I first read about this pension plan in the ET dated June 22, 2010. I was intrigued. Basically, Reliance Life Traditional Golden Years Plan is a regular premium retirement plan that provides guaranteed return, which is declared at the beginning of every financial year during the product term. So far so good. But,

The minimum guaranteed accumulation rate [in other words, the return] will not be less than the savings bank deposit interest rate, as declared by the Reserve Bank of India.

WTF, mate? What kind of guarantee is this?

Next, I ran the numbers through this calculator — assumptions were 35 years policy/premium paying term and a monthly premium of Rs 6,000. Over a period of 35 years, you pay a whopping 6% of your total premium as Premium Allocation Fees and Policy Administration Fees. To further add insult to your injury, you also pay around 1.2% of the accumulated value at the end of each year as Account Administration Fees.

A guaranteed tension plan in my opinion.

My advise:

Over a period of 35 years, you’d do FAR FAR FAR BETTER simply by saving the same Rs 6,000 each month in a Public Provident Fund account.

What do you think?