I am contributing ₹10,000 to HDFC Personal Pension Plan since last 10 years in. I am not satisfied with the returns generated by the plan. Should I continue with my investments or exit? Please Guide. I have now started investing ₹50,000 in NPS since last year. I want to know which one would be better for me? Please guide.
- Kishore M Mulay
HDFC Personal Pension Plan is a Unit Linked Pension Plan. The plan offers you an insurance cover and it allows you to invest a part of your premium regularly to build a retirement fund and buy an annuity with it when you want to retire. A part of your premium goes towards the insurance cover and other charges and the rest is invested to generate returns. That is the reason why these products cannot be compared to pure insurance or investment products. As a rule, it is better to avoid such plans that combine insurance and investment. They are costly and they mostly offer modest insurance life cover and returns. You may consider exiting the policy.
Do not mix insurance and investment needs in future. You must always buy a pure term insurance plan for securing a life cover. Also, it is always better to invest in insurance plans to achieve your long-term financial goals. If you are looking for tax benefits, you may consider investing in Equity Linked Savings Schemes (ELSSs) or tax saving schemes.
If you want a government-sponsored retirement product with extra tax benefits, you can invest in National Pension Scheme (NPS). But remember you can only withdraw 40 per cent of the corpus tax-free at the time of withdrawal. You must use at least 40 per cent of the corpus to buy an annuity. You can withdraw the remaining 20 per cent, but it will be added to your income and taxed as per the income tax slab applicable to you.
This article was originally published on April 12, 2016.
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