On 3rd May, 2010 IRDA came out with an amended ULIP regulation…or whatever it is  called. There is nothing special except that the reports in the media suggest that it is something new.

Well the things are:

No partial withdrawal from a pension plan – this will make the pension plan even more tax inefficient. To the mis-sellers it will not matter. The client will not know till he tries to withdraw. L O L.

You will have to annuitise the plan – all the amount (it also says 1/3rd) can be taken as a lumpsum – the balance 2/3 has to be converted to a pension. This friends is not TO protect YOU. It is to help the life insurance company keep the accumulated money permanently with the insurance company. This is to help the insurance company earn fee and pay a poor return to the policy holder. In a country where the Senior Citizen Yojana pays 9% p.a. why buy an annuity which pays 5%. Beats me.

And I know of brilliant professional brothers of mine who have bought real big – Rs. 20L pa pension plans – WITHOUT understanding what they have bought. God bless the EDUCATED FINANCIAL ILL-LITERATES OF mera Bharat mahan.

Cir No. IRDA/ACTL/CIR/ULIP/071 /05/2010


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  1. thanks, can assure you reading between the lines to find a topic EVERYDAY is taxing..and sometimes boring. However am also assured that no magazine / somebody else’s website will allow me so much of ‘khunas’ on all players. And to write all this without any gain – sometimes i keep wondering what keeps me going, and how long will be able to do it. 1000 posts…is too much, na?

  2. subra sir,

    you can maybe invite people to suggest some topics. wouldnt want to miss your views. Very few people do this without any gain & consistently.


  3. suggestions always welcome, links welcome – Dr.Khan’s comments mostly come with a link, criticism welcome, book review welcome, book review of my book more than welcome.

    Not keen to do product reviews. I only know about 2-3 ulips, & about 5-6 schemes of MFs (that is enough, but I know people keep a long list). All my portfolio reviews (used to do a regular column in Money Today called Portfolio Doctor – in the name of Iris) – just simplifying ones portfolio is enough.

  4. Sir, I’m 35 year old self-employed.

    I already have 95% exposure to equity and MF schemes.

    As a last or final retiral benefit, I’d like to buy a pension plan.

    I understand that final corpus from Pension plans can be commuted upto 1/3rd and the remaining is used to buy annuity (which inturn will provide regular pension).

    The sum of pension is directly linked to returns from annuity purchased.

    I’m given understand that returns from annuity are usually VERY LOW and hence the pension rate will be lower than Bank or Corporate FD rates. So, it does not make any sense to go for Pension plans. Correct me, if I’m wrong.

    A good friend of mine, suggests me to steer clear from pension products. Instead, he advises me to park funds in PPF or Corporate FD or NCD’s, which will provide superior returns than pension plans.

    To sum up my query, I’m really worried about the returns from Pension annuities. Hence, I’m not able to take a call, whether to subscribe or not.

    What would you suggest, Sir?




    The client will not know till he tries to withdraw !!

    You can find these lines on Subramoney 🙂

  6. I do not know of any salesman who volunteers THE LIMITING FACTOR of any product, unless the customer ASKS for it. Teaching what questions to ask is not enough – people have to understand the answers :).

  7. Here’s a suggestion.
    This applies for maybe a different platform..but still let me post it here.
    Can we have a portfolio building contest based on some scenarios suggested by you (every month maybe).
    That would be really good to gather the collective wisdom of the readers and have your views on it.
    I know that’s a long shot.

  8. In a nutshell, avoid all the pension plans. Thanks Subra Ji and thanks God that till i have not invested in any pension fund.


  9. @ Vivek V, In the light of the info posted by U, my choice for u ‘ll be to subscribe NPS Tier 1 & Tier 2 both accounts. Invest minimum 6K in Tier 1 & max. as per ur wish in Tier 2 acct. Over the period of time, the accumulation in Tier 2 acct. ‘ll be huge due to lowest possible FMC in India. Also in case of Tier 2 acct. there is no mandatory investment guidelines to invest in an Annuity at the age of retirement.

    Dear Subra, Correct me If I’m wrong.



  10. Ha.. one would think reading policy/offer document end-to-end would be enough. If anyone thought this plan has some liquidity in case needed and invested, now without he knowing, some regulator has come and retrospectively closed the liquidity/withdrawal options.
    One more reason for me not to go for any policy as long as this kind of regulator is there. (funny to read their “mission statement” in their website)

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