I took a ULPP in 2007 for a ten year term from HDFC Standard Life. Completed 5 premiums amounting to a total of ₹13.3 lakhs. The policy is in paid up status now and matures in April 2017. I am not interested in pension and am keenly considering surrendering the policy prior to maturity. Current fund value is about ₹24 lakh. Please advise if surrender is prudent now or next year. My plan is to invest the surrender proceeds in MF scheme. Recommend a couple of MF schemes suitable for SWP.
- Raghavan Srinivas
Unit Linked Pension Plans (ULPP) are pension schemes with inbuilt insurance. Your ULPP has given good returns. However, on maturity of such pension plans, you can withdraw 1/3rd of the maturity amount as a tax free lump sum and the balance 2/3rd has to be necessarily converted into an annuity. The annuity option, while guaranteeing income at a fixed level, offers low returns, is not tax-efficient and locks up your money. As you are not keen on a pension anyway, it will be wise to surrender the plan now rather than wait till maturity.
If you do not have a regular pension from your employer, it makes sense to divide your investment amount between assured return schemes for capital security and MF debt schemes for higher returns. For the safe portion you can opt for government backed schemes like Senior Citizen Savings Scheme (SCSS) or Post office Monthly Income Scheme (POMIS) which has capital protection and fixed rate of interest. For the market linked portion, Birla Sun Life Dynamic Bond and UTI Dynamic Bond are recommended plans.
Since you have completed the lock in period on your ULPP, the surrender value should be the same as the prevailing fund value. You may contact your insurer and find out if there is any specific clause for surrendering your ULPP before the vesting age (maturity).