HDFC Life New Immediate Annuity Plan – Honest Returns

Let us review HDFC’s Immediate Pension Plan purely from returns perspective. While there are many other aspects to be looked into while taking an annuity/pension plan, this blog does not aim to cover any other aspects. Below are the parameters used to download official illustration about this plan.

Links – Official Website link of the Plan Official Brochure of the Plan

Plan Name	HDFC Life New Immediate Annuity Plan
UIN Number	101N084V31 (Always check this!!)
Review Date	08th March 2023
Primary Annuitant Age	60 Years
Annuity Plan Type	Immediate Income
Primary Annuitant City	Delhi
Primary Annuitant Gender	Male
Primary Annuitant Country	India
Primary Annuitant Resident Status	Indian
Purchase Price	₹15,00,000 (₹15,27,000 with GST)
Premium Payment Term	Single
Pension Mode	Yearly
Purchase Mode	Online
Secondary Annuitant Age	55 Years
Secondary Annuitant Gender	Female

The plan comes in 2 Annuity Option – Single Life and Joint Life and many sub options underneath them. All these options have been listed below. However, we will only be reviewing the 2 options pertaining to Return of Purchase Price (RoP plans) as they are the most sought after. In subsequent revisions, I will try to cover other options as well. You should also not fall for clever marketing of Insurance companies because not every plan marketed as a Pension Plan is truly a Pension Plan.

Single Life Annuity Options

1. Life Annuity
   The annuity will be payable at uniform rate in arrears for the life of the annuitant.
   On the death of the annuitant, the annuity payments will cease and no further amount will be payable.
2. Life Annuity with Return of Purchase Price – Reviewed
   The annuity will be payable at uniform rate in arrears for the life of the annuitant.
   On the death of the annuitant, the annuity payments will cease and we will pay to the annuitant’s nominee the 100% of the purchase price.
3. Life Annuity with Return of Balance Purchase Price
   The annuity will be payable at uniform rate in arrears for the life of the annuitant.
   On the death of the annuitant, the annuity payments will cease and we will pay to the annuitant’s nominee the balance of the purchase price i.e. purchase price less all annuity instalments made prior to death.
   In case the annuity payments exceed the purchase price, no benefits will be paid on death
4. Life Annuity with a Guarantee Period
   The annuity will be payable in arrears for the life of the annuitant or until the end of guarantee period, whichever is later.
   On the death of the annuitant or at the end of the guarantee period, whichever is later, the annuity payments will cease and no further amount will be payable. The annuitant has the option to choose a guarantee period of 5 or 10 or 15 or 20 years.
5. Life Annuity with 5% escalation
   The annuity will be payable in arrears for the life of the annuitant. The annuity will increase annually by 5% p.a. of the annuity amount at inception.
   The first escalated payment is made one year after the first year
   On the death of the annuitant, the annuity payments will cease and no further amount will be payable.
6. Life Annuity with Return of Purchase Price in Parts
   The annuity will be payable at uniform rate in arrears for the life of the annuitant.
   At the end of 7 years, 30% of the purchase price is paid to the annuitant on survival.
   On death of the annuitant beyond seven years, the annuity payment will cease and we will pay to the annuitant’s nominee 70% of the purchase price.
   On death of the annuitant within 7 years, the annuity payment will cease and we will pay to the annuitant’s nominee the full purchase price.
7. Life Annuity with Return of Purchase Price on Diagnosis of Critical Illness
   The annuity will be payable at uniform rate in arrears for the life of the annuitant.
   Upon the annuitant being diagnosed with any of the 6 specified illnesses before age 85 or on death of the annuitant, whichever occurs earlier, the annuity payments will cease and 100% of the purchase price of the annuity will be payable. The purchase price will be paid to the nominee in case of annuitants death otherwise it will be paid to the annuitant

Joint Life Annuity Options

1. Joint Life Annuity with 100% annuity to the secondary annuitant
   The annuity will be payable at a uniform rate in arrears so long as at least one of the two annuitants is alive.
   On the death of the primary annuitant, secondary annuitant will receive 100% of original annuity throughout life
   On death of the last survivor, the annuity payments will cease and no further amount will be payable.
   If the secondary annuitant predeceases the primary annuitant, the annuity payments shall cease upon the death of the primary annuitant.
2. Joint Life Annuity with 50% annuity to the secondary annuitant
   The annuity will be payable at a uniform rate in arrears so long as the primary annuitant is alive.
   On the death of the primary annuitant, secondary annuitant will receive 50% of original annuity throughout life.
   After death of the last survivor, the annuity payments will cease and no further amount will be payable.
   If the secondary annuitant predeceases the primary annuitant, the annuity payments shall cease upon the death of the primary annuitant.
3. Joint Life Annuity with 100% annuity to secondary annuitant and Return of Purchase Price – Reviewed
   The annuity will be payable in arrears so long as at least one of the two annuitants is alive.
   On the death of the primary annuitant, secondary annuitant will receive 100% of original annuity throughout life.
   On death of the last survivor, 100% of the purchase price is returned to the nominee.
4. Joint Life Annuity with 50% annuity to secondary annuitant and return of purchase Price
   The annuity will be payable in arrears so long as at least one of the two annuitants is alive.
   On the death of the primary annuitant, secondary annuitant will receive 50% of original annuity throughout life.
   On death of the last survivor, 100% of the purchase price is returned to the nominee.

Single Life Annuity with Return of Purchase Price

Below is the illustration downloaded from HDFC Life Insurance website using the parameters noted above.

Basis the above illustration, we can see that on deposit of ₹15,00,000* (Fifteen Lakh Rupees) in this Immediate Annuity Pension Plan from HDFC, an annual annuity of ₹1,09,050 is payable. Also, the death benefit is noted as the Return of Purchase price excluding the taxes. I have thus showcased 5 scenarios assuming the primary annuitant is alive till the ages of 65, 70, 75, 80 and 85 and post demise, the initial deposit amount is given to the nominee.

From the above, we can see that the return on the deposit ranges between 5.86% to 7.01% as the longevity of Annuitant increases. In case of a 10 year longevity, the return is 6.56% and in the best case scenario of longevity till 85 years, the effective return comes out to be 7.01%.

Joint Life Annuity with 100% annuity to secondary annuitant and Return of Purchase Price

Below is the illustration downloaded from HDFC Life Insurance website using the parameters noted above.

Basis the above illustration, we can see that on deposit of ₹15,00,000* (Fifteen Lakh Rupees) in HDFC Life’s Immediate Annuity Plan, an annual annuity of ₹1,08,350 is payable. This annuity is first paid till any of the annuitants (Primary or Secondary) is above. Thereafter the death benefit, which is noted as the Return of Purchase price excluding the taxes, is given to the nominee. Here again, I have showcased 5 scenarios assuming that either of the primary or joint annuitant is alive till the ages of 65, 70, 75, 80 and 85 and post demise, the initial deposit amount is given to the nominee.

From the above, we can see that the HDFC Life’s Immediate Annuity Plan provides a return on the deposit This Pension Plan has been reviewed purely from returns perspective.between 6.51% to 7.00% as the longevity of Annuitant and time period increases. In case of a 10 year longevity, the return is 6.51% (as compared with 6.56% in case of Primary annuitant) and in the best case scenario of longevity of last annuitant till 85 years, the effective return comes out to be 7.00%.

More than 60% of people who buy an insurance plan (including pension plan) do not understand how a pension plan works and how you can easily identify a Guaranteed Pension plan, thereby losing their hard earned money. So, whether you are planning to buy an insurance plan for yourself or are an insurance agent, it is important to learn how you can identify between a guaranteed and non-guaranteed plan and how the returns of a Pension Plan are calculated?

Now, compared with the current ongoing interest rates on Senior Citizens Savings Scheme of 8.00% and even on Fixed Deposits of 7.5%, the return being given by the Pension Plans is lesser (they always will be). However, each scheme comes with its own pros and cons which are listed below.

Senior Citizens Saving Scheme	Bank Fixed Deposit	Annuity Plan
Typically highest interest rate	Interest Rates higher than Annuity Plans	Interest rate once fixed is applicable for entire duration of the Annuity plan
Maximum 30 Lakh investment allowed	Typically no Upper Limit on the amount of Investment	Typically no Upper Limit on the amount of Investment
Interest rate is revised quarterly	Interest rate gets fixed for the duration of Fixed deposit	Annuity amount gets fixed for the duration of Annuity Plan
Maximum duration is 5 years (Can be extended by 3 years)	Maximum duration is typically 10 years	No maximum duration typically applicable
Cannot be surrendered unless in exceptional scenario	Can be easily closed and renewed (for higher returns)	Very poor value received on surrender
Interest is payable on quarterly basis	Interest can be taken on Monthly or Quarterly basis.	Annuity can be chosen to be payable on monthly, quarterly, semi annually or annually
At maturity, principal is returned	At maturity, principal is returned	At maturity, initial deposit can be returned in case of RoP plans
Can be opened by an individual above 60 years of age (55 years on exceptional basis)	No Age Limit	Age limit varies but can be started even at 18 years of age

An ideal scenario is a mix of the various instruments basis ones needs, requirements and also an outlook of the future. For example, in scenarios where the interest rates are high, it may be better to lock in the higher annuity amount in a Pension plan. However, in case of any upward revision of interest rates, such individuals will not be able to take the benefit of the situation as surrendering a Pension plan will lead to heavy deductions.

You should also do a comparison between the various Pension Plans available in the market and try to see which pension plan is giving you the Best returns and is suitable for your needs.

In the next topic, we will cover when should you buy an Pension plan and also the difference between immediate and deferred Pension plan, so if you have not yet subscribed my YouTube Channel, this is the right time to do so. Which Pension Plan would you like me to review next, let me know in the comments.