2040 | 48925 | 502125 |
| 72 | 31-07-2041 | 48925 | 502125 |
| 73 | 31-07-2042 | 48925 | 502125 |
| 74 | 31-07-2043 | 48925 | 502125 |
| 75 | 31-07-2044 | 48925 | 502125 |
| 76 | 31-07-2045 | 48925 | 502125 |
| 77 | 31-07-2046 | 48925 | 502125 |
| 78 | 31-07-2047 | 48925 | 502125 |
| 79 | 31-07-2048 | 48925 | 502125 |
| 80 | 31-07-2049 | 48925 | 502125 |
| 81 | 31-07-2050 | 48925 | 502125 |
| 82 | 31-07-2051 | 48925 | 502125 |
| 83 | 31-07-2052 | 48925 | 502125 |
| 84 | 31-07-2053 | 48925 | 502125 |
| 85 | 31-07-2054 | 48925 | 502125 |
| 86 | 31-07-2055 | 48925 | 502125 |
| 87 | 31-07-2056 | 48925 | 502125 |
| 88 | 31-07-2057 | 48925 | 502125 |
| 89 | 31-07-2058 | 48925 | 502125 |
| 90 | 31-07-2059 | 48925 | 502125 |
| 91 | 31-07-2060 | 48925 | 502125 |
| 92 | 31-07-2061 | 48925 | 502125 |
| 93 | 31-07-2062 | 48925 | 502125 |
| 94 | 31-07-2063 | 48925 | 502125 |
| 95 | 31-07-2064 | 48925 | 502125 |
| 96 | 31-07-2065 | 48925 | 502125 |
| 97 | 31-07-2066 | 48925 | 502125 |
| 98 | 31-07-2067 | 48925 | 502125 |
| 99 | 31-07-2068 | 563925 | 5652125 |
| XIRR | 6.45% | 6.58% |
Returns in Life Long income option is 6.45% – in other option returns will be different. (Benefits are higher in the case of high sum assured.)
In the case of Death
On the death of the Life Assured during the Payout Period (after policy term), the nominee shall continue receiving Guaranteed Income as per Income Payout Frequency & benefit option chosen till the end of Payout Period. The nominee shall have an option to receive the future income as a lump sum, which shall be the present value of future payouts.
If we think and compare with average life expectancy, we live an average of 80 years, this means the return would be even lower than what it shows. Say it may be less than 6%.
Does it seem to be a great investment option?
My answer to this question is NO because investing in this instrument will surely not going to give enough returns to beat inflation over a long period of time. But if you are a very conservative investor – it’s not bad.
Remember that guaranteed returns come to you only if you stay the course. Even in this case, if you surrender the product mid-way, you will have to let go of your insurance cover, though bundled plans don’t offer a great amount of cover.
Must Read – Best Retirement Plans in India
HDFC  life Sanchay  vs  Annuity
If we compare LIC Jeevan Akshay Annuity & HDFC Life Sanchay Plus – HDFC would definitely a good choice for those who come in higher tax bracket, because there you will get tax free returns.
But again saving taxes can’t be only criteria, we need to see whether it fits our portfolio or not.
It is always preferable to keep a good mix of asset allocation in your portfolio and not just depend on such one kind of income giving instrument.
Some factors like Liquidity, lock-in period, and risk-taking capacity needs to keep in priority and accordingly rebalancing of the portfolio on a timely basis would generate great returns and helps you to beat inflation accordingly.
In nutshell, you need to look at your requirements and your portfolio to make a choice. If you still can’t make up your mind, seek professional assistance from your financial planner.
I would suggest not to go with such guarantee income products to retail investors where tax slab is lower after retirement, it’s better to keep your portfolio diversified according to your risk profile. Systematic withdrawal plan from Mutual funds can be a better option for someone who needs a regular income & willing to take some risk.
Please share your views or ask questions regarding HDFC Life Sanchay Plus or similar products available in the market right now.
Is there a better guaranteed insurance plan than Sanchay Plus from HDFC . Normally all insurance plans give 4-6% returns ,that too without guarantee. In future interest rate will go down. So I think 6-6.5% returns are very good in insurance. What do you say?
Better invest in Index Funds than such scheme. This is my personal opinion as index cannot fall 10% in a day but such schemes can give -ve returns easily (E.g. Bond defaults)
Thank you for sharing the informatic post. Keep sharing.
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