Retirement Plan -Reg.

Question

Dear Pankaj,

I fall under the 30% tax bracket and am looking for some investment+tax saving options. I basically do not like insurance as I feel that high premiums we pay go down the drain after 20 years(of course, the risk is covered, but I am typically not for insurance products). An agent from Bajaj Capital advised me to go for ICICI Prudential Retirement Solution plan which is basically an investment plan, but also covers life insurance. He showed me a projection of Rs.60000 per annum as minimum investment for 7 years and at the end of 15th year, the returns would be somewhere around 11 lakhs. I know that this return is not high considering the inflation but at least gives me a satisfaction of some returns for the insurance. Is it worth investing in that plan? Or, as others say I should not mix investment with insurance and go for a term plan separately which has high sum assured and go for an investment plan separately. Please help me out.

Thanks in advance.

Regards, Gowri Shankar

Pankaj Batra · Answer

Agents must be mis-selling product to you. He must be pushing this product for high commission. These kind of plans are neither good for insurance nor investments. Can bajaj/ICICI give in writing on stamp paper that they would pay this amount on maturity. if they can give this maturity amount in writing, go ahead and buy this plan.

Tax saving mutual funds are best choice for investment + tax saving. If you don't want risk, next choice would be tax saving fixed deposit for 5 years (although return around 6.5% would be less after tax payment). if you want better returns but can stay invested for longer, PPF would be another good choice.

Your assumption for insurance is not correct. You pay a small amount to cover for a huge insured amount. e.g. Rs 10,000 per year for 1 crore cover is small amount. In case something goes wrong, 1 crore payment for dependent is huge amount, which no investment plan can provide unless investments are also huge. Its like car insurance, you pay premium every year, if car is hit you get amount else you get nothing.

I would still suggest you to buy a pure online term insurance first and invest remaining amount into mix of ELSS MF, Tax saving FD and PPF.

Retirement Plan -Reg.

1 Answers