Good for high-risk investors :: Business Line

A five-year lock-in and high surrender charges during the initial years make it suitable only for those with a long-term horizon.

Max Life Forever Young is an unit-linked pension plan (ULPP) which allows you to save 35-60 per cent in equities and the rest in debt instruments. At maturity, the policyholder gets the higher of the fund value or the guaranteed sum. Guaranteed sum is equal to 101-110 per cent of the cumulative premiums paid till maturity depending on the choice of schemes - pension maximiser or pension preserver. The minimum age at entry is 30 years and the minimum vesting age under the plan is 50 years.

On vesting, the policyholder has the option to take an immediate annuity for the full amount or commute one-third of the amount and take an annuity for the remaining amount.

After IRDA’s crackdown on ULPPs in 2012, not many insurers launched products in this space.

This product from Max Life comes after a long lull in the ULPP space and is attractive with rider benefits. But, being a unit linked plan, it may be suitable only for investors with a long-term horizon and those who can stomach volatility linked to the markets.

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BENEFITS

In addition to the guaranteed maturity benefit outlined above, the plan offers assured loyalty addition to the tune of 0.5 per cent of the fund value (rate increases by 0.02 per cent every year) from the 10{+t}{+h} year of the policy. The policy also offers a rider, which allows the holder’s spouse to get the sum of all future premiums, plus higher of the fund value or 105 per cent of the cumulative premiums paid, in case of death. The spouse can either fully withdraw the above amount or convert it into an immediate annuity.

COST

The plan charges lower rates on premium allocation and guarantee charge, but, its policy administration charge is a percentage of annual premium while most others in the market charge this as a fixed amount every month, a flat Rs 30-40, making the product a tad expensive. The policy administration charge is 0.36 per cent of the annual premium per month, and is capped at a high sum of Rs 400. The premium allocation charge is 2 per cent of the annual premium till the 11{+t}{+h} year, after which it is not levied. The guarantee charge is between 0.2 per cent and 0.4 per cent per annum depending on the choice of fund.

OUR TAKE

The Max Life Forever Young Pension plan can be considered by those who intend to stay invested for a fairly long period of time. Discontinuation of the policy in the initial years will mean heavy losses. This is because there is a five-year lock-in period in ULPPs and surrender charges go from 6 per cent of the annual premium (or fund value, whichever is lower) in the first year of the policy to 2 per cent of the annual premium in the fourth year. Also, at the end of the fifth year, you will not be allowed to take home the entire amount. You would have to annuitise a part of it by taking an immediate annuity plan or a single premium deferred annuity plan, according to the new guidelines. While taking an annuity remember to ask for a joint annuity option which ensures the surviving partner gets the pension throughout his/her lifetime.

This plan offers two fund choices — pension maximiser fund, which invests 20-60 per cent in equity; and pension preserver fund, which invests 10-35 per cent in equity. Conservative investors can opt for the pension preserver option.

A balanced fund can achieve the same objective in building a corpus. Those of you, who are a wee more risk averse but like some equity exposure for potentially higher returns, may consider building a retirement corpus through the National Pension System - NPS. The charge structure here is very low, working out to an average of just 0.6-0.8 per cent per annum.