Good or Bad? A Detailed Review

Aviva Saral Pension is a Non-Linked Non-Participating Single Premium Individual Immediate Annuity Plan. It is a single premium immediate annuity plan, that guarantees a regular income for the rest of your life, and provides financial security to your loved ones after you.

• Guaranteed Lifetime Income: Make a one-time payment and receive guaranteed regular income for the rest of your life, starting as early as the next month.
• Secure Your Loved Ones’ Future: opt for the Joint Life feature to ensure a steady income for your spouse.
• Loan Facility: Address unexpected financial needs with the option to avail of a loan against the policy after six months.

Life Annuity with Return of 100% of Purchase Price:

On the death of the Annuitant, the annuity payment shall cease immediately. The Purchase Price (excluding taxes, if any) shall be payable to the nominee(s) / legal heirs.

Joint Life Last Survivor Annuity with Return of 100% of Purchase Price (ROP) on the death of the last survivor:

On first death (of either of the covered lives): 100% of the annuity amount shall continue to be paid as long as one of the Annuitants is alive.

On the death of the last survivor: The annuity payments will cease immediately. The Purchase Price (excluding taxes, if any) shall be payable to the Nominee(s) / legal heirs.

There is no Maturity Benefit under the product.

Life Annuity with Return of 100% of Purchase Price:

Annuity Payments will be made in arrears for as long as the Annuitant is alive, as per the chosen mode of annuity payment

Joint Life Last Survivor Annuity with Return of 100% of Purchase Price (ROP) on the death of the last survivor:

The annuity will be paid in arrears for as long as the Primary Annuitant and/or Secondary Annuitant is alive, as per the chosen mode of annuity payment.

You have the right to review the terms and conditions of this Policy.

If you disagree with any of the terms or conditions, you have the option to return the Aviva Saral Pension Plan Policy within 15 days from the date of receipt of the Policy Document (30 days from receipt in case the Policy is solicited through distance marketing).

The Aviva Saral Pension Plan policy can be surrendered any time after six months from the date of commencement if the annuitant or the spouse or any of the children of the annuitant is diagnosed as suffering from any of the critical illnesses specified in the Policy Document.

• You can avail of a loan against your Aviva Saral Pension Plan policy any time after six months from the policy’s commencement date.
• A convenient one-time investment that provides a steady stream of regular income.

• Annuity payments are subject to full taxation.
• The annuity does not account for inflation adjustments.
• There are limited options available for annuity selection.

The Aviva Saral Pension Plan is a single-premium plan where you invest your retirement corpus to receive a regular annuity.

While the guaranteed lifetime cash payouts may appeal to senior citizens, it’s essential to assess the plan’s returns. Let’s calculate the Internal Rate of Return (IRR) using a quote from the official portal.

A 60-year-old male invests ₹25 Lakhs in the Aviva Saral Pension Plan, selecting Plan Option 1: Life Annuity with a Return of 100% of Purchase Price (ROP).

This option provides an annual annuity of ₹1.56 Lakhs, and upon his death, the ₹25 Lakhs purchase price is returned to his nominee. Assuming a life expectancy of 85 years, the IRR for this cash flow is 6.16%.

This return is suboptimal. Moreover, the annuity amount remains fixed throughout the Aviva Saral Pension Plan policyholder’s lifetime, making it inadequate to keep up with rising living costs and healthcare expenses during retirement.

Another significant drawback of annuity plans is the locking up of funds. Once the Aviva Saral Pension Plan is purchased, the corpus cannot be accessed except in specific situations or upon death.

The combination of low returns, a fixed annuity that doesn’t account for inflation, and restricted access to funds renders the Aviva Saral Pension Plan an inefficient choice for retirement planning.

The return analysis clearly shows that the Aviva Saral Pension Plan falls short of meeting long-term post-retirement expenses. Therefore, let’s explore alternative investment opportunities for your retirement corpus.

Several fixed-income instruments offer better returns than the Aviva Saral Pension Plan, while also providing guaranteed regular income and greater liquidity. Examples include:

• Senior Citizen Savings Scheme (SCSS): Offers an 8.20% interest rate.
• Bank Fixed Deposits (FDs): Provide interest rates ranging between 7% and 8%.
• RBI Floating Rate Bonds: Currently at 8.05% with a floating interest rate.

While these options provide higher returns, they too may struggle to address rising expenses due to inflation. For a sustainable, inflation-adjusted income, a diversified investment portfolio combining equity and debt is essential.

Let’s illustrate this strategy using the same example. A retirement corpus of ₹25 Lakhs generates an annual annuity of ₹1.57 Lakhs under the Aviva Saral Pension Plan. Instead, this corpus can be allocated 60:40 between equity and debt.

₹15 Lakhs in equity for growth (assumed returns: 12% p.a.).

₹10 Lakhs in debt for regular income (assumed returns: 6% p.a.).

The first year’s withdrawal matches the annuity amount of ₹1.57 Lakhs. To combat inflation, withdrawals increase by 6% every five years. The debt portion is replenished periodically from equity to maintain regular payouts.

By age 71, the equity portion is fully shifted to debt for greater stability. Despite this transition, the corpus remains intact, leaving approximately ₹44 Lakhs at age 85.

This strategy highlights the potential of a diversified portfolio to provide inflation-adjusted income and ensure your corpus lasts a lifetime. The 60:40 ratio and asset reallocation can be tailored to your risk tolerance, allowing for a personalized approach to retirement planning.

A steady income stream during retirement is vital to maintain your lifestyle and manage unforeseen expenses. While the Aviva Saral Pension Plan offers regular income, it may fall short of meeting your financial needs and handling emergencies effectively.

The primary limitation of the Aviva Saral Pension Plan lies in its rigidity. It provides a fixed annuity for life and restricts access to the corpus, making it challenging to address rising expenses or unexpected financial demands.

A diversified investment portfolio with regular rebalancing is a more flexible and effective approach to combat inflation over time and it also has a high agent commission.

By customizing an equity and debt allocation based on individual preferences and goals, this strategy can help ensure your corpus lasts throughout your lifetime—and potentially beyond.

Retirement planning is a critical part of any financial strategy, but traditional annuity or pension plans may not suit everyone.

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To develop a retirement plan tailored to your unique needs, consider consulting a Certified Financial Planner who can design a strategy aligned with your goals and circumstances.