ICICI prudential Life introduced Return Guarantee Fund (RGF) recently and I got a call from its tele-caller today. This is yet another option if you like to invest in ULIP plans. I was told by the representative that this plan was launched to public on 22nd Dec’08. I would like to list out the information provided by him about this plan in this post.
After LIC’s Jeevan Aastha and IDBI’s Bondsurance – a fixed return products, ICICI Prudential has launched a fund called RGF(Return Guarantee Fund) on the similar lines. However, the former two are single premium policies while RGF is an ULIP fund with multi premium options spread over a minimum of 5 years. The common factor among all three is the insurance coverage as top up for investment schemes. Advantage of all these schemes is that they offer tax benefit on investment amount as well as the returns upon maturity.
Now let me take you folks through the illustration of the RGF plan as told by the representative. I doubt if this information is proper or not as I could not find all that he said anywhere on ICICI’s website. As per him, if an individual invests a sum of INR 30,000 in this plan, you are assured of getting 50% returns on FIRST year’s premium. However, you will continue to pay annual premiums for 5 years. For the remaining 4 years, ICICI will pay an *estimated* 12% compounded interest on your money. So, your contributions would account to 1.5 lakhs by 5th year and you would get an estimated return of 2.4 to 2.5 lakhs towards the policy maturity. I fail to understand how he is projecting so much! More over he himself acknowledged the fact that on the agreement it is mentioned as 10% compounded interest would be added to the premiums.
I see a lot of catches in these kind of plans. One such catch is that you may switch out to other options anytime on the NAV value, but you will miss out guaranteed return if switched before 20th Dec 2013. To get to the facts, am I getting 50% minimum guaranteed returns for my first premium atleast? Well, it is not truth either. This is due to the fact that only a portion of your first premium is used towards purchase of units. Also, you may want to note that about 20% of the premium is deducted towards premium allocation charge, which they don’t mention while selling the plan to you. Though you expect a total return of fifty percent(Rs 10 NAV to Rs 15 NAV after 5 years), your effective guaranteed return after charges would be way lesser than that, which close to 20% after 5 years. To add to all these, there are more charges that you should be aware of. Prominent ones include the policy administration charges which is about 6% per annum. Also, brace up to shell out some of your NAV’s over a period of time in the form of mortality rate whenever you opt for cancellation of units.
Does that sound good to you? I feel it is a way to fool people. You would earn more in a fixed deposits, ofcourse without the insurance cover though! These are the lucrative times to trap the investors in the name of tax savings. If you are looking for Insurance cover, go for dedicated insurance policies than opting for ULIPs with a very marginal insurance cover.
Disclaimer:This article is based on my personal opinion and observations derived upon my conversation with a tele-caller. For more information, please check with ICICI Prudential Life Insurance directly. Image extracted from ICICI web site.
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I had invested 50k in the RGF in January 2009, with ICICI Pru. In fact, after speaking to another friend of mine who works for Infosys and is also an agent, I soon realised that with the huge charges that ICICI has, getting a return of 50% over the first premium is a stupid maistake, since they already cut over 20-25% as allocation charges. So I will only be left 37000. In five years after mortality charges this will only be like 35000. If it grows by 50%, it will only be 51000. So a profit of 1k is bad in 5 years time. I immediately switched to Growth and RICH funds, and luckily my money is now over 72000. Also, I saw that the RGF value has only increased by 10%.
So, it is important that we dont trust whatever the selling person says. Try to find on your own , or get a good agent. I for instance have an agent, who is an engineer and works for MNC, and reluctantly sells policies helped me a lot in making right switches. So Icici is not bad, but u have either to get complete knowledge, or get in touch with someone who has experience and knowledge.
Note that a good agent/seller will always:-
1. Ask you for monthly/quartely premium frequency. Because it helps reduce the loss and maximise your profit. But bad agents will force you to deposit one time because they get more commission on one time payment.
2. Ask you to invest for more than 10 years or long period. A bad agent will tell u to do it for a minimum period, and ask u to buy new policy after 3/5 years.
3. Will make you a complete plan for your financial needs, like children education and buying house and car. He will also recommend u invest in MFs. But a bad agent will tell u that MF is risky and do only ULIPs
4. Will give u complete brochure and details. A bad agent will only explain to you on paper and try to extract huge premium.
Also, remember that if you are saving for your child’s education, a certain amount needs to be calculated and invested. This will not be the same as ur pension policy premium or simple life insurance premium. So do some calculation of find a good agent. Try to find in your office if they know someone who is good and educated, not some one who is desperate to earn money and knows nothing.
And Mohan, thank you for your article, but I have had 3-4 long and short term policies with ICICI since early days after I started working, and I got really good return. I put in every month 5000 in around 2004, i.e 3lac+ till now and my money has grown to more than 7 lac + . I was also lucky that I invested in the right fund which grew heavily. Also, it is important that you switch if u are not doing on monthly basis, but it is not so much required if you do SIP ,i.e monthly.
Still, I will not consider it as a change of policy.
Either you have to forefeit/loose all the money paid as premiums till now on the first policy, or continue paying for both the policy.
If anyone are already trapped into it, then 2nd option is better.
Lesson Learnt: Change of policy is not possible under any circumstances in any company :-)
Thank you sekhar for the information. In fact I visited the ICICI office and spoke to their agents and was astonished to hear a different story from the horse mouth
When you change the policy there is another lock in period of 5 years which comes into effect
The policy would be considered as new and not taken as transfer from policy to another policy
You can withdraw funds for the next 5 years
The premieum what you pay for the new policy would be considered as a fresh one
Hence guys take care. Visit the offices and do not listen to the Franchisee agents and end up in trouble
regards
Uma shanker achanta
Today I got a call from the agent asking me to switch my existing policy to the new policy with a return gurantee. I asked her what is the returns in % and she gave me as 15% with a premieum amount to be paid is Rs 15000 for one year which comes to Rs 1000 + monthly.
I have asked them to call me back after a day or so
Any comments on this
regards
Uma shanker achanta
As far as I know, no company allows change from one policy to another policy. What they allow is, change of fund (like from growth to balanced/protector, etc) within same policy.
If you listen to the agents, you’ll end up paying/maintaining 2 policies simultaneously. I have read about such cases regarding ICICI.
Please refer to the terms in your policy document you received for exact details.
please tell some policies that gives maximum at maturity time(5 to8)years
Hello,
I am absolutely novice in these financial matters. However, I invested in the Return Guarantee Fund (Life Stage Pension Fund VII), on December, 2009, with annual premium of INR 70K. Well I don’t know I have done a mistake or not. I have not been promised of any 50% return or so.
I would appreciate if you please enlighten me about the following.
(1) What will be the approx net return at the end of 3, 5 and 7th year, taking into consideration all applicable charges and taxes (assuming that I stop paying premium after the 3rd year)?
(2) What is the minimum time period I must wait for a good return (by “good” I mean greater return than FD’s)?
Shubha, thanks for sharing the details. The calculations part is well described in comment # 14 on this article. Please go through and let us know if you still find any difficulty in understanding it.
HI
thats quite useful information. when my brother told me about this i smelled something wrong and this article explained it.
Thanks for your comment Giridhar. I am glad this article was useful to you :)
Excellent information on the post as well as comments of various people. I only want to highlight the need of professionals in the field of financial industry. People also should understand the commissions received by the agents and why they are selling a particular product to you.
I will visit the blog more often from today.. Let us build the educated community in the field of Financial investments.
Thank you. Welcome to my blog!
Hi! if anyone require any detail about icici prudential plans you may let me know. i’ll try to gather as much information as i can.
thanks
krishnan
Hi Krishna, thanks for volunteering to provide information on ICICI prudential plans. Your help will be certainly appreciate.
thanks a lot sir for given imformation about RGF . i saved my money after reading ur view.
Your comment makes me review more products :)
Hi,
I have subscribed to InvestShield Life – New last year for 30k half yearly. Now, I get calls from ICICI Pru customer care that my investment is under loss so switch to Return Guarantee Fund – Life Paid Assured where units would be allocated for 30k (equal to the amount invested last year) and the premium payments would be payed for this new scheme from now on.
Please suggest what to do as I am not good with finance matters. I greatly appreciate your suggestions. Thanks a lot.
@Megha
thanks for your inputs and your support volunteered to help out on ICICI prudential plans.
Hi! if anyone require any detail about icici prudential plans you may let me know. i’ll try to gather as much information as i can.
go on website- iciciprulife.com
Hi! I am also one of the ICICI prudential customer from last 5 years. During last five years i came in contact of various sales/ service staff of the company. i have found them very supportive and helpful. Even my funds are growing well. the only pain which i taken all these years is a visit to branch once in 2 months. be it any service request or financial transaction i always got what i need. even the staff sitting at service desk always tried to help me out in case of any issue. similarly is the case with most of my colleagues/ friends. i think just before making any investment we just have to do some surfing aboout the pdt. Today i am a proud ICICI Pru cst.
Hi , I am new in this investment area, Could anybody tell me what are the important points to be stressed before investing?
first to collect the procedures and areas where u can do investment
than collect all the merits and demerit for each plan,(as it consume tax on return, it give tax benefit on paying, it is single premium or paying contineous for theree years or any lock in period, or what charge a company cut on plans etc) than find ur purpose as u want to tex saaving or for pure financial grow, or is it fix or flowing return like this , than find for how much time u want to give to ur investment. than put only 5% of the amount (u want to invest) on the investment area u choosed (try to find the brochure of company or check the right or wrong on web site of respective company)than carefully read the bond or paper u found after invested the amount. after that u will found ur investment is right or wrong.
frm – ankur agrawal, Haridwar
i have recieved a call from markiting person for RGF, i have no experience about ULIP, person told me that invest Rs. 20000/- annualy and after 5 years i will get Rs. 90000+amount as per share markit, please tell me is it right or not. can i invest this time in this policy and also tell me that what are other charges which are extra payable.
@Natasha, @Nayan Patel
I think Deepak made a good attempt at answering your queries. I don’t have anything much to add.
@Deepak
Thanks for your inputs.
@Nayan Patel
I dont’ agree with your comparison either Nayan. How can you compare a finance product with a telecom product? Well, even I have bought this ICICI rgf 2months back and i don’t see the kind of growth that monty showcased above. Infact I have been fluctuating between very very thin marginal positive and a large swing towards negative value.
@Natasha
If all the agents were to give the right picture about the policies, none of them would stay in their policy selling jobs. You might not agree, but that is the reality.
What I understand about insurance is basically for protection for my family. If I only buy it as an investment then it beats the purpose. My agent showed me an illustration depicting various charges on my policy. I grilled my agent before investing money coz ultimately the onus lies with me. Though I have not invested in the guaranteed fund of any company as yet. However I look forward to invest with them basis my previous experience.
I do not agree to your point in reponse to Ved, Mohan. We are acapable of running business for the organizations we work for, earn salaries in the range that we do – then how can we escape with making a statement that the terms & conditions are too confusing. I am not a telecom person or a software person – but each time I change my pda – I browse the net, check options right from Irla to Croma and then pick the phone I think best suits me. Cost of phone – around 25-30K. When I invest my savings – why no due diligence there? Nokia also mentions stuff on its brouchures which is sometimes difficult to comprehend – but we still make an attempt!
@Ved Prakash
I agree with your thoughts completely.
@naveen
That is a very suggestion. But the bigger question is how many of us can really read and understand those confusing terms and conditions?
@jayant
I don’t deny that either. Like is said before due diligence is what an individual can rely on in these turbulent market scenarios.
@monty, @Nayan Patel
I am glad you both have a positive opinion about ICICI prudential. Looks like it is equally distributed among various people based on the time at which one enters in to the market. Hope everyone gets into profit side :)
I don’t get this. I am in investment field for past 15 years and have been monitoring the NAV for my policy with ICICI pru since the day they have issued me a policy.
To share with you – the NAV has not gone below Rs.10 in the past 2 months of the policy been issued to me.
I think the fund managers at ICICI do a fair job yaar… We are paying them various charges though… I have invested with them once and rest everything is taken care by them.
After reading your article I got panicked and went back just to check the value of units of my policy as on date.I invested in a policy in Dec.The NAV was Rs. 10 with no allocation charges and today the NAV is gone up to Rs. 10.51 giving me a substantial return. The value of my policy is increased by Rs.5000 in just three months. Infact I feel it was a wise investment… Who offers you this kinda return in the volatile market? Newayz at the end 5 years I m gonna get an assured NAV of 15.03 or more whichever is higher for the first premium paid by me. In today’s time, is it possible to ask for more!
I think we all have one thing in common and that is basic education and common sense.. so before making any investment atleast for once you should have a quality discussion with your advisor, and the same shouldn’t be done on any relationship. Fortunatly now a days we have all the information available on our finger tips, so spend time on this aswell, for better understaning of the products. Any kind of an investment has an objective (Short term, Long term etc)., so point is how well you know what you want from your investment..
Spend some time and then decide…
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