Retirement Plans

Free switches in Pension Funds – should use it more pro-actively!!

Posted on February 16, 2008. Filed under: Retirement Plans |

I have a Unit Linked Pension Plan account with ICICI Prudential where I have chosen the “Maximiser” option. Under this option, 100% of the corpus would go into equity investments. I have been accumulating my nest egg for retirement slowly over the last 3 years. You may have seen in all the Unit Linked Pension Plans, the Insurance company gives you an option to switch between funds, like moving from equity to debt or vice-versa. I have long wondered how these switches across different funds could be useful for investors during the initial years where funds are getting accumulated. I know that closer to your retirement date, you try to move a substantial portion of your accumulated savings to debt fund to protect the capital accumulated.

I guess, we all got an opportunity to exercise this option of switches during the recent market crash. The Nifty was cruising along above 6000 levels in January 2008 in-spite of global markets correcting in a big way. Like most of the investors, I was also feeling uncomfortable with the equity valuations, but did nothing other than speculating when the market would crash. I definitely believed that the valuations are stretched and anytime the market would fall. Knowing this, I did nothing to protect my pension plan accumulations. I just completely ignored the need for protecting my capital accumulated under the pension scheme.

What I should have done during Dec/Jan 2008 was to have moved from equity oriented “Maximiser” option in ICICI Prudential to a debt option. By doing this, I would have avoided a huge erosion in the NAV of my Pension accumulation. This is a good lesson and now I understand the need and importance of having “free switches” in these pension plans.

I need to find out the following in these pension plans:

1. Can partial switch-over of the accumulated units possible? I guess, it should be possible.

2. How the actual process of switch happens?
Though all companies claim free switches, practically insurance companies would have built a cost to the investor by having a entry load into the new scheme.

3. How many days does it take to carry out a free switch?

4. What modes can be used to carry over the switch? Phone, online facility or the time tested hard copy letters?

5. Is there anybody who has done these switches successfully in the past what has been their experience? Did they pre-empt the crash in 2008 and protected their retirement nest egg?

If anybody has more information on the above questions, please post it as your comment.

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A New Poll has been commissioned!

Posted on December 3, 2007. Filed under: Retirement Plans |

A new poll question has been posted on the top right hand side of the blog. Please cast your vote.

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