HDFC Life Sanchay Plus Review – Crazy Guaranteed Return

I am not sure if this is a coincidence that when equity markets don’t perform insurance companies bring new concepts. You must be remembering the Highest NAV Guaranteed plans like LIC Wealth Plus & how bad was clients experience.

These days the insurance industry is offering Guaranteed Return plans & one which is getting the most attention is HDFC Life Sanchay Plus.

This post is written by Parminder Singh – our Financial Planner.

HDFC Life Sanchay Plus

Retirement Planning investment varies with each individual depending on their needs and risk capacity. In India, it is not an easy job at all. Falling interest rates, slowing economic growth, and of course, too many financial products do not make life easy.

Setting aside some amount or investing in some assets for the purpose of generating income at old age sounds very simple but be frank it’s very complex. While planning for retirement, consider other expenses such as medical expenses and emergency needs after retirement. Other investment such as children’s education and marriage should be taken care and is not to be mixed with retirement options.

In this article, we will be talking about HDFC life sanchay plus and through light on point if it suits to our retirement portfolio or not.

Overview of HDFC life sanchay plus: Life-Long income option

Note – Rates have reduced from 1st August 2019

(below illustration was added before that)

There are many options in this policy but we are just focussing on Life Long Income – which is most interesting.

This policy comes with two variants, 5 years premium payment option or 10-year premium payment option.

In 5-year premium option, you will get life cover for six years and start getting 33% of the annualized premium from the end of the seventh year till the time you attain the age of 99. At the end of 99 age, the insurance company will pay the total premium you already paid.

In 10-year premium option, you will get life cover for eleven years and start getting  95%  of the annualized premium from the end of twelveth year till the time you attain the age of 99. At the end of 99 age, the insurance company will repay the total premium you already paid.

Illustration:

AgeYearsLow Premiums paidHigh Premiums Paid
5001-08-2019-52250-522500
5101-08-2020-51250-512500
5201-08-2021-51250-512500
5301-08-2022-51250-512500
5401-08-2023-51250-512500
5501-08-2024-51250-512500
5601-08-2025-51250-512500
5701-08-2026-51250-512500
5801-08-2027-51250-512500
5901-08-2028-51250-512500
6001-08-202900
6131-07-203048925502125
6231-07-203148925502125
6331-07-203248925502125
6431-07-203348925502125
6531-07-203448925502125
6631-07-203548925502125
6731-07-203648925502125
6831-07-203748925502125
6931-07-203848925502125
7031-07-203948925502125
7131-07-204048925502125
7231-07-204148925502125
7331-07-204248925502125
7431-07-204348925502125
7531-07-204448925502125
7631-07-204548925502125
7731-07-204648925502125
7831-07-204748925502125
7931-07-204848925502125
8031-07-204948925502125
8131-07-205048925502125
8231-07-205148925502125
8331-07-205248925502125
8431-07-205348925502125
8531-07-205448925502125
8631-07-205548925502125
8731-07-205648925502125
8831-07-205748925502125
8931-07-205848925502125
9031-07-205948925502125
9131-07-206048925502125
9231-07-206148925502125
9331-07-206248925502125
9431-07-206348925502125
9531-07-206448925502125
9631-07-206548925502125
9731-07-206648925502125
9831-07-206748925502125
9931-07-20685639255652125
XIRR6.45%6.58%

Returns in Life Long income option is 6.45% – in other option returns will be different. (Benefits are higher in the case of high sum assured.)

In the case of Death

On the death of the Life Assured during the Payout Period (after policy term), the nominee shall continue receiving Guaranteed Income as per Income Payout Frequency & benefit option chosen till the end of Payout Period. The nominee shall have an option to receive the future income as a lump sum, which shall be the present value of future payouts.

If we think and compare with average life expectancy, we live an average of 80 years, this means the return would be even lower than what it shows. Say it may be less than 6%.

Does it seem to be a great investment option?

My answer to this question is NO because investing in this instrument will surely not going to give enough returns to beat inflation over a long period of time. But if you are a very conservative investor – it’s not bad.

Remember that guaranteed returns come to you only if you stay the course. Even in this case, if you surrender the product mid-way, you will have to let go of your insurance cover, though bundled plans don’t offer a great amount of cover.

Must ReadBest Retirement Plans in India

HDFC  life Sanchay  vs  Annuity

If we compare LIC Jeevan Akshay Annuity & HDFC Life Sanchay Plus – HDFC would definitely a good choice for those who come in higher tax bracket, because there you will get tax free returns.

But again saving taxes can’t be only criteria, we need to see whether it fits our portfolio or not.

It is always preferable to keep a good mix of asset allocation in your portfolio and not just depend on such one kind of income giving instrument.

Some factors like Liquidity, lock-in period, and risk-taking capacity needs to keep in priority and accordingly rebalancing of the portfolio on a timely basis would generate great returns and helps you to beat inflation accordingly.

In nutshell, you need to look at your requirements and your portfolio to make a choice. If you still can’t make up your mind, seek professional assistance from your financial planner.

I would suggest not to go with such guarantee income products to retail investors where tax slab is lower after retirement, it’s better to keep your portfolio diversified according to your risk profile. Systematic withdrawal plan from Mutual funds can be a better option for someone who needs a regular income & willing to take some risk.

Please share your views or ask questions regarding HDFC Life Sanchay Plus or similar products available in the market right now.

2 COMMENTS

  1. Is there a better guaranteed insurance plan than Sanchay Plus from HDFC . Normally all insurance plans give 4-6% returns ,that too without guarantee. In future interest rate will go down. So I think 6-6.5% returns are very good in insurance. What do you say?

  2. Better invest in Index Funds than such scheme. This is my personal opinion as index cannot fall 10% in a day but such schemes can give -ve returns easily (E.g. Bond defaults)

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