Birla Sun Life Dream Retirement Plan

At the outset, we must warn you: product features of this plan seem as complicated as deciphering an ancient treasure map! In general, you should stay away from such complicated products – the complexity almost always works against your interest, and makes sure the agent and the company make hefty returns, not you.

There is a small element of insurance in this retirement plan. But we don’t see the need for this – a retirement plan is not about life insurance, it is about giving you a good corpus or regular pension. The life cover is anyway too small to be of material value to your family. So we ignore this distraction and look at other features of the plan.

The basic option is where you invest an annual premium and build up a corpus at your preferred retirement date. The surprising thing is – the return that this basic component generates is even lower than 3 percent! This is even lower than a simple savings bank interest. The complexity of the brochure makes it difficult to deduce this shocking fact, but there it is.

There are various ‘enhanced’ options detailed, where you pay additional premium (called enhanced savings premium) above the basic option. This premium functions as a normal Unit Linked policy premium, where you can choose different equity based funds where it gets allocated. As with all Unit Linked policies, the charges here are extremely high, and therefore make it difficult for you to get a decent return even if markets do well.

In summary, we suggest staying away from this product. Use a Systematic Investment in a mutual fund to accumulate your retirement corpus. Even if you transfer it to your Bank fixed deposit when you retire, you will make a better income than from a complicated plan like this.

 

Product features:

 

Parameter

Value

Fintotal Comment

Entry age

18-60 years

 

Premium paying term

Single / 5 years / 10 years / 15 years / 20 years / upto retirement

 

Retirement age

55 / 60 / 65 / 70 years

 

Investment Guarantee Charge

2%

This applies on the basic option. As a result, you return is hardly 3%, even lower than savings bank

Premium Allocation Charge

15% in Year I for enhanced savings premium

5% in subsequent years for enhanced savings premium

This is extremely high and makes it unattractive for the investor to go for enhanced options

Policy Administration Charge (assuming a 10-year payment)

15% in Year I, II, III

1.5% thereafter

This high charge, coupled with the premium allocation charge above, effectively kills any other positive the product has to offer

Fund management charges

1%-1.35%, depending on the scheme

This is comparable to any other ULIP

Surrender charges (assuming a 10-year payment)

15% to 60% in first five years

0% thereafter

This can be an unpleasant surprise for the investor

Mortality Charge

As per age

 

 

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