HDFC Single Premium Pension Super Plan: Features & Review

Updated: 05-09-2023 06:06:36 AM

The pension income is the key financial requirement once you retire from regular working life. During your working age, your routine expenses are managed through your monthly earnings. However, once you retire, your income stops, but your expensesdoesn’t. . This is the time you need a backup amount in the form of retirement fund, which may also get exhausted within a few years if not managed properly. Any emergency expense may dent your retirement corpus, thus, leaving you in a financial crunch to cover your day to day expenses. To avoid such exigency, it is extremely important that you have a dedicated stream of income like a pension plan. One such can plan which can secure your retirement is HDFC Single Premium Pension Super Plan.

Why HDFC Single Premium Pension Super Plan?

To avail regular pension income, it is important to save during your working life. For many professionals of age above 40 years, time is the constraint to save on a monthly basis. They have a good investible surplus with a waiting period of 10 years or above. For such individuals, HDFC Single Premium Pension Super Plan provides an opportunity to invest the lump sum amount in the pension fund for the period of 10 years for individuals with moderate risk appetite.

Eligibility

PARAMETERS	MIN	MAX
Age at the time of entry	40	75
Age at the time of maturity	50	85
Policy Term	10 Years
Single Premium	25,0000 (If Single Plan is selected) and 10,000 (Top-Up Premium)	No Limit

Benefits of Single Premium Pension Super Plan

• Irrespective of market dynamics, the pension plan will pay you 101% of the premium paid to you as an assured maturity (vesting).
• Since your money is invested in a long-term fund consisting of quality equity and debt fund, the actual vesting benefit is expected to be much more than 101% of the premium paid to you.
• Hence, on vesting, you will be paid higher of the two: 101% of the premium paid or fund value.
• The plan gives you flexibility regarding premium payment. You can enroll in the plan with a small amount of Rs.25000 without any further obligation to pay more premium. However, as and when you have surplus money, you can top up the policy with an amount of Rs. 10000 or more. Hence you can build up the retirement corpus without any commitment of regular premium payment.
• The equity component of the fund ensures the better growth of your corpus over the long run. Hence your vesting benefit (and therefore pension income as well) is expected to be higher than regular pension income.

Investment Strategy of Your HDFC Single Premium Pension Super Plan

Your money is invested into the dedicated fund to give you better than regular return with minimum risk. The name of the dedicated fund is “Pension Super Plus 2012”. The fund allocates the money into varied asset classes like Government securities, Debt and money market instruments and equities.

Due to the balanced investment of 40 to 60 % in each asset class, your investment grows better than traditional investment vehicles. At the same time, it does not get jolts due to volatilities of equity due to the presence of debt instruments and long-term horizon. The fund is ideal for investors seeking balance towards equity and debt.

What is the Tax Advantage with HDFC Single Premium Pension Super Plan?

You are entitled to get tax advantage at two stages while you enroll into HDFC Single Premium Pension Plan.

Stage-1: When you pay your single premium or subsequent top-up premium, you will get a tax deduction in line with provisions of section 80CCC of income tax act, 1961. Hence, your tax liability in the given financial year reduces substantially.

Stage-2: On vesting, if you withdraw 1/3 amount of your policy proceed as commuted value, it is tax-free withdrawal. For balance 2/3 amount, you can take an annuity from an insurance company for your pension income.

Hence, investing in HDFC Single Premium Pension Super Plan is tax efficient at the time of premium payment and policy maturity, both. Hence it effectively increases the post-tax return of your investment. However, income tax rules are subject to change as per government policy. Moreover, for every individual tax treatment could be varied according to his financial profile. Hence, before considering the above tax benefit, it is advisable to consult your Chartered Accountant or Financial Planner to get exact idea about your exact tax benefit.

How Can I Utilise my Vesting Benefit of HDFC Single Premium Pension Super Plan?

HDFC Life gives you complete control and flexibility over usage of your vesting benefit. Below are some of the recommended ways for your retirement planning:

1. The policy takes ten years before you get vesting benefit. It is quite possible that during the last ten years you might have developed an alternate stream of regular monthly income and you may not want to utilize the fund for a pension. You might have another plan for your policy proceeds. You have complete liberty to utilise your money the way you decide.
2. You can choose to convert your vesting benefit into the annuity so that you can avail regular pension income. There are little formalities from your side; you only have to intimate HDFC Life about your desire to avail annuity. Rest of the process shall be completed by the company, and you will avail monthly pension benefits.
3. As per Section 10 of Income Tax Act 1961, 1/3 amount of the vesting benefit can be withdrawn tax-free. You can withdraw this fund without any tax implication and convert it into Fixed Deposit for your emergency fund or other lump sum fund requirement. You can convert balance 2/3 amount of the vesting benefit into an annuity so that you can avail reasonable pension income. This is the ideal way to strike a balance between the need of emergency fund, regular income, and tax efficiency.

Key Take Away – Surrender of the Policy

Almost every pension plan requires you to be enrolled till the end of the policy terms. You may lose your premium subscription if you have not continued with the plan for a minimum of three years. Even after three years, you may get only 30% to 90% of your premium payment as surrender value. However, HDFC Single Premium Pension Super Plan is unique and beneficial in case of a situation where you can’t continue with the policy because of following features:

1. If you have completed five years of your policy, there is absolutely no deductions or lesser benefits in your policy. You are entitled to avail complete benefits of the fund at prevailing fund value.
2. Even if you have not completed five years of your policy, you will receive the fund with interest amount equivalent to 4% per annum. IRDA has made it mandatory to allocate any excess income earned during your policy period to your vesting benefit even if you discontinued the policy.
3. Being a single premium policy, you don’t have any obligation to pay any further premium. Hence there are no such ‘discontinuation charges’ applied. Your policy doesn’t get affected as far as you do not withdraw any fund from your policy.

Given the above features, in every situation of the surrender of the policy, you will receive more than 100% of what you have invested, as compared to other plans where you can expect from 0% to 90% surrender value.

Also Check: HDFC Pension Plan

Frequently Asked Questions(FAQs):

1.       Can I nominate my relative in my policy? Can I change it later?

Yes, you are allowed to nominate your spouse, children, siblings or anyone with an insurable interest to receive the proceeds of the policy in case of demise of life assured.

Later on, if you want to make alterations in the nomination, you can do so by giving simple written application to HDFC Life insurance company.

2.      What is the death benefit to my nominee?

In case of unfortunate death of the life insured, the nominee gets higher of (1) 105% of total premium paid, including single premium and topped up premium, if any (2) Fund value. The nominee has an option to avail the benefit or to buy the annuity out of the proceeds to get regular pension income.

3.      Can I cancel my policy?

After you purchase the policy, the insurance company gives you “Free Look Period” of 15 days, within which you can review the policy and contact the company in case you have any query. Still, the policy is not in line with your expectation, you can request to cancel the same within the “Free Look Period.” Your full money shall be refunded, after nominal deduction of stamp duty.

Also Check: HDFC Super Income Plan