Mar 14, 2008 12:16 PM
24453 Views
I was looking at investing some money and was apprehensive of equity linked plans considering the condition of the market. I got a call from this agent from India Infoline, who has been behind my life for an appointment for quite some time.
I asked him to meet him. He showed me Life Stage Pension plan. According to him the highlights of the plan were:
100% allocation of the funds I invest.(Most other ULIP plans have huge charges for 1st 3 years).
There is no insurance linked so there are no extra charges.(I was not looking for insurance, anyways)
Lock-in period of 3 years, after which you can withdraw the full amount anytime.
You can switch your portfolio from 100% equity based to 100% debt based at the click of mouse. This is free of cost 4 times in an year.
The income you generate from this plan is completely tax-free.
You get IT deduction under section 80c.
The plan looked good to me. But I thought of doing my own research, since I am a bit apprehensive about these agents. Now check out what I figure out after going through the brochure on company website:
100% allocation is there, but there is 0.5% monthly charges called policy administration charges, which amounts to 6% annually. Apart from that there are 2.25% charges called Fund management charges. If that was not all, there was a fine-print mentioning that these can be increased. Policy Admin charges can be increased by 0.5% for each premium band and fund mgmt charges can be increased to a max of 3.5%.
The lock-in of 3 years is there, but the term of the policy is 10 years. If you withdraw after 3 years, there are surrender charges. And after 10 years, there is annuity based income. When I asked the agent that you gave me wrong info, he said that "Sir, when you get such good returns, you will obviously not withdraw your amount. Also, the surrender charges are there since we are not charging any allocation charges and want the investor to be with us for a long time"? I was totally shocked.
According to the brochure, the annuity or the fund withdrawn would be treated as normal income and the investor has to pay tax on that. When I asked the agent that he told me that the income was tax free, this was his answer: "Sir, we donot deduct any tax. whatever your fund value is there, we would return the full amount to you. The income you generate from this will be Income from other sources, which no body shows in their income tax return anyways. So you do not have to pay any tax" Now can you beat this logic, and that too from an agent of a big company like India Infoline.
The moment I heard this, I asked the agent to just dissapear from my sight.
What I would conclude is that, before investing kindly make sure you read up about the scheme in which you are about to invest. Never believe what an agent says, unless he/she shows you written in a brochure. I would not blame ICICI Pru for this, since they had clearly mentioned all the details in their brochure available on their website. It is our responsibility that we do enough research before we invest in any fund/scheme.
