ulip plans and pension plans of bajaj allinz life insurance
TRANSCRIPT
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ASUMMER TRAINING REPORT
ON
COMPARITIVE STUDY OFCONVENTIONAL PENSION PLAN AND
UNIT LINKED PENSIONPLANS (ULPP s)
Kurukshetra University, Kurukshetra in the Partial Fulfillment forthe Degree of Master in Business Administration
(SESSION 2011-13)- MBA
Under Supervision of : Submitted By:Mr. GAGNISH DUGGAL NISHA SHARMABRANCH MANAGER UNI. ROLL
KURUKSHETRA INSTITUTE OF TECHNOLOGYAND MANAGEMENT
(KURUKSHETRA UNIVERSITY, KURUKSHETRA)
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DECLARATION
I Nisha Sharma Roll No. 2911942 MBA (3 rd Semester) of the
Kurukshetra Institute of Technology and Management , Kurukshetra
hereby declare that the Summer Training Report entitled Comparitive
Study of Conventional Pension Plan And Unit Link Pension Plan is an
original work and the same has not been submitted to any other Institute for
the award of any other degree.
A seminar presentation of the Training Report was made on and the
suggestions as approved by the faculty were duly incorporated.
NISHA SHARMA
MBA- 3 rd sem.
Roll No. 2911942
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ACKNOWLEDGEMENT
With a great sense of gratitude and indebtedness, I am very much thankful to Mr.
RANJEET VERMA head of the department of our institute for allowing me to do this
project.
I specially thank to Mr.Pawan Dhankhar for their help to complete my project
successfully.
I would also like to thank Mr.Gagnish Duggal my summer training guide for making us
understand how to apply theoretical knowledge to real life situations. He trained us with the
functioning of life insurance business. His teaching, support and guidance were of immense
importance in completion of my summer training project.
Finally, I wish to express my thanks from core of my heart to my parents, and my
friends for their help and co-operation for conducting this study.
NISHA SHARMA
2911942
MBA
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INDEX
Topic
Executive summary Introduction
Insurance in India
Introduction of BAJAJ ALLIANZ
Statement of objective
Research Methodology
Introduction of the subject
Analysis & Interpretation
Findings & Suggestions
Annexure
9.1 Questionnaire
9.2 Bibliography
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EXECUTIVE SUMMARY
This project has been undertaken with the purpose to differentiate
between conventional pension plan and unit linked pension plan in such a
way that potential individual to earn regular income in their golden years.
Planning for retirement is an important exercise for any individual.
For it is this exercise, which can help the individual spend his golden years
in peace and comfort.
A retirement plan from a life insurance company helps an individual
insure his life for a specified amount. At the same time, it helps him to
accumulate a corpous, which he receives at the time of retirement.
There are two types of pension plan.
Conventional pension plan
Unit linked pension plan
While a conventional pension plan invest a major portion of the
premium money in bonds and government securities that gives less return.
With a personal pension plan, individual have to pay a regular amount
usually every month or a lump sum to the pension provider who will invest
it on your behalf and on the vesting date, full maturity amount received by
the individual. Entire maturity amount treated as tax free in the hands of
receiver. Whereas unit linked pension plan can play an important role in the
retirement planning exercise. Unit linked pension plan invested in units of
the investment funds of your choice, based on the prevailing unit price.
There are various fund choices in unit linked pension plans like growth
funds, equity managed fund which gives higher return as compare to
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conventional plan. On vesting date, the individual can withdraw only up to
1/3 rd of the maturity amount and remaining 2/3 rd amount has to be invested
in annuity. In unit linked pension plan up to 1/3 rd of the maturity amount, if
withdrawn, is treated as tax-free. Pension received on the remaining 2/3 rd
amount is taxed as per the individual tax slab.
Conclusion:
After the comprehensive study we can conclude that unit linked
pension plan is a better plan that helps individuals plan effectively for their
retirement.
The primary aspect which differ conventional pension plan with unit
linked pension plan is that conventional plan invest a major portion of their
money in government securities, bonds and money market instruments
whereas unit linked invest funds of your choices that gives better returns as
compare to conventional pension plans.
On maturity unit linked pension plan provides a regular source of
income by way of annuity
There are various options available for individual on unit linked
pension plan.
Lifetime annuity without return of purchase price. Annuity for life with the return of purchase price.
Lifetime annuity guaranteed for a certain no. Of years. Joint life/last survivor annuity.
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I NSURANCE SECTOR IN I NDI A
The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market again. Tracing the
developments in the Indian insurance sector reveals the 360-degree turn witnessed over a
period of almost two centuries.
A BRIEF HISTORY OF THE INSURANCE SECTOR
The business of life insurance in India in its existing form started in India in the
year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate
the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act withthe objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the
central government and nationalized. LIC formed by an Act of Parliament, viz.
LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of
India.
The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.
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INSURANCE SECTOR REFORMS
In 1993, Malhotra Committee headed by former Finance Secretary and RBI
Governor R.N. Malhotra was formed to evaluate the Indian insurance industry and
recommend its future direction.
The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector.
The reforms were aimed at creating a more efficient and competitive financial
system suitable for the requirements of the economy keeping in mind the structural
changes currently underway and recognising that insurance is an important part of theoverall financial system where it was necessary to address the need for similar
reforms
In 1994, the committee submitted the report and some of the key
recommendations included:
I) STRUCTURE
Government stake in the insurance Companies to be brought down to 50% Government should take over the holdings of GIC and its subsidiaries so that
these subsidiaries can act as independent corporations.
All the insurance companies should be given greater freedom to operate
II) COMPETITION
Private Companies with a minimum paid up capital of Rs.1bn should be
allowed to enter the industry. No Company should deal in both Life and General Insurance through a single
entity.
Foreign companies may be allowed to enter the industry in collaboration with
the domestic companies.
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Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in
III) REGULATORY BODY
The Insurance Act should be changed An Insurance Regulatory body should be set up Controller of Insurance (Currently a part from the Finance Ministry) should be
made independent
IV) INVESTMENTS
Mandatory Investments of LIC Life Fund in government securities to be
reduced from 75% to 50%
GIC and its subsidiaries are not to hold more than 5% in any company (There
current holdings to be brought down to this level over a period of time)
V) CUSTOMER SERVICE
LIC should pay interest on delays in payments beyond 30 days Insurance companies must be encouraged to set up unit linked pension plans Computerisation of operations and updating of technology to be carried out in the
Insurance industry
The committee emphasized that in order to improve the customer services and
increase the coverage of the insurance industry should be opened up to competition. Butat the same time, the committee felt the need to exercise caution as any failure on the part
of new players could ruin the public confidence in the industry.
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Hence, it was decided to allow competition in a limited way by stipulating the
minimum capital requirement of Rs.100 crores. The committee felt the need to provide
greater autonomy to insurance companies in order to improve their performance and
enable them to act as independent companies with economic motives. For this purpose, it
had proposed setting up an independent regulatory body.
THE I NSURANCE REGUL ATORY AND DEVELOPMEN T AUTHORI TY (I RDA)
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill
in Parliament in December 1999.
The IRDA since its incorporation as a statutory body in April 2000 hasfastidiously stuck to its schedule of framing regulations and registering the private
sector insurance companies.
The other decisions taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of
the IRDA s online service for issue and renewal of licenses to agents.
The approval of institutions for imparting training to agents has also ensured that
the insurance companies would have a trained workforce of insurance agents in
place to sell their products, which are expected to be introduced by early next
year.
Since being set up as an independent statutory body the IRDA has put in a
framework of globally compatible regulations. In the private sector 12 life
insurance and 6 general insurance companies have been registered.
I NSURANCE COM PANI ES I N I NDI A
AVIVA BAJAJ ALLIANZ BIRLA SUN LIFE HDFC STANDARD LIFE
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ICICI PRU ING VYSYA LIFE INSURANCE CORPORATION
MAX LIFE INSURANCE METLIFE INDIA OM KOTAK MAHINDRA RELIANCE LIFE INSURANCE SBI LIFE INSURANCE
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CHAPTER-1
Introduction of BAJAJ ALLIANZ Vision of BAJAJ ALLIANZ Values of BAJAJ ALLIANZ
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Introduction To The Company
About Bajaj Group
Bajaj Auto Ltd, the flagship company of the Rs. 8000 crore Bajaj group is the largest
manufacturer of two-wheelers and three-wheelers in India and one of the largest in the
world.
A household name in India, bajaj auto has a strong brand image & brand loyalty
synonymous with quality & customer focus.
A strong Indian brand- hamara bajaj
One of the largest 2 & 3 wheeler manufacturer in the world
21 million vehicles on the roads across the globe
Managing funds of over rs 4000 cr.
Bajaj auto finance one of the largest auto finance cos. In India
Rs. 4,744 cr. Turnover & profits of 538 cr. In 2002-03
It has joined hands with allianz to provide the Indian consumers with a distinct
option in terms of life insurance products.
As a promoter of bajaj allianz life insurance co. Ltd., bajaj auto has the following to offer
Financial strength and stability to support the insurance business.
A strong brand-equity.
A good market reputation as a world class organization.
An extensive distribution network.
Adequate experience of running a large organization.
About allianz
Allianz group is one of the world's leading insurers and financial services
providers.
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Founded in 1890 in Berlin, allianz is now present in over 70 countries with almost
174,000 employees. At the top of the international group is the holding company, allianz
with its head office in Munich.
Allianz group provides its more than 60 million customers worldwide with a
comprehensive range of services in the areas of
Property and casualty insurance,
Life and health insurance,
Asset management and banking.
Allianz ag- a global financial powerhouse
Worldwide 2nd by gross written premiums - Rs.4,46,654 cr.
3rd largest assets under management & largest amongst insurance cos. a sum of rs.51,96,959 cr.
12th largest corporation in the world
49.8 % of global business from life insurance
Established in 1890, 110 yrs of insurance expertise
70 countries, 173,750 employees worldwide
About bajaj allianz life insurance ltd.
Bajaj allianz life insurance company has developed insurance solutions that cater
to every segment and age-income profiles. For companies it provides comprehensive
'employee benefit solutions' (group term life, Edli, gratuity, superannuation, key man
insurance and more); for the individual invest gain (a unique life insurance plan where
sustenance of income is combined in the same plan that also pays a lump sum), cash gain
(money back), child gain (children's plan), risk care (pure term), lifetime care (whole
life), term care (term with return of premium), swarna vishranti (retirement plan),
protector (mortgage term insurance plan), unit gain (unit linked plan), unit gain single
premium, unit gain plus, unit gain plus sp, lifelong gain plan, unit gain single pension &
unit gain easy pension plans.
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Bajaj allianz has launched a complete set of need-based products to cater to each
varied needs of the customer. Currently bajaj allianz has a product portfolio of 26
products and more need-based products are in the pipeline.
To Be The First Choice Insurer For Customers
To Be The Preferred Employer For Staff In The Insurance Industry.
To Be The Number One Insurer For Creating Shareholder Value
(1.1) portfolio of the company
At bajaj allianz customer delight is their guiding principles. Ensuring world-classsolution by offering customized product with transparent benefits supported by the best
technology is their business philosophy. According to Mr. Amar, Mr. Sinha. The
company has used innovative marketing as well as pricing strategies and their premium
chart would be much lower than the other player in the market. Company has launched
various products in the market with most competitive premium among all player
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ORGANISATION STRUCTURE
Rahul bajajchairman
Madhur bajajVice chairman Rajiv bajaj
MD
Sanjeev bajajExecutive director
K SrinivasVice President (Human
S Ravikumar Vice President (Business
Kevin P D'saVice President (Finance)
N H HingoraniVice President
C P TripathiVice PresidentRakesh Sharma
CEO (International
R C MaheshwariCEO (CommercialVehicles
S Sridhar Ceo(2wh)Pardeep shrisvastava
Presedent(engiee) Abrahim josephVice present(r&d)
Ranjeet guptaVice
BOARD OFDIRECTOR
http://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwari#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwari#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingorani#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingorani#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kshrinivas#kshrinivashttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sravikumar#sravikumarhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kevin#kevinhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingorani#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#cptripathi#cptripathihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sharma#sharmahttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwari#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwari#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sharma#sharmahttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#cptripathi#cptripathihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingorani#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kevin#kevinhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sravikumar#sravikumarhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kshrinivas#kshrinivas -
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What is risk?
It is a condition in which more than one outcome is possible. People take
decisions based on perceptions of risk, not necessarily on the actual risk. Risk is a state of
nature, where as uncertainty is a state of mind. This uncertainty arises from risk. If
something is certain not to occur or certain to occur, there is no risk. Most activities and
events in life, however involve risk we cannot be certain of their outcomes. Except for
some recreational activities, humans generally prefer less risk to more risk. Or we are risk
averse. Risk aversion causes us to undertake actions to minimize uncertainty. Insurance is
one of the most important tool to reduce uncertainty.
What are individual risks?
Individuals are exposed to Property, liability and personal losses. Personal loss
exposures arise from the possibilities of death, incapacity, illness or injury, retirement,
and unemployment. These losses are associated with families and businesses.
What is risk management?
Risk management is most often associated with attempts to manage those risksthat entail the possibility of economic harm. From a financial viewpoint, harm is a
reduction in the economic value of an individual. The economic value of an individual is
the value today of its expected future cash flows. This value today is derived by taking
the present [discounted] value of the difference between expected future inflows and
outflows. We discount future cash flows because money has time value; i.e., we prefer a
rupee today to the same rupee next year after all, if we invested the rupee today, we
[hopefully] would have more than a rupee next year. Thus the purpose of risk
management is to contribute to the maximization of the economic value of an individual
where value is defined as the discounted value of expected future cash flows. Risk
management contributes to economic value by reducing economic harm. The risk
management process follows the classical three-step approach to problem solving and
involves
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Problem Specification Problem Analysis Problem Decision-making
Once exposures have been identified and measured, the various means of managing risk
should be considered and decisions should be made about the optimum strategy in light
of individual objectives. The two fundamental ways of dealing with these losses are
Risk control
Risk finance
Risk Control tools include avoidance, reduction and prevention of risk,
Risk Finance tools include risk retention, risk transfer, and risk sharing Risk
management decision has to be taken on the basis of evaluation of risk manag e
Why is risk to be managed?
This risk management is a revolutionary idea that defines the boundary between
modern times and the past. Because we are vulnerable to more risks than our ancestors
risk management is more important today than in the past. The physical and economic
security formerly provided by the tribe or extended family diminishes with
industrialization. Our income-dependent, wealth-acquiring lifestyles render us and our
families more vulnerable to environmental and societal changes over which we have no
control. Now more formalized means are required for mitigating the adverse
consequences of untimely death, unemployment, loss of health, old age, law suits and
destruction of our property.
Essence of risk management
The Essence of risk management lies in maximizing the areas where we have
some control over the outcome while minimizing the areas where we have absolutely no
control over the outcome.
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Role of life insurance in risk management.
Life Insurance is a contingent claim contract on the pool s assets.
Life insurance is a contract for payment of a sum of money to the person assured
(or failing him/her, to the person entitled to receive the same) on the happening of
the event insured against
Life Insurance comes to the timely aid of the family in the unfortunate event of
the death or total permanent disability of the bread winner. By and large, life
insurance is civilization s partial sol ution to financial uncertainties caused by
untimely death.
Life Insurance substitutes certainty for uncertainty
Life Insurance involves activities and services that are intimately connected withall divisions of economics referred to. The outstanding and distinctive mission of
life insurance is risk -bearing and risk elimination in our economic affairs.
Life insurance is an attractive financial instrument in an individual s portfolio that
provides an assurance of security element alternatives in the light of cost benefit
analysis.
What is ULIP?Unit Linked Insurance Policies (ULIP) was first offered in the United States in
1976, (after being developed and sold successfully in The Netherlands, England, and
Canada) in the name of Variable Life Insurance. Basically it was a type of whole life
insurance whose values may vary directly with the performance of a set of earmarked
investments. Now many markets are offering these ULIPs in children plans (ICICI Smart
Kid policy) endowment and retirement plans (LIC S Forty Plus policy) also. These plans
give an option to the investor to choose between three fund options debt, equity, and
balanced. In these products, premiums can be paid quarterly, half yearly or yearly. Out of
the premium amounts, deductions will be made towards
Initial administrative charges
Investment management charges (there will be an extra charge if the policyholder
utilizes the switch over (from equity to debt or debt to balance) option
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Annual administration charges
Risk cover
and the balance will be invested in a selected fund (debt or equity or balance).
Insurance Companies charge anywhere between 20 -35 percent as upfront charges
for their unit-linked plans. So, every time you make your premium payment, only a
part of it is actually invested in the fund of your choice.
n case of death during the premium paying term or the term of the policy, the sum
assured (Rs.1 Lakh in example) or value of policy fund, whichever is higher, is paid to
the beneficiaries. In case of survival up to maturity, the value of the fund is paid out. The
returns on that day (maturity or death) on the plan depend upon the performance of the market, be it equity or debt . So if the fund value falls below amount invested on
that day, the policyholder will receive a lesser amount. Hence one can see that the risk
here is transferred to the policyholder as nothing is guaranteed.
Unit-linked plans are essentially similar to mutual fund products wherein the
premium is invested in various funds in keeping with policyholders risk appetite .
However, the difference in a mutual fund investment is that the money is virtually
at call by the customer. In case of unit-linked insurance plans, it is impossible to
predict whether the market will be in an upswing on the day of the policyholder s
death or on maturity. The Net Asset Value (NAV) will reflect the underlying value of
assets, which in turn is dependent on the movement of the Sensex.
An Evaluation of ULIP Policies
Market-linked returns have become the norm today. This is the reason whyinsurance companies launch unit-linked plans in different avatars. Important segments of
the consumer market no longer consider life insurers as competing only with other life
insurers. In an effort to gain market power and thereby to protect or enhance profitability
the issue of product development and innovation, including pricing and marketing
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innovation, is all the more important with the continued convergence among financial
service competitors.
If we observe the trend of ULIPS in insurance market, after the insurance sector is
opened, private players, came up with aggressive marketing strategies to establish their
presence. And the public sector has, in its turn, redrawn its priorities. It is quietly being
carried out at LIC. Till last year, we used to do our budgeting for individual plans. But
from the beginning of this year we are doing it at the cumulative level, says Ashok Shah,
Zonal Manager (North Zone), LIC in a Ficc-organized insurance seminar in October last
year. This new exercise has helped us in prioritizing the sales of individual plans
according to the market needs, he adds. Accordingly, as already discussed the Buoyant
growth in these plans may be due to Risin g stock market Enticed by the Bull Run, policyholders are putting in more
than the actual yearly premium as they top up the investment portion of their risk
policies.
Falling interest rates ( The last five years saw interest rates fall dramatically by 400
basis points).
Wider pro duct offerings by the insurers (ex. Endowment plan, pension plans etc).
Benefits:
A Unit linked plan providing an opportunity for the discerning investor to benefit
from the returns available in the Capital Market without going for direct
investment in the capital market
Unlike traditional products where investment details and various charges are kept
under wraps, ULIPs project all these information upfront.
But when we think the risk management part of ULIP Policies the following
questions will arise.
Linking the market to the death benefit one s family gets:
Linking death benefits to the market returns may end up in ambiguity which is in
the negation of Life insurance purpose. The purpose of Life insurance is to substitute
certainty for uncertainty. For Eg. If an individual aged 35, middle class employee who
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purchased ULIP Policy were to die when the index is at 5,000, his family stands to get
Rs.5 lakh. But if were to die when the index is at 8,000, his family will get Rs.8 lakhs.
A very sharp rise in the sensex is not a common phenomenon and since 1992, a rise of
more than 250 points has happened only 13 times. A list prepared by Economic Times
based on the difference between the current close and the previous close reveals that out
of these 13 times rise in sensex, seven rises in the sensex of more than 250 points had
taken place in 1992 during the Harshad Mehata bull run (that had taken the Sensex above
the 4000 point mark for the first time in history). Hence in the long run, returns in the
stock market are likely to settle in the range of five to six per cent. Even the traditional
insurance market offers conservative yearly return of 5-6 per cent year after year for long
years or for next 20 years.In this scenario the risks in ULIP Policies may be listed out like this.
The chances of dying in an index downturn
Is it possible to replace the economic value of an individual to their dependants
with these policies?
Is it appropriate for a 35 year old middle class man to bet his last penny on the
direction of the market?
Is it prudent to link the money an individual want to leave behind for family to the
whims and fancies of stock market mechanics?
What is the position of maturity value if the policy matures at the time of break
out of scams like Harshad Mehta and Ketan Parekh.
Is it appropriate to consider Insurance as a means to make big bucks?
The possibility of falling equity markets and the effect of it on future sales for
insurance companies.
What is the credibility of banks and insurance companies with their customers
when they receive low returns on maturity or death? Even if there is guaranteed Sum assured what about the cost of the product and
bearish trend in the stock market?
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Key achievements:
Races past gross written premium of over rs. 1001 crore, with growth of over
357% over previous year s Gross written premium of rs. 219 crores
First year premium of rs 860 crore a 380% growth over last year s fiscal year
premium of rs 179 cr.
Rocketed to no. 2 position as against no 6 at the end of last financial year amongst
pvt. life insurance cos., with a clear lead of rs 240 crore
Fastest growing insurance company with 380% growth
Market share jumps almost 4 times from 0.95 % to 3.39 % amongst all life
insurance cos.
Increased its product portfolio from 7 to 19 simple and flexible products
Launched complete suite of employee benefit solutions (group products for
corporate)
The bajaj allianz difference Business strategy aligned to clients' needs and trends in Indian and global
economy / industry
Internationally experienced core team, majority with local background
Fast, decentralized decision making
Long-term commitment to market and clients
Trust
At bajaj allianz, we realize that you seek an insurer whom you can trust. Bajaj
auto limited is trusted name for over 55 years in the Indian market and allianz ag has over
110 years of global experience in financial services. Together we are committed to
provide you with time tested and trusted financial solutions that provide you all the
security you need for your investments. And more..
Underwriting philosophy
Our underwriting philosophy focuses on :
Understanding the customer's needs
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Underwriting what we understand
Meeting the customer's requirements
Ensuring optimal coverage at lowest cost
Claims philosophy
The bajaj allianz team follows a service that aims at taking the anxiety out of
claims processing. We pride ourselves on a friendly and open approach. Company
focused towards providing customer a hassle free and speedy claims processing.
Company s claims philosophy is to :
Be flexible and settle fast
Ensure no claim file to be seen by more than 3 people
Check processes regularly against the global allianz opex (operational excellence)
methodology sold over 1 million since inception.
Customer orientation
At bajaj allianz, our guiding principles are customer service and client
satisfaction. All our efforts are directed towards understanding the culture, social
environment and individual insurance requirements - so that we can cater to all your
varied needs.
Experienced and expert servicing team
A team of experienced people who understand Indian risks and are supported by
the necessary international expertise required to analyze and assess them drives us.
Service engineers located in every major city.
Superior technology
In order to ensure speedy and accurate processing of customer needs, we have
established world-class technology, with renowned insurance software, which networks
all our offices and intermediaries
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Using the web, policies can be issued from any office across the country for retail
products.
Unique, user friendly software developed to make the process of issue of policies
and claims settlement simpler (e.g. online insurance of marine policy certificate).
Bajaj allianz unit gain plan
The thumb rule for buying insurance is that your insurance needs are minimal in
your early earning years, increase with added responsibilities (marriage, children, loans
etc.) And taper off by the time you retire. It is difficult to find a single insurance plan that
can take care of all your changing requirements in life additional protection, more
money to invest, sudden requirement of cash or a steady post-retirement income.With bajaj allianz unit gain, you can invest in one life insurance plan that can take
care of all your changing requirements throughout your life. This plan has been designed
to provide you with maximum flexibility, so that you do not have to worry about your
changing needs.
These are very good plan for those who want protection (especially) for their
family because happiness and security for our family is all that we want. However, the
uncertainties of life often worry you. Unfortunate events can make you are no longer
around. Life insurance can help ease many of those worries. It ensures that your loved
ones are adequately provided for and that their future is secure, no matter what the
uncertainty.
Bajaj allianz unit gain offers the unique option of combining the protection of life
insurance with the attractive prospects of investing in securities. You can choose the
investment funds you want to invest your money, providing you with an opportunity to
have a direct stake in the performance of the financial markets. You also benefit from
attractive tax advantages and can protect your loved ones against unfortunate events.
The bajaj allianz unit gain plan
The bajaj allianz unit gain comes with a host of features to allow you to have the
best of all worlds protection and investment with flexibility like never before. Some of
the key features of this plan are:
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Guaranteed death benefit
Choice of 6 investment funds with flexible investment management: you can
change funds at any time.
Attractive investment alternative to fixed-interest securities Provision for full/partial withdrawals any time after three full years premiums are
paid.
Unmatched flexibility to match your changing needs.
How does the plan work?
The premiums paid are invested in a fund/funds of your choice (depending on the
allocation rate) & units are allocated depending on the price of units for the fund/funds.The value of your policy is the total value of units that you hold in the fund/funds. The
insurance cover charges are deducted through monthly cancellation of units. The fund
administration charge and fund management charge are priced in the unit value.
Minimum sum assured = 5 times the annual premium.
Maximum sum assured = y times the annual premium where y will be as per the
following table:
Age group 0 30 31 35 36 40 41 45 46 55 56 60
Y 125 105 75 55 30 20
Table no (1.1) (maximum sum assured)
Benefits and conditions What tax benefits are available for this plan? The plan offers tax benefits under
section 80c and article10(10d) at 1961 .
What additional feature does this plan offer you? You can avail of the accident
and disability benefit under this plan.
What are your entry conditions for lifeguard level term assurance? Your age at
entry should be between 18 years and 50 years. The minimum term is 5 years and
the maximum term is 25 years, which is subject to a maximum of 65 years of
age. The minimum premium for the product is rs. 10000 per annum.
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Bajaj Allianz unit gain easy pension plan
With Bajaj allianz, you can take control of your future and ensure a retirement
you can look forward to. There are two packages to choose from:
Unit gain easy pension regular premium
Unit gain easy pension single premium
What are the benefits available?
The plan works in two parts - the deferment period and the annuity period. During
the deferment period, the plan builds up the funds required to purchase the
immediate annuity. The deferment period ends at the vesting date. You are free to
choose your age of retirement (vesting date) between 45 and 70 years. The
benefits on vesting date (the date you choose to retire)
The account value as on the vesting date will be used to purchase an immediate
annuity. The immediate annuity will be purchased at rates prevailing at that point
of time. Option to take lump sum: you have the option to take up to 1/3rd of the
account value on the vesting date as a lump sum. This amount would be tax free
in your hand, as per current tax laws. The balance amount will be used to purchase an immediate annuity.
Open market option:
`You have the option to purchase an immediate annuity from bajaj Allianz or
from any other company. If the immediate annuity is purchased from bajaj Allianz, the
amount available for purchase of the annuity will be marked up by 2%.
The minimum installment of annuity from bajaj allianz is rs. 1000/-. The annuity
frequency may be changed to make each installment more than the minimum
requirement. If it still below the minimum, the account value may be utilized to purchase
an immediate annuity from any other company in the open market as per your choice, or
paid in lump sum, if permissible, subject to the prevailing tax laws.
Annuity options:
You will be able to choose from all immediate annuity products offered by bajaj allianz
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Life insurance at the vesting date. The annuity products currently available are:
Annuity for life
Annuity for life with 5, 10 or 15 years certain payout
Annuity for life with return of capital
You also have the open market option to purchase immediate annuity.
How does the bajaj allianz unit gain easy pension plan work?
The premiums paid are invested in a fund/funds of your choice (depending on the
allocation rate) & units are allocated depending on the price of units for the fund/ funds.
The value of your policy is the total value of units that you hold in the fund/ funds. The
administration charges are deducted through cancellation of units. The fund managementcharge is priced in the unit value.
Value of units: the unit price of each fund will be the unit value calculated as per the
following formula.
Important details of the bajaj allianz unit gain easy pension plan
Minimum Maximum
Age at entry 18 65
Deferment period 5 40
Age at vesting 45 70
Table no (1.2) (details of plan)
Payment mode
For your convenience, we have provided 4 premium payment modes that can be
single, yearly, half-yearly, and quarterly. We also offer a monthly premium payment
mode with salary deduction schemes. In addition, you also have the option to pay top-upsto increase your investments. The minimum single premium is rs. 10,000/-. For regular
premium, the minimum premium is rs. 10,000/- for the annual mode, rs. 5,000/- for half
yearly, rs. 5,000/- for quarterly, and rs. 1,000/- for the monthly mode. The minimum top-
up premium is rs. 5,000/-.
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Full withdrawals
Unit gain easy pension offers you the flexibility of full withdrawals by
surrendering units. For single premium plan full withdrawals are allowed anytime after
the payment of the single premium. For regular premium plan full withdrawal is allowed
after 3 full years regular premiums (including top ups) are paid. The surrenders are paid
out at the value of units, and there is no surrender penalty on full withdrawals after 3 full
years regular premiums (including top ups) are paid.
Free look period
Within 15 days from the date of receipt of the policy, you have the option to
review the terms and conditions and return the policy, if you disagree to any of the terms
& conditions, stating the reasons for your objections. You will be entitled to a refund,
which will be the lower of:
The premium paid less the insurer s costs of issuing the policy and the policy
documents (including but not limited to stamp fee charges), or
The value of units, less the insurer s costs of issuing the policy and the policy
documents (including but not limited to stamp fee charges).
Termination of the policy The policy will terminate on occurrence of any of the following:
The units in the policy are fully surrendered
The account value becomes rs 100/- or less
The account value is not sufficient to support deduction of units for a period of
three months.
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Tax benefits
Death benefit is tax-free. The 1/3rd lump sum that can be taken on the vesting
date is Also tax-free. Premiums paid are eligible for tax relief under sec. 80 cc (1) or sec
88 of it act. In case of change in any tax laws relevant to the policyholder or the fund
performance, the same will be applied as per regulations prevailing at that point of time
Unit gain plus gold:
With Bajaj Allianz unit gain plus gold we have formulated a unique combination
of protection and prospectus of attractive returns with investment in various mix of
securities to make a perfect plan to last you a lifetime of prosperity and happiness.
Key features of this plan are:
1. Guaranteed life cover, with a flexibility to choose insurance cover according to
your changing Needs.
2. Presenting a unique investment Asset Allocation Fund where in you have not to
worry to switch funds in case market condition charges rather experienced fund
managers will monitor the mix of Assets in the fund and will manage the mix in
such situations to maximize returns.
3. If you want to manage the mix of assets for your policy on your own, you have
the choice of 5 other investments funds with complete flexibility to switch money
from one fund to other to manage your investment better
4. Flexibility of partial withdraw at any time after three years from commencement
of the policy provided three full years premium are paid.
5. A host of optional additional rider benefits which include assurance to your
family with family income benefit and waiver of premium benefits.
How does the plan work
Premiums paid by customers, net of premium allocation charge, are invested in
funds of your Choice and units are allocated depending on the unit price of the fund. The
value of your policy is the total value of units that you hold in the fund . The insurance
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cover charges, policy administration charges and the additional rider benefits charges are
deducted through monthly cancellation of units fund management charges is priced in the
unit value.
BENEFITS
Death benefit:
On death occurring before the age of 7 years: the death benefit will be the fund
value as the date of receipt of intimation of date at the office.
On death after the age of 7 years and before the age of 60 years: the benefits
payable would be the sum assured less value of partial withdraw made in the last 24
months prior to the date of death or the fund value as on the date of receipt of intimation
of death at the company offices whichever is higher. The death benefit payable would be
calculated separately for regular premiums and top up premiums.
Maturity benefits:
On maturity the fund value in respect of regular premiums and top up premiums
will be paid
Surrender benefits:
The surrender value of the policy will be equal to the fund value less surrender
charges, if any. Any time after three years from the date of commencement of the policy,
provided due premiums for first three policy years have been paid, the policyholders will
have the option to avail of surrender benefits by complete surrender of units.
Additional rider benefits:
The following additional rider benefits in the form of rider can be availed at the
option of the policyholder.
UL Accidental death benefits rider UL Accidental permanent total/partial disability benefit rider. UL Critical illness benefits rider.
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UL Hospital cash benefits rider
Free lock period:
Within 15 days from the date of receipt of the policy ,you have the option to
review the terms and conditions and return the policy, if you disagree to any term &
conditions, stating the reason for your objections. You will be entitled to a refund of the
premium paid, subject only to a deductions of a proportionate risk premium for the period
on cover and the expenses incurred on medical examination and stamp duty charges. The
return paid to you will also be reduced/increased by the amount of any reduction/increase
in the fund value.
Day of grace :
A grace period of 30 days for the yearly, half yearly and quarterly modes and of
15 days for the monthly modes is allowed under the policy, your policy remains in force
for all insurance covers, if any even if the due premiums are not paid during this period.
Revival of the policy: It is possible to revive a policy that has lapsed due to non-payment of premiums
within 2 years from such date of lapse. You have to give a written application to the
company to receive the policy with all due unpaid regular premiums. The revival will
effected subject to underwriting.
Tex benefits :
Premium paid and benefits received will be eligible for tax benefits as per
application tax laws.
Important details of Bajaj allianz unit gain plus gold:
Minimum age at entry 0 years risk commences at age 7. Minimum maturity age 18 years
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Maximum maturity age 70 years Additional rider benefits 65 years for all riders expect UL wop.
Century plus
Bajaj Allianz Century plus offers, you a limited premium payment term option
and a unique combination of protection and prospectus with attractive returns. With
98% allocation in first 2 years and 100% thereafter, we ensure that your investment
income gets accelerated and you reap benefits from a plan that delivers prosperity and
happiness to you.
Features of the plan are Guaranteed life cover of sum assured plus fund value.
Take maximum advantage of booming markets today and get maximum
allocation on your funds from the 1 st year onwards.
Loyalty units to enhance your fund value every year from the sixth policy year.
If you want to manage the mix of assets for your policy on your own, you have a
choice of 5 investment funds to invest it.
Flexibility to partial withdraw at any time after 3 year from commencement of the policy provided 3 full premiums are paid.
At maturity, you can take your fund value at maturity date or periodic instalment
spread over a maximum period of 5.
A host of optional additional rider benefits which includes assurance to your
family with accidental death benefit and accidental permanent total/partial
disability benefit.
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WHY?
Integrity is the bedrock on which the company and the expectations of the
customers and employees are built.
Integrity establishes the credibility of the person, define the character and
empowers one to do justice to the job.
Enables building confidence and trust, achieving transparency and laying a
strong foundation for a binding relationship.
Guiding principle for all walks of life .
INNOVATIONS
WHAT IS IT? Building a storehouse of treasures through experiences.
Looking at every product and process through fresh eyes everyday
WHY?
To exceed customer expectation and maximize customer retention.
To achieve competitive advantage.
To promote a growth and upgrade standards in the industry.
To foster creativity amongst employees and partners
To open a world of new possibilities.
CUSTOMER CENTRIC
WHAT IS IT?
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Understanding his expectation by keeping him as the center point
Listen actively.
Understand customer need and deliver solutions.
Customer interest always supreme
WHY?
Reinforce brand loyalty by complete transparency.
Customer is the source of revenue for the company.
Customer is the reason for our existence.
Ensure that customer choose our company to do business with. Will contribute to customer retention
Customer goodwill alone can bring more business and more customers .
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PEOPLE CARE
WHAT IS IT? Genuinely understanding the people we work with.
Guiding their development through training and support.
Helping them develop requisite skills to reach their true potential.
Know them on a personal front.
Create an environment of trust and openness.
WHY?
People are the most valuable asset of the company.
Motivate to individual to give his/ her best.
Job satisfaction.
TEAM WORK
WHAT IS IT?
Whole team makes the ownership of the deliverable.
Consult all involved, understand and arrive at a common objective.
Co-operate and support across departmental boundaries.
Identify strength and weaknesses accordingly allocate responsibility to
achieve common objective.
WHY?
Together every one achieves more.
It adds joy at work place.
Teamwork generates synergy and provides a focused approach.
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CHAPTER-2 .
STATEMENT
OF
OBJECTIVE
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STATEM ENT OF OBJECTI VE
The objective of study is the comparative analysis of ULPPS with traditional
pension plans in terms of returns, risk coverage, growth and liquidity; various factors that
are to be studied like income level and stock market, performance, age; risk bearing
capacity
The objective of this report is to find out the difference between Conventional Pension
Plans and Unit linked pension plans by comparing both of them. The main aim of this
research is to find out the truth which is hidden and which has not yet been discovered.
The truths that Unit linked pension plans are better than Conventional pension plan.
The main purpose of this study is to gain familiarity with a phenomenon and toachieve new insights to Unit linked pension plans against Conventional pension plan.
No doubt, after watching the ups and downs of the stock market take the idea of a
traditional pension might sound pretty good but now there is a new concept of Pension
plan i.e. Unit linked pension plan, they are the source of getting higher tax free returns
and are beneficial for long term investments. On the other hand they also provide
financial back up at the event of the death of policy holder.
CONSTRUCT
Comparative analysis of ULPPS and traditional Pension Plans .
INDEPENDENT VARIABLES
Stock market situations,income levels,age,risk bearing capacity,level of inflation in
economy.
Dependent VariablesDemand and sale of (ULPPS) performance of the company,
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CHAPTER-3
RESEARCH
METHODOLOGY
So we should consider the following steps in research methodology:
Meaning of research Problem statement Research design Sample design Data collection Analysis and Interpretation of data
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Meaning of Research
Research is defined as a scientific & systematic search for pertinent information
on a specific topic. Research is an art of scientif ic research.
PROBLEM STATEMENT
The research problems, in general, refers to some difficulty with a researcher
experience in the contest of either a particular or a theoretical situation and want to obtain
a salutation for same. The present project has been undertaken to do the Financial
Analysis at UCP.
RESEARCH DESIGN
A research is the arrangement of the conditions for the collections and analysis of
the data in a manner that aims to combine relevance to the research purpose with
economy in procedure. In fact, the research is design is the conceptual structure within
which research is conducted; it constitutes the blue print of the collection, measurementand analysis of the data. As search the design includes an outline of what the researcher
will do from writing the hypothesis and its operational implication to the final analysis of
data. 5
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Research Design can be categorized as:
The present study is exploratory in nature, as it seeks to discover ideas and insight
to brig out new relationship. Research design is flexible enough to provide opportunity
for considering different aspects of problem under study. It helps in bringing into focus
some inherent weakness in enterprise regarding which in depth study can be conducted
by management. 5
SAMPLING DESIGN:
A sample design is a definite plan for obtaining a sample from the sampling
frame. It refers to the technique or the procedure that is adopted in selecting the sampling
units from which inferences about the population is drawn. Sampling design is
determined before the collection of the data.
TYPES OF RESEARCHDESIGN
EXPLORATORYRESEARCHDESIGN
DESCRIPTIVE&
DIAGNOSTICRESEARCH DESIGN
EXPERIMENTALRESEARCHDESIGN
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Several decisions have to be taken in context to the decision about the appropriate sample
selection so that accurate data is obtained and efficient results are drawn.
DATA COLLECTION
After the research problem has been identified and selected the next step is to
gather the requisite data. While deciding about the method of data collection to be used
for the researcher should keep in mind two types of data VIZ. primary and secondary
TYPES OF DATA
PRIMARYDATA
SECONDRYDATA
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PRIMARY DATA:
The primary data are those, which are collected afresh and for the first time, and
thus happened to be original in character. We can obtain primary data either through
observation or through direct communication with respondent in one form or another or
through personal interview. 3
SECONDARY DATA:-
The secondary data on the other hand, are those which have already been collected
by someone else and which have already been passed through the statistical processes.
When the researcher utilizes secondary data then he has to look into various sources from
where he can obtain them. For example Books, magazines, newspapers, Internet,
publications and reports etc. 3
In the present study I have made use of secondary data collected from their websiteand from their records.
METHODS OF PRIMARY DATA
OBSERVATIONMETHOD
QUESTIONNAIRE METHOD
INTERVIEWMETHOD
SCHEDULEMETHOD
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RESEARCH M ETH ODOL OGY
A careful investigation or inquiry especially through search for new facts in any
branch of knowledge.
Research Methodology is a way to systematically solve the problem. It may
be understood as a science of studying how research is done scientifically.
Basic purpose of each and every research is to discover answers to questions
through the applications of procedures.
The process of research includes research design, which includes a conceptual
structure within which research could be conducted.
The function of research design is to provide for the collection of relevant evidence with
minimal expenditure of effort, time and money.In this report the research design applied is DESCRIPTIVE
It includes primary survey and the related facts and findings.
It describes the current state of the market and the preferences of Unit linked
pension plan over conventional pension plan.
It describes the relationship between conventional pension plan and Unit linked pension
plan along with the description as to how they are competing in the market.
RESEARCH M ETH ODOL OGY
Research Design : Descriptive
Population: General Public
Data: PRIMARY DATA through doing a survey to find out the best among two.
SECONDARY DATA by collecting useful information from journals,
Newspapers and web sites.
Sample size: 150 PEOPLE
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CHAPTER-4
I NTRODUCTI ON OF CONVENTIONAL
PENSI ON PL ANS
AND
UNI T LI NKED PENSI ON
PLANS
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Introduction to Pension Plans
Pension plans offered by life insurance companies help individuals plan
effectively for their retirement. For, it is pension plans that provide individuals with a
regular income in their golden years.
However, since the tax benefit on such plans is limited to Rs 10,000, investments
in such plans have been somewhat subdued. Apart from the tax benefits, it is important
that individuals evaluate pension plans from a retirement planning perspective.
Life insurance policies are valuable assets to mitigate the financial risk of untimely death.As such, every individual facing such a financial risk who can afford to pay for such a
protection must seriously consider purchasing some life insurance. In the current Indian
market, this choice is difficult on three counts:
Inherent complexity due to uncertainty and long time horizons.
The need to compare a plethora of different types of products from competing
insurance companies.
Most insurance policies bundle pure insurance with savings to offer composite
products.
A pension is a steady income given to a person (usually after retirement) .
Pensions are typically payments made in the form of a guaranteed annuity to a retired or
disabled employee. Some retirement plan (or superannuation) designs accumulate a cash
balance (through a variety of mechanisms) that a retiree can draw upon at retirement,
rather than promising annuity payments. These are often also called pensions. In either
case, a pension created by an employer for the benefit of an employee is commonly
referred to as an occupational or employer pension. Labor unions, the government, or
other organizations may also fund pensions.
http://en.wikipedia.org/wiki/Retirementhttp://en.wikipedia.org/wiki/Annuity_(financial_contracts)http://en.wikipedia.org/wiki/Retirement_planhttp://en.wikipedia.org/wiki/Retirement_planhttp://en.wikipedia.org/wiki/Annuity_(financial_contracts)http://en.wikipedia.org/wiki/Retirement -
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What are Pension Plans?
Simply put, pension plans (also referred to as retirement plans) are offered by
insurance companies to help individuals build a retirement corpus. On maturity this
corpus is invested for generating a regular income stream, which is referred to as pension
or annuity. Pension plans are distinct from life insurance plans, which are taken to cover
risk in case of an unfortunate event.
Pension Plan Details
Age (Yrs)
Sum
assured
(Rs) Tenure (Yrs)
Annual premium
(Rs)
Maturity
amt (@6%)
(Rs)
Maturity amt
(@10%) (Rs)
30 500,000 30 13,500 960,000 1,590,500
Actual rate of return (%) 5.10 7.80
Annuity amt (Rs) 71,500 118,500
The example given above is illustrative. It will differ across insurance companies.
Let us take an individual aged 30 years who wants to buy a pension plan with a sum
assured of Rs 500,000 for a 30-year tenure. The premium to be paid for the same is
approximately Rs 13,500. In case of an eventuality, the beneficiary will stand to get the
sum assured of Rs 500,000 plus the bonuses/additions, if any.
In case the individual survives the tenure, he will stand to benefit to the tune of
the maturity amount as indicated in the table below. Assuming that he buys an annuity for
life, the annual amount he would get as pension would be approximately Rs 71,500 (onRs 960,000) or Rs 118,500 (on Rs 15,90,500). The option of receiving
monthly/quarterly/half-yearly pension is available with most life insurance companies.
However, the returns shown at 6% and 10% are not calculated on the premium
paid. They are calculated after deducting expenses from the premium. The actual
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compounded annual growth rate (CAGR) on the premium works out to approximately
5.10% (for the 6% figure) or 7.80% (for the 10% figure).
Conventional Pension Plan
Conventional pensions may be suitable if you're employed and not in a company
pension scheme, or as an addition to a company pension. You may also wish to set up a
personal pension if you are self-employed, or if you are not working but can afford to put
aside money for retirement.
How Personal Pension work?
The policy is basically a savings contract, which is designed to provide an income
for life from retirement. It does this by providing a notional lump sum on retirement,
comprising of sum assured plus any attaching bonus. Subject to the prevailing
regulations, part of this lump sum can be taken in form of cash and the rest converted to
an annuity at the market rate. Alternatively, if it is permitted by the prevailing
regulations, the notional lump sum can be used to buy an annuity with any of the
insurance company who will accept such business.
On earlier death after the first year, for Regular Premium policies all premiums paid to date will be returned with interest at 8% per annum, subject to a maximum of the
sum assured plus bonuses declared to date. For Single premiums, it is sum assured plus
bonuses declared to date. Normally, we will declare a reversionary bonus once a year.
Once added, it cannot be reduced.
Reversionary bonus will take the form of a simple addition to your policy benefits. In
addition, on maturity, a terminal bonus might be payable. On death, an interim bonus,
reflecting the period since the last addition of reversionary bonus, might also be payable.
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Where Conventional pension plan invest?
Conventional pension plans invest a major portion of the premium monies in
bonds and government securities (G-Secs). That is why the returns are on the lower side.
And if one were to factor into the equation an annual inflation figure of approximately
5%-6% per annum, then the real return figures look even more unimpressive.
Riders available in conventional plan:
Critical Illness Rider: In the event of the Life Assured contracting a critical
illness, an additional payment equivalent to the Sum Assured under the rider
would be made. This cover is available up to a maximum of 65 years of age.
Claims for critical illnesses are not admitted for the first 6 months of the policy.
This benefit is available on the basis of the life assured surviving 28 days from
such diagnosis. Accident and Disability Benefit Rider : In case of accidental death, the nominee gets an
additional Sum Assured under this rider.
(a) In case of accidental death while travelling by mass surface transport, the
nominee will get twice the Sum Assured under the rider.
(b) In the event of total and permanent disability due to an accident, which impairs
one's capacity to earn, 10% of the Sum Assured is paid every year for 10 years.
Term Cover - Additional Protection for your family: You have the option to
include a Term Cover in your policy, which will provide an additional life
insurance protection at a nominal cost. This also ensures that the pension availableto spouse is further supplemented.
Family Income Benefit: You can select the unique Family Income Benefit from
Bajaj Allianz that ensures total financial protection for your loved ones. In case of
death or accidental total permanent disability, a guaranteed monthly income of
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1% of the sum assured (12% per annum) is paid till the vesting date or at least for
a period of 10 years, whichever is higher. Moreover, all future premiums are
waived. This unique regular income benefit can act as an important supplement to
the pension available to the spouse in case of death mode may be changed to
make each installment more than the minimum requirement. If it is still below the
minimum, the Sum Assured + Accrued Bonuses would be paid.
Why returns in conventional plans is low ?
Because of not taking of the risk nature they invest in government securities and
bonds their returns are in the lower side. That is why the sale of conventional pension
plan is also low.
UNIT LINKED PENSION PLAN
The unit linked pension plan is basically an insurance contract, which is designed
to provide a retirement income for life.Your premiums are invested in units of the investment fund of your choice, based on the
prevailing unit price. On vesting the value of your units will be used to buy your
retirement benefits.
On earlier death, the beneficiary receives the value of your units plus a cash lump
sum of Rs. 1,000.
The amount of money that a person invested in a ULPP, and will end up with
during retirement depends on three factors - costs such as those for management and
administration, fund management performance and the market growth over the years.
Costs are important as they eat into your premium contribution before the
remainder can be invested. Thus, the lower the costs, the better the chances of higher
accumulation.
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Various companies structure or spread the costs differently during the tenure of
their plan. The structuring may even differ with plans from the same company.
Out of the three factors, while fund management and market growth are
prospective in nature and beyond your control, you can research on the cost structure of
various ULPPs - information that the insurance advisor can give you - before you invest.
Given the cost structure, you can project the retirement corpus you will need at
the get at the end of the tenure. Since most of the ULPPs right now have a very short
track record, it makes sense to supplement it with the fund performance to find out
whether the company can really deliver on its projections (see Growth and Returns).
Considering plans with the highest equity exposure from six top life insurers (in
terms of their market share), we find that among plans with 100 per cent equity exposure,
HDFC Standard Life's plan comes right on top with the best projected value.
It has shown consistency in returns and has the maximum exposure to equities. Of
the two other companies providing plans with lower equity exposure, the choice is not a
clear one.
By now, it will be clear to you that in the future, you will have to do much more
than just take the easy route of investing in a pension plan to save taxes. You will have to
take an informed decision on the prospects.With the right amount of homework, you can
ensure that you get a lot of happiness out of the happy combination pension plans
provide:
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Unit-Linked Pension Plans
Built-in Flexibility Age at Term/
Vesting (Yrs) Deferment (Yrs)
Available Plans Min. Max. Min. Max.
HDFC Standard life Unit Linked
Pension50 75 10 40
ICICI Pru. Life Time Super
Pension45 75 10 57
SBI Life Horizon II Pension 50 70 10 52
Met Advantage Plus 45 55 10 50
Aviva life Insurance-Pension
Plus40 70 5 70
Max Life insurance Life maker 50 70 5 52
Returns Annualized Projected Max. Equity
over 1-
year (%)
return(%)
corpus
(Rs) lakh Exposure (%)
HDFC Standard Life Unit-
Linked Pension36.46 39.2 51.38 100
ICICI Prudential Life Time
Super Pension38.06 40.08 45.38 100
SBI Life Horizon II Pension 46.61 132.44 46.39 100
Met Advantage Plus 38.44 38.25 45.92 100Aviva life Insurance - Pension
Plus16.75 24.59 44.42 60
Birla Sunlife Flexi Secure Life
Retirement Plan-II16.18 14.29 51.21 35
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Why Unit linked pension plan good?
Most insurers in the year 2011 have started offering at least a few unit-linked
plans. Unit-linked life insurance products are those where the benefits are expressed in
terms of number of units and unit price. They can be viewed as a combination of
insurance and mutual funds.
The number of units that a customer would get would depend on the unit price
when he pays his premium. The daily unit price is based on the market value of the
underlying assets (equities, bonds, government securities, et cetera) and computed from
the net asset value.
The advantage of unit-linked plans is that they are simple, clear, and easy tounderstand. Being transparent the policyholder gets the entire upside on the performance
of his fund. Besides all the advantages they offer to the customers, unit-linked plans also
lead to an efficient utilisation of capital.
Unit-linked products are exempted from tax and they provide life insurance.
Investors welcome these products as they provide capital appreciation even as the yields
on government securities have fallen below 6 per cent, which has made the insurers slash
payouts.
According to the IRDA, a company offering unit- linked plans must give the
investor an option to choose among debt, balanced and equity funds.
If you choose a debt plan, the majority of your premiums will get invested in debt
securities like gilts and bonds. If you choose equity, then a major portion of your
premiums will be invested in the equity market. The plan you choose would depend on
your risk profile and your investment need.
The ideal time to buy a unit-linked plan is when one can expect long-term growth
ahead. This is especially so if one also believes that current market values (stock
valuations) are relatively low.
So if you are opting for a plan that invests primarily in equity, the buzzing market
could lead to windfall returns. However, should the buzz die down, investors could be
left stung.
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If one invests in a unit-linked pension plan early on, say when one is 25, one can
afford to take the risk associated with equities, at least in the plan's initial stages.
However, as one approaches retirement the quantum of returns should be subordinated to
capital preservation. At this stage, investing in a plan that has an equity tilt may not be a
good idea.
Considering that unit-linked plans are relatively new launches, their short history
does not permit an assessment of how they will perform in different phases of the stock
market. Even if one views insurance as a long-term commitment, investments based on
performance over such a short time span may be appropriate.
ADVANTAGES OF ULPP S
The advantage of unit-linked pension plans is that they are simple, clear, and easy
to understand.
Being transparent the policyholder gets the entire upside on the performance of
his fund. Besides all the advantages they offer to the customers, unit-linked plans also
lead to an efficient utilization of capital.
Unit-linked products are exempted from tax and they provide life insurance.
Investors welcome these products as they provide capital appreciation even as the yields
on government securities have fallen below 6 per cent, which has made the insurers slash
payouts.
According to the IRDA, a company offering unit-linked plans must give the
investor an option to choose among debt, balanced and equity funds. If you opt for a unit-
linked endowment policy, you can choose to invest your premiums in debt, balanced or
equity plans.
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If you choose a debt plan, the majority of your premiums will get invested in debt
securities like gilts and bonds. If you choose equity, then a major portion of your
premiums will be invested in the equity market. The plan you choose would depend on
your risk profile and your investment need. ULPP provides multiple benefits to the
consumer
The benefits include:
Investment and Savings
Flexibility
Investment Options
Transparency
Liquidity
Regular income
Tax planning
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CHAPTER-5
ANALYSIS
AND
INTERPRETATION
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CONVENTIONAL PENSION PLAN
ICICIPrudential(ForeverLife)
Tata AIG(Nirvana)
BajajAllianz(Swarna
Vishranti)
LIC(JeevanSuraksha/
JeevanDhara)
LIC(JeevanNidhi)
HDFCPersonalPension
Plan
Max NewYork Life(EasyLife)
SBI(LIFELONGPensions)
Kotak Mahindra(Retirement
incomeplan)
INGVys(Be
Yea
MINIMUMANNUALPREMIUM(RS)
6,000 - 5,000 2,500 3,000 2,400 2,500 3,000 4,000 5,000
MINIMUMCOVER (RS)
50,000 50,000 50,000 50,000 50,000 - - 25,000 - -
MIN-MAX.TENURE(YRS)
5 30 - 5 - 40 2 - 35 5 35 10 - 40 10 40 2-52 yrs for Pure Pension
plan; 5-52 yrsfor Pension
cum LifeCover plan.
5 - 30 5 -
MIN/MAXAGE ATENTRY(YRS)
20-60 18-55 18-65 18-65 yrs(for JeevanDhara);18-70 (for JeevanSuraksha)
18-65 18-60 20-60 18-65 yrs for Pure Pension
plan; 18-60for Pensioncum lifecover plan.
18-60 18-
MIN-MAXVESTINGAGE (YRS)
50-70 50-65 45-70 50-79 40-75 50-70 50-70 50-70 45-65 45-70
RIDERSAVAILABLE
Criticalillness rider,Accident anddisability
benefit rider
Termrider,Criticalillnessrider,Accidentrider
Termcover,Criticalillnesscover,Hospitalcash
benefit,Accident
benefit,Familyincome
benefit
Termassurancerider,Criticalillnessrider
Accidentaldeath anddisability
benefitrider,Termassurancerider,Criticalillnessrider
No No No Term /PreferredTerm rider,Accidental
benefit rider,Criticalillness rider,Permanentdisabilityrider, Lifeguardianrider,Accidentaldisabilityguardianrider
TerRid
LIFE COVER AVAILABLE
Yes - Yes Yes Yes - - Yes Yes -
Conventional pension plans invest a major portion of the premium monies in
bonds and government securities (G-Secs). That is why the returns are on the lower side.
And if one were to factor into the equation an annual inflation figure of approximately
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5%-6% per annum, then the real return figures look even more unimpressive.This is
where unit linked insurance plans (ULIPs) can play an important role in the retirement
planning exercise. ULIPs have a mandate to also invest a portion of the premium in the
stock market apart from bonds and G-Secs. Studies have shown that from a long-term
perspective, equities are equipped to give a higher return other fixed income instruments
like bonds and G-Secs. And since retirement planning is a long-term exercise, individuals
would do well to consider investing a portion of their retirement money in pension
ULIPs.
Pension ULIPs: How they fare
ICICIPrudential(LifetimePension II)
HDFCStandardLife(UnitLinkedPensionPlan)
Birla SunLife(FlexiSecureLife II)
LIC(FuturePlus)
BajajAllianz(UnitGaineasyPension)
Max NewYork Life(LifeMaker PensionPlan)
MetLife(MetAdvantage)
ULIP FUNDOPTIONS
PensionMaximiser II (Growth),PensionBalancer II(Balanced),PensionProtector II(Income),Preserver
Growthfund,Equitymanagedfund,Balancedfund,Defensive fund,Securefund,Liquidfund
Nourish,Growth,Enrich
Bondfund,Incomefund,Balancedfund,Growthfund
Equityindex
pensionfund, Equity
plus pensionfund, EquityMidCap
plus pensionfund, Debt
plus pensionfund,Balanced
plus pensionfund, Cash
plus pensionfund
Growthfund,Balancedfund,Conservative fund,Securefund
Multiplier,Accelerator,Balancer,Moderator , Protector,Preserver
ALLOCATIONTO EQUITIES Upto 100%in pensionmaximiser-II; upto 40%in pension
balancer-II;nil inProtector II& Preserver
100% ingrowthfund; 60-100% inequitymanagedfund; 30-60% in
balanced
Upto35% inEnrich;upto 20%inGrowth;upto 10%in Enrich
Bondfund: NIL;Incomefund: Notmorethan20%;Balanced
Equityindex pensionfund: atleast 85% instocks
primarilyfrom NSE
Nifty Index;
20-70% inGrowthfund; 10-40% inBalancedfund; 0-15% inConservative fund;
Multiplier:100%;Accelerator: upto80%;Balancer:upto 50%;Moderator : upto
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fund; 15-30% indefensivemanagedfund; nilin securemanaged& liquidfund
fund: Notmorethan30%;Growthfund: Notmorethan 60%
Equity plus pensionfund: atleast 85%;EquityMidCap
plus pensionfund: atleast 50% inmidcapstocks; Debt
plus pensionfund: NIL;Balanced
plus pensionfund: 30%-50% inequity indexfund and50%-70% indebt plusfund; Cash
plus pensionfund: NIL
NIL inSecurefund
20%;Protector andPreserver:
NIL
MINIMUMPREMIUM(RS)
10,000 10,000 5,000 5,000 10,000 10,000 10,000
LIFE COVER
OPTIONAVAILABLE
Yes No Yes Yes No No Yes
HOW IS SUMASSUREDCALCULATED
Option 1:Zero sumassured.Pureaccumulation. Option 2:Sumassured =annualcontributionX tenure.
Sumassured =Rs 1,000
plus thefundvalue.
10 timestheregular
premiumamount.
5-20times theannualised
premium
Zero sumassured.Pureaccumulation.
Sumassured =value of units in the
policy.
110% of the valueof units inthe unitaccount.
MIN/MAXAGE ATENTRY (YRS)
Option 1:18-65.Option 2:18-60
18-60 18-65 18-65 18-65 18-60 20-55
MIN-MAXVESTINGAGE (YRS)
45-75 50-70 50-70 40-75 45-70 50-70 45-65
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INITIALYEARS'EXPENSES
17%-22% infirst yr.12%-15%for secondyr.(Exact
percentagedependsupon theannual
premiumamt).
8.50%-22% for years 1and 2.(Exact
percentagedependsupon theannual
premiumamt).
21% for the firstyear.
8%-13%for years1 and 2.(Exact
percentagedependsupon the
premiumamount).*
15% for thefirst year.
20% inyear 1;10% inyear 2.
20% inyear 1. 2%for years 2to 10.
FUNDMANAGEME
NT CHARGES
Maximiser II- 1.5%;
balancer-1.0%;
protector II& preserver-0.75%
0.80% 1% Bondfund andIncomefund:
1%;Balancedfund:1.25%;Growthfund:1.50%
EquityMidCap
plus andEquity plus
pensionfunds:1.5%;Equityindex
pensionfund: 1%;Debt plus
pensionfund andCash plus
pension
fund:0.70%;Balanced
plus pensionfund: Asapplicableoncomponentfunds
1.25% for Growthfund;1.10% for
Balancedfund;0.90% for Conservative andSecurefund
Multiplier andAccelerator: 1.75%;
Balancer andModerator : 1.50%;Protector andPreserver:1.25%.
Having said that, it is also important that investments in ULIPs are made after
considering expenses like fund management charges since this will impact returns over the long-term. Also, don't lose sight of your overall equity allocation.
For example, if the individual has already invested a significant amount of his
money in stocks and equity funds, then he might be better off investing in a conventional
pension plan from a diversification perspective.
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ULIPs other important benefits like liquidity. You can withdraw money from a
ULIP to meet emergencies. Also, you can invest surplus money (i.e. top-ups) over and
above the premium amount.
Some insurers have launched capital guarantee ULIPs. Such products aim to
guarantee the premiums paid by the individuals (net of expenses) plus the bonus declared,
on maturity. Individuals, who fear 'loss of capital' in a ULIP, will find such products
attractive.
However, capital guarantee ULIPs have lower equity exposure which could
dampen returns for the aggressive investor.
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DIFFERENCE BETWEEN CONVENTIONAL PENSION INS PLANS
AND UNIT LINKED PENSION PLANS
There