Birla Sun Life Freedom 58

Here is yet another example of taking a very real investor need (retirement planning), but making it a losing proposition for her through extremely high charges. While the idea is good, we recommend against this product due to its high costs that make getting decent returns almost impossible.

Birla Sun Life Freedom 58 is a Unit Linked pension plan; there is no life insurance cover. First there is an accumulation phase where you contribute premiums and your corpus gets built.  

Then there is an annuity phase, where you use the corpus to get an annual pension. So far so good; but the problem comes when charges in the accumulation phase are as high as 20 percent in the initial years (see details below). With such huge sums knocked off from your premium in initial years to pay handsome commissions to your agent, your investments will be in the red for a long time. Your agent will likely push you to stop paying premiums after 3 years and even withdrawing; this will make sure you end up with a huge loss.

If you are worried about retirement, do not go for this (or any other) pension plan. Start a simple Systematic Investment Plan in a mutual fund, contributing whatever you can. Move it to safer avenues when you retire and live off the returns. This will work much better for you than this charge-laden complex pension plan.

 

Product features:

 

Parameter

Value

Fintotal Comment

Entry age

18-75 years

 

Minimum Accumulation Phase

5 years

 

Premium Allocation Charge (on regular premiums)

8% in Year I

2% in Year II and III

 

This is extremely high and makes it unattractive for the investor

Policy Administration Charge

8% in Year I, II, III

3% 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

They exist, but amount is not mentioned

This can be an unpleasant surprise for the investor

Life Cover

Zero

 

 

Illustration:


Let us assume a simple case:

  • Your age: 50 years
  • Planned retirement: 60 years
  • Accumulation phase for 5 years
  • Premium: Rs.30,000 per year 

Let’s see what you get:

  • Absolutely no life cover
  • Of your first year premium of Rs.30,000/-, 16% (Rs. 4,800/-) is removed. Most of this goes to your agent’s pocket. Only the remaining gets invested in the fund.
  • Of your second year premium of Rs.30,000/-, 10% (Rs. 3,000/-) gets removed again. Most of this again goes to your agent, and only the remaining gets invested
  • Of your third year premium, 10% (Rs. 3,000/-) is chopped off again.
  • In all future years, you lose about Rs.900/- annually
  • Thus, on Rs.30,000 annual premium, you have lost almost Rs.12,000 as charges in five years.
  • In addition to this, of your total fund, the fund management charge of ~1% is cut every year
  • Instead, if this Rs.30,000 per year had gone into a Systematic Investment in a Mutual Fund, not a single Rupee would have been deducted as policy charges. It would not take a mathematician to deduce that the returns here will be much better

In summary, investments can deliver returns only if the costs are not so high. Even there, there is no evidence that these funds of Birla Sun Life can deliver superior returns to other excellent funds available in the market. So you would rather give this product a miss.

Fintotal Product Analysis is the ideal place to seek unbaised and neutral view on all financial products.

Do not get fooled by agents and distributors, just check here before you make any purchases.


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