Many investors buy pension plans to provide them with some income even after retirement. Salary will cease after retirement. But the income will start from the pension scheme.
Which pension plan should you take?
There is no dearth of pension schemes. One option is the National Pension Scheme (NPS). LIC and other insurance companies have also launched many pension schemes.
In this post SBI Life Saral Pension Yojana) and see if you should buy this pension plan.
SBI Life Saral Pension Yojana (SBI Life Saral Pension Plan in Hindi)
- Non-Linked Participatory Traditional Pension Plans (I don’t like such plans)
- You can also add life insurance up to Rs 50 lakh to this plan. If you add this rider, it will also pay the sum assured in case of death during the policy term. But you don’t need such a rider.
- A reversionary bonus is guaranteed for the first five years. Nothing particularly useful.
You will have to pay the premium for a few years. When the policy matures (maturity date/vesting date), you can withdraw some money in a lump sum. You have to buy the annuity plan from the rest of the plans. LIC Jeevan Shanti There is an annual plan. You will get lifetime pension from the annuity scheme.
SBI Life Simple Pension Plan: What Happens at Maturity (SBI Life Simple Pension Plan: Maturity)
At the maturity of the scheme, this amount will be credited to you:
Vesting/Maturity + Vested Reversionary Bonus + Terminal Bonus, if any Sum Assured
Reversionary bonus is announced every year. Every year this bonus is added to your policy.
Terminal bonus is also announced every year, but it applies to your policy only in the year the policy matures (or the investor dies). Terminal bonus is expressed as a percentage of vested reversionary bonus.
At maturity you get 3 options:
#1 1/3 of your deposited amount (accumulated fund)rd A lump sum can be withdrawn. You have to buy an annuity plan with the remaining amount.
Suppose the amount including bonus etc is Rs 10 lakh, you can withdraw Rs 3.33 in lump sum. The annuity plan has to be purchased for a minimum of Rs 6.67 lakh. Remember that if you want, you can also buy an annuity plan with full amount.
Recently, IRDA has reduced the lump sum withdrawal amount to 1/3rd has been increased to 60% from above. It remains to be seen when this policy will be implemented.
#2 You can buy Single Premium Deferred Pension Plan with whole amount.
#3 If you are below 55 at the time of policy maturity, you can extend your policy term up to 70 years. If you do, you will have to continue paying premiums.
SBI Saral Pension Yojana: Tax Benefit and Tax on Maturity (SBI Life Saral Pension Yojana: Tax Benefit)
By investing in this SBI pension scheme, you will get a tax benefit of up to Rs 1.5 lakh under section 80CCC. Note that this tax benefit comes within the limit of Rs 1.5 lakh under section 80C.
You will not have to pay any tax on the lump sum withdrawal at the time of maturity. As written above you are 1/3rd A lump sum can be withdrawn. You will not have to pay any tax on this amount.
You have to buy an annuity plan with the remaining amount. You will not have to pay any tax on this amount. But you will have to pay tax on the income from this annuity plan as per your tax bracket.
If you surrender the plan before the policy term is over, there is a big problem. If you have availed tax benefit under section 80CC on investment in the plan, you will have to pay tax on whatever amount you get. For more information This post (English) Read on
SBI Saral Pension Yojana: How will the returns be?
Let us try to guess this with the help of examples.
A 35-year-old man earns Rs. 10 lakhs (sum assured on vesting/maturity) is purchased. The policy term is 25 years. The premium will be Rs 33,443. Including GST, the premium will be Rs 34,948 in the first year and Rs 34,196 in subsequent years.
As we saw above, your deposit amount will depend on 3 things.
- Sum Assured on Maturity/Vesting
- Vested Reversionary Bonus
- Terminal bonus
We know that the sum assured on maturity/vesting is Rs.10 lakhs. There is no longer any bonus guarantee. But we Previous years bonus You can get an idea by looking at it. Reversionary bonus ranges from 3.0% to 3.25%. The terminal bonus was 15%. Note The terminal bonus in this scheme is expressed as a percentage of vested reversionary bonus. Also, you don’t get terminal bonus every year. Available in maturity year only.
Vested Reversionary Bonus = 25 years (policy term)
Terminal Bonus (15%) = 15% * Rs. 8.125 lakhs (Wasted Reversionary Bonus) = Rs. 1.22 lakhs
Total accumulated funds at maturity/vesting = Rs 10 Lakh + Rs 8.125 Lakh + Rs 1.22 Lakh = 19.34 lakh Rs
This is a return of 5.80%. Returns are not special. Remember this pension plan is a pure investment product. In PPF you get 7.9% pa
Note that you cannot withdraw this entire amount in one lump sum. You also need to buy an annuity plan with some amount.
Is State Bank Saral Pension Yojana the best pension plan?
In my opinion you should not invest in SBI Saral Pension Plan.
We saw that the return was about 6% per annum. You will get good returns in Public Provident Fund. So do you PPF account can also be used for pension,
One thing to keep in mind before buying any pension plan.
There are two phases of pension scheme. First you deposit money for some time and then you withdraw money. In the form of a lump sum or annuity plan.
See, you don’t need a pension plan for regular income after retirement. You can collect money any way you want. In Fixed Deposit, PPF or Mutual Fund. Once the money is deposited, you can do anything. With that money you can also buy an annuity plan for regular income.
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