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How to Plan A Prosperous Retirement with ULIP Investment Plan

How to Plan A Prosperous Retirement with ULIP Investment Plan

Retirement Plan with ULIP

Nowadays it is natural to be too busy with all the things at hand - Career, family, children, friends and parents, if you could manage it, perhaps you won’t even have time for yourself. But, like so many things inevitable in life certain financial goals are inevitable yet ignored, in the hopes of a better time.

Retirement is one such financial goal, and you should not doubt that there will be a day when you would want to hang your boots and relax. If you have not started planning for your retirement, perhaps now is the time to start! Unit linked Insurance Plans offer great opportunities to capture growth and boost your wealth for a sufficient retirement bonus.

An Ideal Retirement Plan

If you are in your 30s right now, retirement is an important goal for you, but it’s a long way away. Therefore, you will need your retirement plan to have the following characteristics:

  • Helps you build a strong retirement corpus
  • Works in auto mode without your regular attention

Whatever investment route you choose for investing in your retirement must fulfil both traits at the same time.

Fixed Income vs. Equity Investments:

Fixed income instruments must offer market-linked returns so that your retirement corpus can keep up with the inflation. Equity investment on the other hands is highly volatile and hard to time, so unreliable for an important goal like retirement.

That means the investment route cannot be low return fixed-income instrument or a 100% equity (high-risk) investment. The ideal retirement plan would be a mix of both and should have good tax efficiency.

This is where unit-linked insurance plans or ULIPs come into play. ULIPs offer all the qualities we are looking for in our ideal retirement plan. 100% debt portfolio may cause you to worry if the corpus will be sufficient, while 100% equity investment may give you sleepless nights during large downturns.

Planning Retirement with ULIP

Planning Retirement with ULIP Investment Plan

We have already discussed what you will need from your ideal retirement plan. ULIPs have all the features you need to create your ideal investment plan for retirement. Following steps should help you create your ideal retirement plan with a ULIP:

Step 1: What is the Goal?

In this step you need to define the following 3 aspects of your retirement goal:

  • How much time do you have to retire?
  • How much money would you need from this ULIP at retirement?
  • Where do we stand right now?


Time to retirement depends on your current age, as we take the expected retirement age at 60. So, if you are 30 years old right now, you have about 30 years to achieve your retirement goal.


The second question needs a lot more calculations, but let us simplifies them for our case here. Assuming your and your spouse’s current annual expense stands at Rs. 6 lakhs a year. Growing at 5% average inflation rate, you will need about Rs. 26 lakhs a year post your retirement.

To generate such an income every year you will need approximately Rs. 3.25 crore at the age of 60. But this is not the goal for the ULIP alone; this is your entire retirement corpus. If you have few investments already in place for retirement, you can deduct their value at 60 from Rs. 3.25 crore.

For example, if you are investing Rs. 1 lakh a year in a PPF or NPS account, you can expect about Rs. 1.25 crore at the age of 60. That means you will only need about Rs. 2 crores from the ULIP investment.

Present Situation

If you have already started investing in a ULIP or similar pension plan you will have the following two choices:

  • Make appropriate changes to the existing plan and continue
  • Redirect the plans to another goal and start a new investment

Step 2: Selecting a ULIP Plan

Select a plan which lets you set a portfolio management strategy and has the following portfolio strategies in place:

  • Systematic transfer option – for once a year investors
  • Automatic fund rebalancing option – automatically adjusts your portfolio for market opportunities and safeguards returns

Apart from these two, the ULIP should also have the option to move the entire corpus in the final few years from high-risk funds to low-risk funds. So, your accumulated money stays safe from market volatility as you approach your goal.

Invest 4G ULIP from Canara HSBC OBC Life, offers all these features and more. Since you are going to invest for a very long time, Invest 4G boosts your corpus by adding units to the plan over the years.

Step 3: How Much to Invest?

The answer to this question depends on:

  • How much you can invest?
  • Maintain the tax-free status of your ULIP investment

For the case we took as an example, you will need to invest about Rs. 1.8 lakhs a year for the next 30 years. That is considering a conservative rate of return of 8.5% per year.

If you can invest this much start with this amount and you can stop investing in the future once your goal amount is achieved. If your current capacity allows a lower amount of investment, you will need to increase the investment later.

Maintaining your tax-exempt status of ULIP investment is easy. All you need to do is make sure the policy sum assured or life cover is at least 10 times the annual premium. For example, in our case above, the policy has to have a life cover of at least Rs. 18 lakh.

Step 4: Select Portfolio Strategy

This step depends a lot on how frequently you invest in the ULIP investment plan. Here we can discuss two modes of investment:

  • Monthly mode
  • Other than the monthly mode

Strategy for Monthly Mode Investment

If you can invest in the monthly mode you can choose the auto rebalancing option. All you need is decide the ratio of equity and debt allocation in your portfolio in the beginning. This ratio should be based on your risk appetite and comfort with equity market volatility.

For example, if you decide a 50:50 ratio, the portfolio will rebalance the allocation regularly to meet this standard. Thus, when equity markets are performing well, your growing funds will flow to the safety of debt and vice versa when equity faces downtrend.

Strategy for Other than Monthly Modes

In case you are investing in any other mode than monthly, you can select the systematic transfer option. Allocate your premium to debt and liquid funds in a fixed ratio. Money in the liquid fund will be systematically invested in an equity fund every month, while debt investment keeps growing steadily.

Whichever portfolio strategies you choose just make sure you can bring in the entire corpus into safe funds before maturity. Invest 4G plan from Canara HSBC OBC Life has the option to move all your savings from equity funds to liquid funds in the final four years of the policy.

The gradual transfer doesn’t affect your corpus and helps you safeguard your retirement funds from the market movements in the final years.

Speak to an insurance specialist now!


In order to understand ULIP NAV, you first need to understand how ULIPs work. In ULIPs, a portion of premium from different investors is accumulated to create one investment corpus. This money is invested in several different market instruments. So to divide the returns properly among all the investors, the fund manager divides the net asset value in to small units with a specific face value. NAV is the per market share value of a fund. To better understand the definition of NAV, take a look at the formula below -

Net Asset Value = [Assets-(Liabilities + Expenses)] / Outstanding Units

It's not risky to invest in ULIP if you chose a safer path. Risk factor in ULIPs depends on the investment option you choose. If you are not okay with sharp movements, then choosing a low risk investment is a better idea. For people with high risk appetite, it's good to choose equity funds while risk-averse investors can go for debt funds.

You can opt for settlement option if you want to take your fund value in periodic installments. With the settlement option, you can get your maturity amount in installment as per the frequency chosen by you over a maximum period of 5 years. You can choose complete withdrawal of fund value at any point of time. Although, you will not get any life cover during this period.

ULIPs are life insurance products that provide paths to invest. And just like other investment option, there's no guaranteed investment return in a ULIP. Although, if you like taking risks and want to earn more returns on your investment, then opt for equity funds.

At the time of maturity of ULIP policy, you will get the fund value on your prevailing NAV. Fund value is the number of units of policy multiplied by NAV (net asset value).

Value of the fund = Total units of policy x NAV (Net Asset Value)

Well, discontinuing your premium payment will disrupt your savings as well as financial goals. In such case, you can approach your insurance company and ask for the revival of discontinued policy within the stipulated timelines. Also, you will have to pay all the unpaid premiums.

ULIP plan is a combination of investment and insurance. Thus, one must hold this plan for a duration of at least 10 years so as to get investment benefits out of it. As an early exit will have its own consequences. ULIPs have a lock-in-period of 5 years. Thus, you may surrender your policy before the completion of 5 years, but you will be paid only after the end of 5 years.

Generally, minimum lock-in period for ULIP is 5 consecutive policy years. During this time period, if the policyholder discontinues or surrenders the policy, then he/she will not able to receive any payouts. Withdrawals are only allowed at the end of the lock-in period. In addition to this, if you surrender your policy before the lock-in period ends, then you will have to pay surrender charges as well. Also, it is advisable not to exit your plan after the completion of 5 years of lock-in period, because if you stay invested for a longer duration it will help you reap better benefits.

The amount that you pay towards the Unit Linked Insurance Policy is eligible for tax deduction as per Section 80C of the Income Tax Act, 1961. This means that the premium amount paid will be deducted under section 80C from your taxable income up to a maximum limit, which is currently ₹1.5 Lakhs. However, the aggregate amount of deductions under section 80C, section 80CCC and 80CCD (1) shall not, in any case, exceed ₹1.5 Lakhs. Also, upon the maturity of the policy, the payout amount you receive will be exempt from income tax, subject to the applicable provisions of Section 10(10D) of the Income Tax Act, 1961.

Here’re the following major benefits of buying ULIP

1. Tax Benefits – It helps you to reduce tax liabilities. This means you are liable to enjoy tax benefits on the premiums paid towards the policy as per Section 80C of the Income Tax Act.

2. Long-term growth– One of the major benefits of buying a ULIP plan is that it offers long-term benefits. ULIPs come with a lock-in period of 5 years which will keep you invested for a longer period.

3. Dual benefits – ULIPs not only offer life coverage but also come with a wide range of investment funds that will help you earn great returns. This includes balanced funds, debt funds or equity funds. You can invest in any of them depending on your need and risk appetite.

4. Flexibility – It gives you the flexibility to switch between funds basis your risk appetite. You could select multiple funds and different investment strategies.

5. Partial withdrawal option – It allows you to make partial withdrawal in case of any uncalled medical emergency or contingency after completion of lock-in period.

ULIP is a perfect investment option if you are looking for long term wealth creation. It could be buying your own house, a new car, going on a long vacation, or your child’s higher education or marriage, ULIP helps you to meet all your long-term financial goals. Moreover, it comes with a lock-in period of 5 years which keep you invested for a longer period and helps you earn better returns. The lock-in period is calculated from the date when the policy is issued.

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