Life insurance is often used as a form of investment, and is thus also referred to as the best investment plans. The plans offer a two-way benefit. Firstly, they offer the safety net of insurance where the insured and his/her nominee or family get the necessary cover to guard against any potential risks, and on secondly, they get an investment product that they can use to meet their goals – whether short-term or long-term.
These investment plans are essentially of two types, Unit Linked Insurance Plans or ULIPs that provides returns based on market performance, and traditional endowment plans that offer a lump sum or annuity payout at the end of the investment policy term when the life insurance investment policy matures. Both these types of savings schemes or investment plans offer a policyholder life cover and a savings option but differ in their construct.
The best investment plans invest the premium as paid by the policyholder in the stock market and gives them returns which are comparatively volatile as they depend on the performance of the stock markets – debt or equity. Whereas, an endowment plan offers lower but safer returns. However, a customer does not get to know where they are saving money or it is being invested due to the opaque construct of endowment plans, unlike ULIPs where they know where their money is being put. ULIPs offer customers the option to check the status of their investments through a figure called the Net Asset Value (NAV), among others. That’s why a ULIP is also known a best investment plan.
Nonetheless, endowment plans have their benefits. Where ULIPs give the investment policyholder a lot more flexibility and transparency, endowment plans act as a guaranteed savings plan option as they offer definite returns.
Types of Investment Plans
Life Insurance Investment Plans for Investment Planning
The best investment plan offers the policyholder both life cover plus the added advantage of saving money. A life insurance investment policy is always taken keeping a future objective in mind and this objective could be either a long-term or a short-term objective, like buying a house, child's marriage and education or just building up a retirement corpus. The best investment plan acts as a two-in-one solution.
Unit Linked Investment Plans (ULIP) for Investment Planning
Unit Linked Investment Plans or ULIPs as commonly referred to are a type of life insurance plan wherein the money paid as premium by the policyholder is invested into the stock markets. Each and every ULIP has a different set of funds that they invest in. Policyholders who invest in a best investment plan get a certain number of units of the fund. These investments are based on the correlation of the fund value of the fund they are investing in and the premium the investors have put in.
E.g., if Mustakeem is investing Rs. 10,000 in an Equity Fund which carries a Fund Value of Rs. 10, he would get 100 units of the Equity fund (Rs 10,000 divided by Rs. 10)
This best investment plan offers a higher but more volatile return as they are directly linked to the performance of the stock market. The higher the market grows the better the returns are and vice versa. ULIPs are the best investment plans or savings schemes as they help build up corpus at a faster rate than a traditional investment plan which offers lower comparative returns. ULIPs are a great investment option if one has the risk appetite and is willing to invest for the long-term to get good returns.
Endowment Plan for Investment Planning
Endowment plans are the traditional form of life insurance plans that offer a policyholder a life cover with very low returns. Endowment plans are usually taken by policyholders who are looking for a savings plan but one which offers them guaranteed returns in lieu of a higher life cover.
Endowment plans are the best investment plan for investors who are not looking for a large corpus but are actually more concerned about keeping their money safe and secure, and still receive a certain amount of returns on their assets.
Guaranteed Return Plan for Investment Planning
These are savings plans that offer a guaranteed amount of money to a policyholder at the end of a specific investment policy term. The focus is on saving money for the future. The policyholder needs to compare and know that the guarantee he gets here is specific to set of terms and conditions of the plan. These conditions could be either a:
- Highest NAV, which is usually in Unit Liked Investment Plan
- Capital Guarantee, again offered by Unit Liked Investment Plan
- Maturity Guarantee, offered by traditional endowment plans
Benefits & Features of the Best Saving Schemes
The best investment plans or savings schemes offer more than one benefit to the consumers. Primarily, they offer:
Protection to loved ones
The best investment plan offers the dual benefit of insurance cover and investments. This means that in the event of anything unfortunate happening to the insured, their family will receive the sum for which they were insured in addition to the fund value either as a lump sum or in the form of periodic payments. This benefit of best investment plans helps secure the family’s future if the insured party is unable to earn a living or in the unfortunate event of his demise.
Goal based savings
These best investment plans or savings schemes are a great way for saving money for a goal – whether it is buying a house or a car, paying for children’s education costs, or planning for marriage or retirement. The endowment funds offer a secure yet safe way to plan for retirement if you are not keen on riskier market linked ULIP plans. The ULIP plans offer alternative investment opportunities and you can take a look at their historical returns to calculate your investment and corpus build up in a few years time. Also, the lock-in period of a best investment plan or best saving scheme ensures the investment stays untouched and builds up over the years to help you achieve your objectives.
Act as Savings Plans which help build up corpus to fulfil an investment objective as a best saving scheme
Life insurance investment plans help in saving money that can be used to fulfil an investment goal. Whether you want to buy your first house in seven years and/or save enough to buy a second home in the next five, the savings plan feature of the best investment plan can help accomplish your aims. The lock-in period ensures you saving money builds up over time and you get a corpus that you can use as needed to buy a house or invest in other assets.
Tax Benefit under section 80C and 10(10D) of current Income Tax Act
The premium paid under these best investment plans qualify for deduction under section 80C of the Income Tax Act up to applicable limits. This means that you are not taxed on the money you invest in these best investment plan or best saving schemes and additionally your income is reduced by the extent of your investments. The exemption, however, is limited to the total exemption limit under section 80C and cannot exceed that statutory limit. In addition, the payout received on maturity is exempted from tax under section 10(10D) of the Act. So in essence, you save on tax while making the investment in the best investment plan and also while receiving the amount.
Options to obtain a loan in lieu of the same as a guarantee against non-payment
Banks and financial institutions take these best investment plans as collateral for any loans given to the insured. These instruments act as security for the loan. Since the loan is in the form of a secured loan, the interest rate is generally lower and other terms and conditions more favourable as compared to unsecured loans. This is another way a best investment plan can help the insured.
What Personal Things to Check before Investment Planning
There are quite a few things that a person should keep in mind while deciding on the best investment plan or best saving scheme for their investments and life cover. The key factors are their financial goals that will determine the amount of money they need and how much they need to save to build up that corpus, the amount of savings they have on a regular basis, their future expense obligations and so on. These factors will help them rationalise between what is required in terms of cover and investment and what they have currently. The step-by-step filtering will help find the best investment plans.
- Goals: Your investment planning goals should determine what type of a best investment plan or best saving scheme you should buy. These goals may include your saving money, own marriage, buying a house or a car, providing for children’s education and marriage, building your retirement corpus and so on. In fact, even small term goals like foreign trips can be financed by investment plans like ULIPs. If you are just starting out in your career or have a small family, then you can definitely opt for a best saving scheme such as a ULIP to fund your short-term goals. On the other hand, if you are in your 40s or even 50s, then endowment plans are better as best saving schemes in combination with ULIPs or other investment options like mutual funds. Your investment planning goals will help determine which of the best investment plans work for you.
- Current Expenses vs Savings: Your current expenses and savings will have a say on the type of investments you can make to achieve your goals. With less savings and more expenses, it is unlikely that you can define large short-term goals that can be met by insurance investment plans. In such a scenario, it is best to buy an adequate life insurance cover and try to opt for mutual funds that may give better returns. Alternatively, if you live at home with your parents and have no major outgo like rent, then you are likely to have are saving money every month and should find some best investment plans to put your money in and get their two-in-one benefit.
- Future Expenses vs Savings: The amount of savings you will have in the future will also determine what kind of best saving scheme works as the best investment plan for you. If you have fewer expenses now because the children are young, you can plan for the major expenses that will come your way in a few years like the children’s college education or marriage. This means that you should opt for a best investment plan or best saving scheme that charges premium for a few years and then pays out enough that it can itself pay for any future premium from the annuity or other lump sum benefits. Moreover, you investing a higher amount now means that the best investment plan will grow to a larger capital base in 20-30 years time when you need it for your retirement. Planning your future expenses is a good way to filter the best investment plan for you.
- Major Expenses That May Arise: These best investment plans or savings schemes are a smart way to get the cover you need and also grow your money at the same time through the best saving schemes. The major expenses like buying a house or funding your retirement can be easily covered by ULIPs and even endowment plans. Also, you can plan for the major expenses that are certain to occur and take them into account while determining the best saving scheme. E.g., suppose your child is in primary school, then you know that within 8-10 years you will have to bear major expenses for their education. As such, it makes sense to start a small ULIP that ensures you can meet this definite expense in a few years time through the best investment plan.
- Insurance Cover – Existing vs. Required: The insurance cover of the best saving scheme should be adequate to take care of you or your family in case you are unable to work anymore or in the unfortunate event of you being no more. The cover provided by the best investment plan should be able to pay for your own or your family’s expenses in the years to come until your children can take care of you and your spouse in addition to themselves. To understand how much you need, make an estimate of your current and future expenses vis-a-vis what a best saving scheme offers. The cover of best investment plans should be adequate to pay for these expenses including major ones like mortgage payments, education, medical insurance premia, etc. If your cover is less than what is required, then opting for ULIPs or endowment plans as best saving schemes are a better way to ensure you increase your money while protecting yourself and your family at the same time.
- Number of Dependents: The number of dependents should also determine the amount of insurance investments you need in the best investment plans. If you have only a wife and child as dependents then your needs would be less from savings schemes in comparison to when you may be taking care of your siblings, parents, parents-in-law, grandparents, nephews, nieces, etc. Your best investment plan should not only be able to cover for all the necessary expenses and also help you build a corpus for all your and your family’s major goals. Also, the age of the younger dependents matter while choosing the best saving scheme. If you have teenage children, then it is likely you need a good plan to save up for their college education or marriage. ULIPs are better for such cases than endowment plans.
How to Find the Amount of Cover Required for Investment Planning
To understand how much cover a person needs in a best saving scheme, he or she has to take stock of their existing expenses, compute to the extent possible the amount of future obligations that are likely to crop up and how much money they need to meet their living expenses now and in the future. A key factor is also the age of dependents as this would determine how long before they can meet their own living expenses without having to depend on the payouts from savings schemes.
- Existing Debts: The existing loans that a person has are one of the primary things that one should consider while calculating the amount of life cover required in the best saving scheme. The existing loan may be a house loan or a personal loan, a car loan or an education loan. It may also include loans that a person or his/her dependents may have to take in the future and their EMI payments. E.g., a child may have to take an education loan in the future to cover for further studies or foreign studies. In such cases, the best investment plan should be adequate to cover for repayment of these loans for 2-3 or more years until the child lands a job and can repay the loan himself or herself.
- Replacement of Income: This is perhaps the most important aspect of applying for a best saving scheme in the first place. The payment from the best investment plan on the happening of an unforeseen or unfortunate event must be adequate to cover for the loss of income without any material change in one’s lifestyle. Suppose the sole breadwinner has a salary of Rs. 12 lakh per annum, then the investment policy should be able to cover for a substantial part, if not all of the income loss suffered by the family, if the insured is unable to work due to a partial or total disability or in the unfortunate event of his demise. Saving money also helps to build up a corpus that can yield interest income.
- Existing and Future Expenses: The best investment plans should be enough to cover any major expenses at present or in the near or distant future. So, larger expenses such marriage, children’s education, continuing treatment of illnesses, etc. have to be accounted for in the calculations along with saving money while arriving at the life insurance cover required for the family. The expenses should be thought out with some rationality to select the best saving scheme. Considering medical expenses or hospital stay for the family does not make sense if there is already a Mediclaim investment policy covering all such expenses. However, the annual premium amount for buying such an investment policy should be factored in while making the calculations.
- Existing Cover: The existing cover should be discounted while calculating the cover required if it is a personal investment policy. If it is the employer’s group investment policy, then the coverage under it can be considered. For more clarity, it is always better to ask the employer for the benefits under the group investment policy. Once the facts are clear, the individual can reduce the amount they are likely to receive under these policies from the new cover they need under the insurance investment plans.
Income of Spouse or Other Members of Family: While calculating the amount of cover required from savings schemes, it makes sense to discount the income of the spouse or other members of the family. This will help provide a more realistic picture of the amount of cover and investments required. If the spouse earns then the amount of cover should be able to take care of all the major expenses that are likely to occur and also take care of most of the expenses that are being met by the income of the insured. The rest of the expenses can be met from the income of the spouse.
Investment Plans Comparison for Investment Planning
Investment plans are of different type and not necessarily all plans fulfil the investment objective that a policyholder may have. To know more about this, it is always good to compare before you can purchase the best investment plan. When we are comparing we need to look at a few things.
- Cover: The amount of cover that savings schemes offer is a good indication of which insurance investment plans are better as compared to the others. The better plans will always offer the most comprehensive and yet practical coverage. Though most of the savings schemes offer similar plans, some of them may offer increased cover if the ULIP investments reach a certain milestone or may offer the same cover at a lower premium. Also, with the IRDA keeping a strict vigil on the insurance market, most insurance companies now focus on ULIPs as long-term investment products unlike before when they were mostly sold by unscrupulous agents as short-term investment plans. This means that companies now are more likely to offer better cover than before as the investors are buying the investment policy for the longer period instead of looking at it like a short-term plan.
- Add-On Covers and Riders: The best investment plans offer additional covers and riders at significant discounts. These add-on riders may include increased life cover for a smaller additional premium, cover for parents or larger number of family members, health cover, regular health checkups, and so on. These additional riders, though not always a feasible option, may offer the specific cover that a person may be seeking. For instance, some riders may include personal accident insurance, and child insurance, among others. All of these are available at a discount as compared to what taking one of them as a single investment policy may come up to in terms of premium amount. An individual can opt for the add-on covers or riders that suit their needs.
- Flexibility to Change Cover: Some insurance investment plans allow the insured individual to increase or even decrease their cover during the investment policy period. This is essential as the cover needs vary according to your age and responsibilities. During your early years, the cover can be less but it has to increase as your income and responsibilities grow with age. This is because the investment olicy amount should be able to cover for any loss of income without the need to make any major changes to your lifestyle. A good plan will let you increase or decrease your cover according to your needs.
- Insurance Premium: Though most of the insurance premium amounts are similar, additional fees and charges may affect the returns on these insurance investments. Endowment plans, as a rule, are costlier than ULIPs due to the guaranteed returns they offer. Some things to look out for include what part of the premium is used for investments. Some ULIPs may load more of their costs during the initial years of investment while others may spread them over a few years. This means that the sum allocated to the investment is less in the initial years. This affects the amount of returns as larger the initial investment, the higher the long-term returns.
- Option to Increase or Decrease Premium: The best investment plans will offer the option to increase or decrease your premium amount depending on your payment capabilities. Some may offer top up plans that let you increase your cover on payment of additional premium. This is a good option to have as you may want to pay a higher premium to make additional investments when you can and then reduce your premium when you have other responsibilities where you need to put your money.
- Returns: In most cases, the returns offered are a good way to understand which plan is better. However, that is not so certain a case with investment plans. For one thing, there are two types of plans, the market linked ULIPs whose returns are dependent on the market and may offer higher returns, and the endowment plans that offer sure returns but on the lower side. Another point to note is that the returns in endowment plans only come after a few years while in the case of ULIPs, the insured can withdraw the entire amount once the lock in period has expired. A good way to understand which plan is better is to understand your requirements. If you prefer sure but safe returns, then endowment plans are ideal. Alternatively, if you are comfortable with the higher risk for the higher returns, then the ULIPs are the best investment plan for your needs.
- Type of Payouts: Different savings plans offer different types of returns. For instance, some may offer a lump sum payment while others may offer an annuity while others may offer a bit of both. The choice of returns will depend on a few things – the goal for which the investment is being made, the time for which the investment will be made, the type of return desired, etc. In case, the savings plan is being chosen for a specific goal such as child’s education or retirement, then the type of returns desired will vary. For instance, in case of child plans it will be better to receive annuities over a few years that will cover graduate and post-graduate education costs whether in India or abroad. For retirement, it is better to receive a lump sum payment near retirement to cover any relocation or other costs and then receive monthly payouts that serve as retirement income. What option of payouts you choose will depend on your expectations of your needs.
- Fund Options Available: ULIPs invest their money in funds that are linked to various securities – whether trading on the market of otherwise. For instance, some ULIPs may offer near guaranteed returns that are on the lower side as compared to market-linked funds that offer riskier but higher returns. The lower near guaranteed ULIPs invest in non-risky debt securities and savings plans and are thus able to protect your capital from market volatility. Most insurance companies offer choice of funds that may sometimes depend on your age bracket. Some may offer a choice of debt and equity market funds with an equal proportion of your funds (50:50) invested in each type of securities or slightly skewed in favour of debt or equity (say 70:30). Most experts suggest taking a higher exposure to equity at a younger age and then slowly moving to debt as you age, so that by the time you retire all your money is in debt funds. Such a strategy works better as you are exposed to the market risks at a younger age when you can recover from any downswing, and this risk decreases with age as your responsibilities increase. Moreover, the corpus you have built up remains safe from the vagaries of the market. Consequently, the funds available are an important thing to check before making your choice.
- Flexibility to Change Investment Amount: Insurance companies allow the insured party to change the amount of their investments according to their needs. This is especially good as the amount of savings increase over the years and investors have the option to considerably grow their asset base. The increase in the investment is generally accompanied by a corresponding increase in the life cover, though the increase in the cover may not be proportional as the focus is more on growing the investments.
- Alternative Investment and Insurance Options: An important thing to check and decide if you should invest in a best investment plan or not. This works well if you already have some sort of cover say a standard life insurance investment policy or a term plan. In such cases, you can put your money in mutual funds, which even though they may not provide an insurance cover, are likely to offer better returns. However, if you do not have an investment policy and are looking for an investment cum insurance cover then these investment plans are the best things for you to put your money. You can use an endowment plan as a backup for definite returns and ULIPs for other goals such as a house, car, foreign travel and retirement, among others.
- Insurance Premium Payment Options: Most funds give you the option to make monthly, quarterly, half yearly or annual payments. In certain instances, the quarterly, half yearly or annual options make sense as the payment outgo may be less since the companies may offer a discount due to the lesser paperwork involved. However, the amount of premium is generally high and as such only makes sense when you have enough money to pay that amount when the premium falls due. If you are starting out on your career or do not have the necessary savings plan to make a lump sum premium payment, then the monthly payments make better sense. The insurance companies may also offer the option to change the periodicity of the premium payment for certain plans. You can start with the monthly or quarterly payment options at the start of the investment policy and then switch to the semi-annual or yearly payments in the later years.
- Tax Benefits: The premium for a life insurance investment policy is exempt under the Income Tax Act up to the prescribed limits. This means that when you make any premium payment for the policies you have, you can claim deduction of the amount thus invested from your total income. For instance, suppose you invest Rs. 50,000 annually in life insurance policies from your annual income of Rs. 4 lakh. In this case, while calculating your income tax, you can deduct Rs. 50,000 under section 80C of the Indian Income Tax Act. Only the remaining amount, Rs. 3.5 lakh will be liable to taxation, provided there are no other exemptions available. Moreover, the policies have an additional tax benefit. The payout from these policies qualifies for exemption under section 10(10D) of the Income Tax Act. This means that all the money you receive at the end of the term when the investment policy matures will be tax free in your hands.
Goals of Investment Insurance Plans for Investment Planning
Investment insurance plans can have a range of goals – from buying a house to buying a car or from building up a corpus for children’s education to building one for retirement. The type of plans to choose will depend on the goals and the final objective of plans.
Investment Insurance Plans for Asset Build-Up or Wealth Creation
Investment plans are ideal for building up one’s wealth. Several aspects of the plans such as regular payment, lock-in periods, flexibility to choose cover or investment amount help build up a corpus that can be used to invest in a large asset such as a house or considerably increase the individual’s asset base. These plans are ideal for people in their 20s and early 30s as they can start putting aside certain amounts for specific goals like planning a foreign trip, creating a corpus for early retirement, putting aside amounts for children’s education and so on. The addition of a life cover is a bonus as it insures against any potential risks.
Investment Insurance Plans for Children
The investment plans for children can be further sub-divided into two: the first for the children’s education and the second for their marriage. Both education and marriage are major expenses and need proper asset planning. Insurance investment plans are ideal for these as they provide the child the necessary cover in addition to helping the parent prepare for the eventual expenses.
- Investment Plans for Children’s Education: The education expenses for children start taking gargantuan proportions after secondary education. From taking tuition classes to studying for competitive exams, all preparations for furthering their education and career prospects are expensive and need an adequate savings plan. In addition, college fees in private colleges and foreign universities are quite exorbitant and will only increase in the future. All these expenses cannot be met out of the monthly salary of the parents and need to be properly planned. The best investment plans are ideal for such cases as they provide the necessary cover for the child and also help the parent build-up a corpus for major expenses. Some things to check out while choosing a plan for children’s educational expenses include:
- Whether the payout is lump sum or regular: Regular payouts are better to pay the tuition and college fees while a lump sum payment is best to meet major expenses that crop up at the start of college or a foreign education course. Some plans offer both options with a lump sum payment when the child reaches a certain age like 18 or 21 years and payouts at regular intervals
- Whether the cover insures against children specific problems: Children have their own set of unique ailments and the better plans will cover such contingencies. They will also provide reimbursement for illnesses and diseases that require hospital stays.
- Possibility of Increasing or Decreasing Cover or Investment: Since the parents meet most of their children’s expenses, it makes sense to go for a higher investment in the initial years and lesser cover. This will also help to build up a larger corpus in the later years.
- Investment Plans for Children’s Marriage: Thebestinvestment plans for children’s marriage help to meet the large expenses generally associated with the event. The best plans are those that give a payout at a certain age of the child such as 23 or 25 years. If the insurance investment plans are started when the child is young, small premiums can help to build up a large corpus.
Investment Insurance Plans for Retirement
The best investment plans are ideal for retirement planning. If started at a young age, they can help build up a considerable corpus by the time the investor/insured person retires. The best investment plan is one that provides a lump sum payout at the retirement age or just before, to meet the relocation expenses from the place where the person is working to his hometown, and regular payments thereafter that serve as monthly income for the individual. The insurance companies offer a range of annuity or periodic payout options for their best investment plan that the persons can choose from based on their needs.
The type of best investment plan chosen should depend on the age of the insured person. Though equity-linked ULIPs offer the best returns, they are not ideal for people above a certain age due to their higher risk profile. People in their 20s or early 30s can opt for an aggressive best investment plan with a focus on equity but those in their 40s or 50s should gradually move away from equity and stick to conservative debt funds. Starting early helps to build a significant corpus by the time the person retires. The best strategy is to start early, have an equity-oriented investment in the 20s and early 30s and gradually move towards a debt-focussed portfolio with age. Some insurance companies provide the option to do this automatically with the person’s full awareness while others provide the insured individual to manage the allocation themselves through the best investment plan. Most companies do not allow individuals beyond a certain age to opt for aggressive funds for the best investment plan and instead gives them a fine-tuned combination of growth and capital preservation.
Most pension plans offer the insured the option to make a lump sum premium payment each year or opt for regular payments. The choice between the two should depend on the convenience of the insured person, his ability to pay, and the discount provided in the lump sum amount. Insurance companies offer the option to change the periodicity of the premium of the best investment plan depending on the insured’s convenience. They also offer additional options to increase the investment policy amount, change the investment mix or increase the cover through top-ups or otherwise.
Classification of Insurance Investment Plans
The best investment plans can be classified according to the type of investments they provide, the periods in which the premium needs to be paid and the life stage of the investor/ insured person.
- Guarantee Plans or Non-Guarantee Plans: There are primarily two types of plans: those that come with a guarantee of returns and those that do not. Each of them has its advantages and disadvantages. The guaranteed plans offer lower but secure returns. They are an ideal and best investment plan if the investor is looking for safeguarding their assets and looking for stable growth of their money. Most of the guaranteed plans invest the insured party’s money in secure instruments that are definite to provide the necessary returns. The non-guarantee plans offer better returns but do not promise definite profits as they are market linked. The investments are made in funds that can range from aggressive funds that invest in equity growth stocks and focus on capital appreciation to conservative funds that invest in debt, money-market instruments or bank deposits and focus on capital preservation.
- Single Premium Plans or Regular Premium Plans: The single premium best investment plans offer a lower premium as the paperwork and other administrative charges are less. However, from the insured’s perspective, these plans make sense only if they can afford to pay the lump sum. Regular premiums are better for younger people who are just starting out on their careers and do not have much savings.
- Life Stage Plans or Non Life Stage Plans: These plans allocate assets according to the investor’s age. Those in their 20s or 30s are given adequate equity exposure as they can better manage the risk. For people in their 40s or 50s, the investment allocation shifts to less-riskier stocks and instruments that provide stable and secure returns. The plans for people in their 40s or 50s focus on gradual asset growth and conservation of the corpus already created.
1. If savings, we need to look at ULIP with a guaranteed return possibility
2. For corpus building, a traditional ULIP with no guarantee
3. For a retired person, an annuity plan
- How much money can I pay as premium each year, since life insurance is a long term contract.
- What are the charges under the plan, lower the charges higher the return