Pension – Questions and Answers


A few reader queries and their answers:

1) Do you think pension policies from insurance companies make up for a good investment for availing pension?  Why or  why not?

Answer: No. They do not. First of all thanks to some Quixotic regulations no life insurance company is selling a pension plan, so this question is kind of irrelevant.

I do not like a ‘made by insurance company’ pension plan, because in a typical traditional plan, they do not tell you what are the costs, where they will invest, who is the fund manager, …really you are playing blind. The chances of accumulating an inflation adjusted surplus is almost close to zero. Not worth putting your hard earned money into it.

2) Also in case of pension policies, should one opt for traditional or ULIP? Does it depend on the age bracket one is in? Please explain?

If you must opt for a pension plan by a life insurance company opt for a unit linked plan with the following characteristics:

low up front charges, asset management charges less than 1.25% to 1.5% , a high level of equity (if you have 10+ years to go, get to 100% equity if it is possible). Do not touch the traditional plan at all.

3) While choosing an investment option for retirement corpus or pension for retired life thereafter, what factors should one take into account?

For this I will do a separate post.

4) Does money accumulated through EPF or PPF  enough for retirement? Or one should have a number of products to meet this goal? If yes, what should be their allocation in the portfolio?

No. Money accumulated through EPF OR PPF will not be sufficient for your old age or retirement. If you have a good EPF scheme and you are investing in PPF for a long time, you need a well managed Equity Fund like Hdfc Top 200, Franklin India Bluechip, Hdfc Equity fund, Icici Pru Discovery fund, Templeton India Growth fund or even Hdfc Prudence fund – which behaves like an equity fund!

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5 Responses to “Pension – Questions and Answers”

  1. Saw your comments in ET Wealth today. As always, skeptical and humorous:-)

  2. Hi Subra,

    How about NPS? Does it still make sense?



  3. waiting for your pension post.
    inflation is killing– as anyone who buys veggies and milk can’t help but note.

  4. I completely agree with you sir. For many of service class people, retirement planning is nothing but buying a pension plan. It is one of the biggest blunder.
    I have tried to pen down some points on same subject.

  5. Thanks for your valuable inputs.

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