The case of a Lady Teacher - Born in March 1973

Brief introduction: This lady married in the year 2001, joined as a teacher in school at a monthly salary of 6000/- per month in the year 2002. She contacted me in the month of March 2004 and wanted a suitable way to have pension income by the age of 50. By this time the HDFC Std Life Ins. Co. had introduced Unit Linked pension plans. Without a hitch I suggested her to go for the regular premium ULPP . She had some fear about the performance of the stock related investment but upon being told that it is as safe as any other instrument she went for it. The product feature have been given here under:

Policy No.10005XXX Plan Start Date: 23 Mar 04
Policy Term : 20 yrs
Mode: Annual Premium Amt : 10000/- per year.
Fund allocation Rate for the first two years 78% and thereafter 99%
Initial choice of Fund : 100% in Balanced Fund
Premiums paid till 23 Mar 07 - Three
Present Holding of Units: 336 Units in Balanced Fund and 841 Units in Defensive Fund as on 23 Mar 07
Total Fund Value as on 23 Mar 07 : Rs.32370/-(Post Charges)

Annualised Return on investment works out to 14% per annum for the last three years.

Her choices in this plan are:

• She can Top-Up any amount besides paying premium, any number of times but each time the amount of top-up has to be more than Rs.5000/-
• She may choose to go on premium holiday and the policy would remain in force.
• She may surrender the policy any time now after passage of three year period and receive full fund value without any deduction.
• She has exercised switching between the funds for the sake of safety and did not have to pay any thing. Her present fund choice is tilted towards security.In the month of April 07 she will be having a feel of the market after company results are out and take a suitable action of switching in to Equity Manged Fund or Growth Fund.
• She has the freedom to choose one out of the many options for receiving the pension when the plan matures including the option of receiving 33% of the corpus in cash without inviting any tax incidence.
• She has the option of nomination change at will.
• She is getting the benefit of section 80C on her premium payments.
• She has option of switching between the funds for twenty four times in a year without any charges.
• The fund value at maturity will work to Rs. 10 lac at the rate of return so far achieved i.e. 14% and would translate in to monthly pension of 8000/- to 9000/- per month depending on the long term yield on govt. paper. Her fund value would paid to nominee after her death , or else the pension may continue to be received by her husband , if she so chooses.

HDFC SLIC has performed most satisfactorily as far as the fund management goes. Their performance has been best in the industry.

This is the practical out come of a wise decision and had a traditional plan been chosen the returns would have been a meagre 5-6%. You will be given glimpse in to many more plans under unit linked schemes after obtaining no objection from the policy holder concerned.

Hari Om

Krishna Kumar Khandelwal