Product Feature:

Outflow:

• You pay ₹1 lakh for 10 years, cool off period 1 year and
  Total outgo: ₹10 lakhs (over 10-year period)

Inflow: Guaranteed & Tax-Free Income

• You get ₹1.05 lakh per year from 12th year till next 25 years
• plus get your ₹10 lakhs returned.
  Total inflow: ₹36.25 lakhs (over 25 years) – fixed and guaranteed.
• All the payment will continue to be made to the nominee (in case of death of life insured)
• Option to take all the future payments as lump sum.

Product Feature:

Outflow:

• You pay ₹1 lakhs for 12 years, cool off period 1 year
  and
  Total outgo: ₹12 lakhs (over 10-year period)

Inflow:Guaranteed & Tax-Free income

• You get = ₹2.25 lakh per year from 14th year till next 12 years
  Total inflow: ₹27 lakhs (over 12 years) – fixed and guaranteed.
• All the payment will continue to be made to the nominee (in case of death of life insured)
• Option to take all the future payments as lump sum.

Re investment risk: Indeed, mutual funds give better returns than Sanchay, albeit without guarantee, and we may accumulate much more in mutual fund if 12% returns are calculated for the same payment profile. However, once we have accumulated the desired corpus and it is time to take regular income, we may or may not get the desired 9% return on the corpus and it will certainly not be fixed till your age of 99 years. So, when time comes to withdraw fixed amount every year, we face a re-investment risk. It is therefore a trade-off between getting high returns and guaranteed returns. It is also an established principle that if you are getting guaranteed return then you are not taking any risk and therefore there is no premium on your return. Sanchay Plus removes this re-investment risk.

Taxation: A triple A rated bond is closest to a guaranteed return product. If we were to compare Sanchay with other Tax-free bonds, the returns on AAA (Guaranteed) bonds is close to 6.4% which comes to pre-tax return of just over 9% for high tax bracket investors. However, these bonds do not have such long tenure like Sanchay, they do not exist for long period of 39 years without the option/risk from issuer to pay you back your sum and close the bond. It is also unlikely that the credit rating of AAA bonds will be same for next 39 years. If rating of a given bond comes down, then guarantee feature of bond disappears.
If one buys a monthly pension plan, known as annuity, at the age of 60 years with the accumulated corpus, the monthly payments are taxed, since annuity is taxable in the hand of receiver. In HDFC life Sanchay, the monthly income is tax free since it is proceeds of maturity of insurance policy which comes u/s 10(10D) of Income tax Act.

Flexibility:Unlike mutual funds or senior citizens scheme where funds can be withdrawn anytime, investment are locked in HDFC Life Sanchay till the income period starts. Sanchay does offer an option to withdraw all the future payments at a discounted value. Early withdrawal does mean forgoing tax-free & fixed future income and therefore not recommended. In mutual fund also we can set a systematic withdrawal on some funds, but it means that withdrawal could eat into the corpus.

Inflation: Since the income period in this scheme is so long, the inflation shall reduce the buying price of your income after 12 years, so imagine a scenario where Sanchay starts paying income of ₹100,000 a year, in twelve years’ time from now and then continues to pay for next 12 years. It means, the investor shall continue to get ₹100,000 per year 24 years from now, certainly the buying power of that amount will not be same as ₹100,000 now. This product does not protect you from inflation.