Which pension plan to buy?
No this is not a guide on which pension plan to buy. It is an invite to see a video presentation by Deepak Shenoy a blogger…he has posted a video on the Max New York Life Pension Plan.
http://blog.investraction.com/ – a website called CapitalMind …see the video understand it ….and come back here…
He has made the pension plan look bad (fair to him he has said at the end that this is just one plan which he has picked up…it is likely to be true for many other plans.
However he has been kind to Max New York Life….actually. He has missed out something which makes the plan worse.
Any reader…Ranjan Verma, Manish….anybody want to fill in the gap…?
Deepak Shenoy
Thanks for the mention! And I’m curious: what did I miss out? I did mention one thing in the blog post: That you can change your investment pattern when you do it yourself (like investing more when you get a bonus, or less when you’re financially constrained etc.)
Btw, the permalink of the video is:
http://blog.investraction.com/2010/06/video-pension-plans-vs-do-it-yourself.html
But I would love to hear more reasons!
subra
had a nice long chat with Deepak….and told him about it.
Manish
So, who is going to tell it to the rest of us? Deepak or you??
Deepak Shenoy
Manish: I updated the post and here’s what Subra revealed:
What happens if the person dies after 5 years of retiring? The remaining money goes to Max New York Life! Meaning – they offer this as a pension for life WITHOUT return of principal, which makes the plan EVEN more bad, in comparison with the g-sec investment. (where, if you die, your next-of-kin inherits the bonds, the cash flow and can do what they want with it).
Paramjeet
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Raja
Hi Subra,
Just to add slight variation to the point of ‘WITHOUT return of principal’.
Some like, ICICI for instance offer return of principal. But in that case the annuity rate suffers. By how much ? The sales guy wasn’t ready to give a exact figure but only revealed it would be close to less by 0.5% than normal.
So, say 6% return in normal case and 5.5% in case we expect the corpus back.
Regards
Raja
subra
hi Raja
life is not so simple :). It is a far, far more complicated calculation. Of course it is easy for the salesman to say so! If a 70 year old and a 55 year old are seeking pension from the same corpus the pension can be dramatically different. Add to that R O P and non R O P. There is no great science – but it has to be understood. The sales man may have seen the previous sales and extrapolated – without checking the age and the no. of years! L O L
Deepak Shenoy
Raja – go to LICIndia.com’s premium calculator.
http://www.licindia.in/premium_calculator.htm
Choose their annuity plan – Jeevan Akshay VI. Use an age of 60 (birthdate 1950) and purchase price of 50 lakhs. Multiple options exist under “annuity type” – choose “annuity payable for life” and calculate premium, and do it again with “annuity payable for life with return of premium”.
In the first case you’ll get 4.75 L a year, the second case = 3.75L. Yield differential is 2%. It should be the same with other insurers (different for different ages obviously)