The Hindu Business Line : ICICI Pru Life Stage pension Plan

It is critical that individuals have a long-term vision, while they plan for the retirement plan and asset allocation plays a very important role in creating a retirement kitty. Any investor’s portfolio should consist of a proper mix of equity and debt elements based on age and risk appetite. Let us take a look into the recently launched ICICI Pru Life Stage Pension (unit-linked) plan.

Salient features: The policy provides you with a unique lifecycle-based strategy that continuously re-distributes your money across various asset classes based on your life stage and risk tolerance, thus providing you with a customised retirement solution. Life Stage Pension offers two portfolio strategies: Lifecycle-based and fixed portfolio.

(i) Lifecycle-based portfolio

This plan adapts itself to your changing life stages and ensures that your investments are managed effectively. At the inception, your investments will be distributed between two funds, an equity fund (Pension Flexi Growth) and debt fund (Pension Protector) in proportions that depend on your age. This plan is based on automatic asset allocation. Based on the age band, the fund automatically shifts between equity and debt. As age increases, the equity component reduces and the debt increases.

For example, if one chose the plan at the age of 18 the investment towards equity will be 85 per cent and that towards debt at 15 per cent. Once you turn 26, exposures to equity will be restricted to 75 per cent and the balance allocated to debt.

Other features

Quarterly rebalancing: Your fund allocation might get altered because of market movements. Your allocations will be revisited every quarter and reset to prescribed limits.

Capital protection: When policy nears the chosen vesting date, you need to ensure capital preservation so that short-term market volatility at the time of vesting does not impact your investments. In order to achieve this, your investments in Pension Flexi Growth will be systematically transferred to Pension Protector in 10 instalments in the last 10 quarters of your policy.

(ii) Fixed Portfolio Strategy

If you prefer to allocate your investments into different classes based on your personal judgment, then you can opt for the fixed portfolio strategy. You have a choice of 6 funds to select from.

Flexible retirement date: You can start receiving pension anytime after you reach 50 years of age. However, in view of market conditions or due to any other reason you can defer this date till the age of 80 years.

Top up: You can decide to increase your investment by investing surplus money over and above premiums, at your convenience. The minimum top-up is Rs 2,000. Top up premium can be paid provided all regular premiums have been paid.

Death benefit: In the unfortunate event of death before vesting, the spouse receives the fund value. This may be received as lump sum or may be used to purchase pension. If the spouse is not the nominee, the benefits will only be paid in lump sum to the nominee.

Switch between the funds : When you have a fixed portfolio strategy then you also have the option to switch between the six fund options at a time of your choice, depending on your financial priorities.

Benefits during pension phase: The accumulated value of your investments will start paying you a regular income in the form of pension at a frequency chosen by you. The annuity can be received monthly, quarterly, half-yearly or yearly. Five different ways of receiving pension: (i) Life pension; (ii) Life pension with return of purchase price; (iii) Life annuity guaranteed for 5/10/15 years and life thereafter; (iv) Joint Life, Last survivor without return of purchase price; (v) Joint life, last survivor with return of purchase price

Commutation of pension fund: You have the option to receive a lump sum up to one-third of the total fund value (or as per prevailing regulations of IRDA/IT or any other regulatory body, tax free, on the vesting date.

Charges

Premium Allocation Charge: There are no premium allocation charges for regular premiums in this policy. All top up premiums are subject to an allocation charge of 1 per cent and the balance amount is used to allocate units.

Fund management charge: The Pension Flexi Growth will have highest charge of 2.25 per cent and Pension Preserver will have the least of 0.75 per cent.

Policy administration charge: It is a percentage of the annual premium and will be charged regardless of the premium payment status. This charge will be levied only for the first 10 policy years.

Switching Charge: Four switches are allowed every policy year. Subsequent switches would be charged at the rate of Rs 100 per switch.

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