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In a world of uncertainty and soaring expenses, it is important to park your money right. To strike a balance between financial safety and stability, you must make wise investments and stay on top of your financial responsibilities. Therefore, investing in a financial instrument that gives you the best returns and provides financial protection to your family is necessary. Besides this, it is always better to be prepared for the difficult times in life.
While investing, it is ideal to find products that offer guaranteed returns upfront, have higher interest amounts, offer tax-free returns, and create a guaranteed source of alternate income. One financial instrument that fits this multi-functional role is a Guaranteed Return Plan. In a Guaranteed Return Plan, you can invest a certain amount upfront, and the return is guaranteed on investment. For example, if a 30-year-old individual invests Rs 5,000 per month in HDFC Life Sanchay Plus for 10 years, he will receive Rs 4,470 per month as income from the 12th year for 25 years. It means that the individual gets Rs 19.6 lacs in total.
Guaranteed income plans let you invest between Rs 1,000 and 2,00,000 monthly, and between Rs 12,000 and 24,00,000 yearly. These plans are expected to generate an annual rate of growth investment between 5.3% to 6%. You can even choose a one-time investment or a term of 5, 7, or 10 years. Additionally, you have the flexibility of choosing the income period, as well as the choice to receive the income monthly or annually. Your protection can be further enhanced with optional riders like critical illness riders or accidental disability riders by paying an extra premium. Moreover, you get to choose from three kinds of income, based on your life stage and priorities. These three kinds of income are:
In this option, you have to pay the premium for 10-12 years, and you get a guaranteed payout for the next 12 years.
This option creates a legacy for your family through guaranteed payouts for 25 or 30 years, and you receive the return of premiums at the end of the Payout Period.
This option helps generate guaranteed retirement income for your entire life, and you get the return of premiums at the end of the payout period.
The past few years have seen a steep decline in customer interest in FDs, owing to lowering interest rates. An immediate cause of this is the repo rate cuts by the central bank. However, what is noteworthy here is that long-term rates have remained unfettered. This factor has upped the importance of Guaranteed Return plans. It is the first time in two decades that the interest rates on guaranteed return products are better than FD rates. As a result, these trends have started taking shape in demand among customers.
From 8.5% per annum in 2014 to an all-time low of 5.4% in 2020, the return on Fixed Deposits has fallen significantly. This factor has contributed to the declining interest of the masses in FDs. As one of the best alternatives for Fixed Deposits, Guaranteed Return plans have been offering better returns than FDs.
While FDs with a minimum tenure of 5 years are tax-free under section 80-C of the Income Tax Act, the customer still has to pay tax on the maturity amount. However, the invested amount or maturity amount in a Guaranteed Return plan is tax-free.
Considering the depreciating interest rates, the return on bank fixed deposits is likely to fall further. However, unlike the maximum lock-in period of 10 years in Fixed Deposits, Guaranteed Return Plans allow customers to lock in the interest rate for up to 45 years.
Promising better returns than FDs, most Guaranteed Plans today offer a return of up to 6% per annum. Additionally, these plans come with different payment terms, generating an annual rate of growth that ranges between 5.5% and 6%.
In plans like the regular income plan of TATA AIA Fortune Guarantee Plus, you also do not need to pay any surrender charges. It implies that if you choose a one-time investment option under this plan and want to withdraw money within the first five years, there will be no surrender charges.
Hence, as the return rates on Fixed Deposits start to decline, Guaranteed Return Plans rise to the occasion, offering better returns with no tax exemptions. Guaranteed Plans could act as the perfect solution to any financial challenge you may be facing. So whether you have already begun investing or you're planning to start, investing in Guaranteed Plans is a great option.
07 May, 2021