Almost every individual has a definite working life to earn money. The working duration is typically 35 to 40 years, while life expectancy is about 80 years. Hence, there is a long duration of 20 to 25 years after retirement that requires a regular flow of money for your routine expenses, even if you don’t have regular earnings. This expense is over and above the emergency need like medical expenses at an older age. Hence, it is utmost important that you must have a regular flow of income without affecting your contingency fund. The solution to this situation is the reliable pension fund that can give you regular income flow after your retirement. HDFC has launched HDFC Guaranteed Pension Plan in line with this requirement.
Why HDFC Guaranteed Pension Plan?
HDFC Guaranteed Pension Plan is the non-linked and non-participating deferred pension plan. It states that your pension income is not dependent on market returns or profit of the fund, but it is guaranteed at the time of enrolling the pension plan. Apart from your sum assured, HDFC adds 3% amount of sum assured on vesting for every completed year of your policy term. Hence this pension plan is most popular among individuals seeking assured income without linking it to market dynamics or other variable factors.
Eligibility
| PARAMETERS | MIN | MAX |
| At the time of entry | 35 | 65 |
| Age at the time of vesting | 55 | 75 |
| Premium Payment Terms | 5,7,10 years | |
| Sum Assured | Rs 86,830 | No Limit |
| Minimum Installments | Rs 2,000 | No Limit |
Benefits of HDFC Guaranteed Pension Plan
Guaranteed Addition: For each completed year in a term, 3% value of the sum assured is added as a Guaranteed addition on vesting. This addition is on the top of the sum assured at the beginning of the pension plan.
Vesting Addition: The vesting addition depends on the number of years in your policy. For example, for ten years’ term policy, you will get the amount equivalent to 30% of sum assured as vesting addition. For 20 years’ term, you will get the amount equivalent to 60% of sum assured as vesting addition.
Vesting Benefit: At the end of the policy term, your vesting benefit is a summation of the following:
- Sum Assured
- Guaranteed Addition
- Vesting Benefit.
The sum assured is decided at the time of availing Pension plan and guaranteed addition and vesting benefit will be given as a fixed percentage of sum assured. Hence, your entire policy proceed is Pre-decided and guaranteed irrespective of market conditions or other variables. This feature makes the HDFC Guaranteed Pension Plan most popular among risk averse investors.
Death Benefit: Upon the death of the life assured, your nominee will get entire premium paid by you with 6% return every year. In case the nominee would like to get regular pension income, he or she can buy the annuity from HDFC Life and avail monthly pension.
What is the Tax Benefit under HDFC Guaranteed Pension Plan?
This plan gives you tax benefits at two stages:
- When you buy the policy, your premium payable is eligible for tax benefit under section 80CCC of the Income Tax Act, 1961.
- From the vesting amount, you can withdraw 1/3 amount as commuted (lump sum) value, as it is tax-free as per section 10 of income tax act 1961. For balance amount, you need to buy the annuity to avail this benefit.
Although these benefits are expected to be continued till your pension plan is in force, it may change from time to time as per the government’s decision. Moreover, tax treatment for each individual depends on his overall financial profile. Hence, it is advisable to confirm above benefits from a qualified financial consultant or your Chartered Accountant(CA).
Also Read: HDFC New Immediate Annuity Plan: Features & Review
How Can I Use Vesting Benefit?
The Vesting benefit is the entitlement for your regular premium payment over the years. As per policy terms, you will be paid sum assured, guaranteed additions and vesting additions. You will have the choice what to do with the lump sum amount. There are many options you can choose:
- From entire vesting benefit amount, you can buy the annuity and avail pension income every month.
- Over the period of several years during your policy, if you have generated another regular stream of income, you might not need monthly income. You can withdraw the entire amount and utilize or invest as per your planning.
- For tax efficient treatment, you can withdraw 1/3 of the vesting benefit as commuted value, that is tax-free. For balance amount, you can buy an annuity for monthly income. This way, you can meet three objectives: (1) Good lump sum amount in hand (2) Reasonable Pension Income (3) Tax efficient planning.
In a nutshell, once you fulfill your obligation of regular premium payment, it is in your control how you would like to utilize the proceeds of your policy.
How does My Premium Payment Plan Look Like?
Once you decide the sum assured and term of your HDFC Guaranteed Pension Plan, you can select the frequency of premium payment as per your choice – monthly, quarterly, half-yearly or yearly. If you do not have a cash flow problem, you can choose yearly premium payment, as it is cheaper than any other option. In case you are more comfortable with small payments every month, you can arrange monthly ECS mandate from your bank account. To strike a right balance between convenience and cost-effectiveness, you can choose quarterly or half-yearly options to your benefit.
Below table shows the premium payable for a minimum sum assured for reference. The actual amount will vary according to your chosen sum assured, the term of the policy and other factors.
| Premium Frequency | Premium Payable (Rs) | Policy Fees Per Installment Payable(Rs) | Amount Payable (Rs)
(Before tax and levies) |
| Yearly Payment | 24000 | 200 | 24200 |
| Half Yearly Payment | 12000 | 110 | 12110 |
| Quarterly Payment | 6000 | 60 | 6060 |
| Monthly Payment | 2000 | 25 | 2025 |
Also Check: HDFC Pension Plan
FAQs
Q1. Should I buy the policy online or offline?
As far as you are conversant with internet browsing and net banking, online mode of buying will save your time and efforts. Moreover, you can use online pension calculator to decide the exact amount of your premium for your desired amount of pension.
In case of online payment mode is not suitable, or you need assistance in understanding the terms and condition of the HDFC Guaranteed Pension Plan, you can opt for offline mode as well. All you have to do is to call helpline number and inform the executive to arrange your meeting with the adviser.
Q2. What if I want to discontinue the policy mid-way?
Any pension plan is the long-term financial planning with disciplined investment at regular intervals to reap the desired future benefits. However, some unexpected situations may compel you to discontinue the future premium payments. In such cases, as far as you complete three years of regular premium payment, you are eligible for Guaranteed Surrender Value(GSV). The amount of GSV depends on the number of years completed in your policy. It varies from 30% to 90% of the premium amount paid by you.
Q3. What if I found the policy purchased is not as per my expectation?
HDFC gives you 15 days of “Free Look Period” after you purchase of your policy (If you buy policy through the distant marketing, you will get 30 days to cancel your policy). You can re-check every terms and condition of the policy once you receive the same. In case of any confusion, you can get clarification from helpline number or your adviser. If you are not satisfied with the response, you can apply to cancel the policy within “Free Look Period.” The entire amount you had paid shall be refunded back to your bank amount after deducting nominal stamp duty charges
Q4. What is the grace period and how does it matter to me?
Once you enroll for HDFC Guaranteed Pension Plan, you need to make a timely contribution by way of premium payment as per your desired payment frequency. In case you miss the due date, you may not get full benefits as mentioned in the policy. However, to allow you reasonable time to make the payment, the insurance company gives you a grace period after due dates, within which you can pay the premium without any loss of benefit mentioned in the policy.
The grace period varies according to premium frequency. For yearly, half-yearly or quarterly payment, the grace period is of 30 days after due date, while for monthly payment option, it is 15 days after the due date. Your policy remains fully valid, and you are entitled to every benefit of the policy even after you make the payment after the due date but within the grace period.