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:

Age Years Low Premiums paid High Premiums Paid
50 01-08-2019 -52250 -522500
51 01-08-2020 -51250 -512500
52 01-08-2021 -51250 -512500
53 01-08-2022 -51250 -512500
54 01-08-2023 -51250 -512500
55 01-08-2024 -51250 -512500
56 01-08-2025 -51250 -512500
57 01-08-2026 -51250 -512500
58 01-08-2027 -51250 -512500
59 01-08-2028 -51250 -512500
60 01-08-2029 0 0
61 31-07-2030 48925 502125
62 31-07-2031 48925 502125
63 31-07-2032 48925 502125
64 31-07-2033 48925 502125
65 31-07-2034 48925 502125
66 31-07-2035 48925 502125
67 31-07-2036 48925 502125
68 31-07-2037 48925 502125
69 31-07-2038 48925 502125
70 31-07-2039 48925 502125
71 31-07-2040 48925 502125
72 31-07-2041 48925 502125
73 31-07-2042 48925 502125
74 31-07-2043 48925 502125
75 31-07-2044 48925 502125
76 31-07-2045 48925 502125
77 31-07-2046 48925 502125
78 31-07-2047 48925 502125
79 31-07-2048 48925 502125
80 31-07-2049 48925 502125
81 31-07-2050 48925 502125
82 31-07-2051 48925 502125
83 31-07-2052 48925 502125
84 31-07-2053 48925 502125
85 31-07-2054 48925 502125
86 31-07-2055 48925 502125
87 31-07-2056 48925 502125
88 31-07-2057 48925 502125
89 31-07-2058 48925 502125
90 31-07-2059 48925 502125
91 31-07-2060 48925 502125
92 31-07-2061 48925 502125
93 31-07-2062 48925 502125
94 31-07-2063 48925 502125
95 31-07-2064 48925 502125
96 31-07-2065 48925 502125
97 31-07-2066 48925 502125
98 31-07-2067 48925 502125
99 31-07-2068 563925 5652125
XIRR 6.45% 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.

3 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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