Decoding Insurance

Why 4G ULIPs is the safest investment option?

Listen to the article

Retirement is perhaps one of the most important goals when we start investing. While we may have different goals as different individuals but one goal that becomes common to all of us is retirement. There have been a lot of innovations around retirement planning and investing. One such innovation that has come in recently is 4G Unit Linked Investment Plans (ULIPs).

These plans help individuals accumulate money over the years and then they can withdraw their money when they need it in their sunset years in a tax-friendly manner. Policybazaar has been leading this initiative to innovate in this space. Excerpts from the interview of Vivek Law with Ayush Mittal, former Head of investments at Policybazaar.com:

Q.We have been talking about it for a year since 4G ULIPs were launched. How have these 4G ULIPs performed?

A. They were launched a year ago and they're really being a pleasure in the market. Customers are really finding it much more customer-friendly because the structure of these 4G ULIPs is completely focused on them. They have the flexibility to withdraw money at any given point in time. The charges have been reduced, in fact the other charges have been brought down to zero. The insurance companies are adding funds in the customer’s portfolio so that they see the corpus building and with the market up, they find it a much more effective investment option. So, 4G ULIPs in the market is trending.

Q.If I recollect, these have a Fund Management Charge (FMC) of 1.35%. All the other charges are zero or they have reduced?

A. All the other charges are zero. The fund management as suggested by IRDA is capped at 1.35%. They vary with the type of funds but they have to be capped at 1.35%.

Q. So are you saying some of them are offering lower than 1.35%?

A. It's based on the type of funds that you select. If you select a depth one, it might have a lower FMC charge and if you select a mid-cap which is much more volatile and takes much more handling charge, it will be 1.35%.