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Should I invest in SBI Life Smart Privilege ULIP with low returns and high charges?

Milind

Milind Vadjikar  |1071 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Jan 09, 2025

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Jan 09, 2025Hindi
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I am planning to invest in SBI life smart privilege ULIP with 10 lakhs p.a. and 5 year lock in period as it is suggested by a friend but i have came across a thread in your website where many members got very low or modest returns in same plan. Should i consider this plan or not? I have gone through various charges to manage pplicy also which are very high but policy managers ensures reversal of charges after lock in period ends like 1% FV on 6th yr, 2.5% FV on 10th year. And to inform you i have already one life insurance cover policy from Max life insurance, So is it worth to invest in Sbi Life smart privilege plan now?

Ans: Hello;

Never make the mistake of mixing investment and insurance.

The annual premium that you are planning to invest(10 L pa) will require you to pay LTCG tax on maturity as per new rules.

If you already have a sufficient life insurance cover then I suggest you to avoid this ULIP and invest in NPS, mutual funds(both equity and debt), gold and real estate for your other goals.

Best wishes;
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam Kalirajan  |8058 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 14, 2024

Asked by Anonymous - May 14, 2024Hindi
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Hi i have purchased sbi smart priviledge plan. I have taken for a single premium of 8 lakhs. Its been 6 months and i dont see any growth in my fund. In fact my amount is only decreasing. I really dont have much knowledge in stock market and all. Am very much worried about my money. If anyone have taken same plan pls share your experience in this
Ans: This SBI Life Smart Privilege Plan review delves into the plan's features to help you decide if it aligns with your financial goals. While it promises a blend of insurance and investment benefits, there are several drawbacks to consider before you invest.

Disadvantages of SBI Life Smart Privilege Plan:

Lower Returns: ULIPs typically underperform compared to pure investment options like mutual funds. Insurance and administrative charges eat into your returns. The review calculates that even with an 8% CAGR in underlying funds, the plan's Internal Rate of Return (IRR) is only 6.74%.

Multiple Charges: The plan comes with a variety of charges, including premium allocation charges (up to 5 years), policy administration charges, fund management charges, surrender charges (if you exit early), partial withdrawal charges, premium redirection charges, and mortality charges. These fees reduce your overall returns significantly.

Limited Liquidity: You're locked in for at least 5 years. There are surrender charges if you withdraw your money before the policy term ends, further restricting access to your invested amount.

Market Dependence: Unlike traditional life insurance, your returns depend on market performance and your chosen fund within the plan. This introduces investment risk.

No Loan Facility: Unlike some ULIPs, SBI Life Smart Privilege Plan doesn't allow you to take loans against your policy.

Lack of Transparency: The underlying funds in this plan are less transparent compared to those offered by mutual funds. This makes it difficult to assess the risks involved.

Alternatives to Consider:

PPF + Term Insurance: This combination offers guaranteed returns with PPF and pure life coverage with a term insurance plan. The review suggests a PPF investment with a term insurance plan might yield a better return (around ?1.63 Cr) compared to SBI Life Smart Privilege Plan (around ?1.57 Cr) for the same investment over 15 years.

ELSS Mutual Fund + Term Insurance: This option provides potentially higher returns with an ELSS Mutual Fund, but carries investment risk. However, the review estimates a potential return of ?2.5 Cr with an ELSS Mutual Fund compared to ?1.57 Cr with SBI Life Smart Privilege Plan (for the same investment over 15 years).

Before You Invest:

Investment Goals: Align your investment with your short-term or long-term financial goals.
Risk Tolerance: Consider your comfort level with market fluctuations.
Financial Advisor: Consult a financial advisor for personalized investment advice based on your needs and risk tolerance.
Conclusion:

The SBI Life Smart Privilege Plan might seem attractive, but the review highlights several disadvantages, particularly lower returns compared to alternatives. Consider exploring options like PPF or ELSS Mutual Funds with term insurance for potentially better returns and flexibility. Always consult a financial advisor before making any investment decisions.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

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Ramalingam Kalirajan  |8058 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 21, 2024

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Sir, I had invested 6 lakh per annum (payment period -5 years) in SBI SMART PREVILEGE INSURANCE CUM INVESTMENT PLAN with 100% in MIDCAP FUND. What is the past history & future benefit of SBI SMART PREVILEGE PLAN? Is it beneficiary or advisable to invest 100% in Midacap fund? If there is any disadvantage in this Plan, do inform because i have little knowledge in Investment process...
Ans: Assessing Your Investment Strategy
Your decision to invest in the SBI Smart Privilege Plan with 100% allocation to Midcap Fund is significant. Let's explore the option of surrendering the ULIP and reinvesting the funds into mutual funds for potentially better outcomes.

Surrendering the ULIP
Considering your concerns and investment objectives, surrendering the ULIP may be a prudent choice. ULIPs often come with high charges and limited flexibility, which can impact your returns over the long term. Evaluate the surrender value and any associated charges before making a decision.

Reinvesting in Mutual Funds
Reinvesting the funds from the surrendered ULIP into mutual funds offers several advantages. Mutual funds provide greater flexibility, transparency, and potentially higher returns compared to ULIPs. With a diversified portfolio of mutual funds, you can optimize your investment strategy and minimize risks.

Benefits of Mutual Funds
Mutual funds offer a wide range of options catering to different risk appetites and investment goals. They provide professional management, diversification, and liquidity, making them suitable for long-term wealth creation. Choose funds that align with your risk tolerance and financial objectives.

Disadvantages of ULIPs
ULIPs often come with high charges, including premium allocation charges, policy administration charges, and fund management charges. These charges can significantly reduce your returns, especially in the early years of the policy. Additionally, ULIPs may lack transparency and flexibility compared to mutual funds.

Importance of Diversification
Diversification is key to managing risk in your investment portfolio. Allocate the reinvested funds across different asset classes, such as equity, debt, and balanced funds, to spread risk and optimize returns. A Certified Financial Planner can help create a well-diversified portfolio tailored to your financial goals.

Benefits of Regular Funds Investing through a Certified Financial Planner
Investing in regular funds through a Certified Financial Planner (CFP) offers several advantages. CFPs provide personalized advice, portfolio management, and regular reviews to ensure your investments are aligned with your objectives. They help optimize your portfolio for better returns and risk management.

Conclusion
Surrendering the ULIP and reinvesting the funds into mutual funds can be a wise decision considering your investment goals and concerns. Mutual funds offer greater flexibility, transparency, and potential for higher returns compared to ULIPs. Consulting with a Certified Financial Planner can provide valuable guidance to optimize your investment strategy and achieve your financial objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8058 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 12, 2024

Asked by Anonymous - Jun 19, 2024Hindi
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Hi, I am 42 years old. I have started an ULIP in Sbi Life - Smart Privilege LP in 2017. Policy Term of 20 Years and premium payment of 5years. Currently the policy is in fully paid up condition . So far the policy performed well. I paid 6 Lacs per year and totally 30 Lacs in 5 years. Current Value of my policy is 72 Lacs. I have selected 70% in Midcap , 5% in Balance Fund, 20% in Equity growth fund & 5% in Top 300 fund. I am not worried about the risk taking level. Is it worth to continue this policy further? my aim is to get 75 K monthly. Can I change to Mutual fund with SWP?
Ans: You have a Unit Linked Insurance Plan (ULIP) with SBI Life - Smart Privilege LP, which you started in 2017. You paid Rs. 6 lakhs annually for five years, totaling Rs. 30 lakhs. The current value of your policy is Rs. 72 lakhs. Your allocation is 70% in Midcap, 5% in Balanced Fund, 20% in Equity Growth Fund, and 5% in Top 300 Fund.

You aim to receive Rs. 75,000 monthly. Let's explore whether it's better to continue with the ULIP or switch to Mutual Funds with a Systematic Withdrawal Plan (SWP).

Performance and Structure of ULIPs
ULIPs combine insurance and investment. Your policy has done well, growing from Rs. 30 lakhs to Rs. 72 lakhs. This growth indicates a good performance. ULIPs offer life cover, which provides financial security to your family in case of your untimely demise.

The charges in ULIPs include premium allocation, fund management, mortality, and policy administration. These charges can impact returns over the long term. Despite these charges, your policy has performed admirably.

Evaluating Mutual Funds with SWP
Mutual Funds are solely investment products, without an insurance component. They typically have lower charges compared to ULIPs. Actively managed Mutual Funds allow flexibility and can be tailored to meet your risk profile and investment goals.

A Systematic Withdrawal Plan (SWP) allows you to withdraw a fixed amount regularly from your Mutual Fund investment. This can provide a steady monthly income. With an SWP, you can plan for Rs. 75,000 monthly withdrawals.

Risk and Return Assessment
You mentioned that you are not worried about risk. Both ULIPs and Mutual Funds can be tailored to match your risk appetite. In your ULIP, 70% is in Midcap, which is high-risk but high-reward. A similar allocation in Mutual Funds can potentially yield better returns due to lower costs.

Mutual Funds provide diversification and professional management. You can choose a mix of Equity, Balanced, and Debt funds to match your risk profile. With the right selection, Mutual Funds can outperform ULIPs over the long term.

Tax Implications
ULIPs have a tax advantage under Section 80C for premiums paid and Section 10(10D) for maturity proceeds. Mutual Funds also offer tax benefits, particularly Equity Linked Savings Schemes (ELSS) under Section 80C.

However, the tax treatment on withdrawals differs. Withdrawals from Mutual Funds are subject to capital gains tax. Long-term capital gains (LTCG) on equity funds are taxed at 10% above Rs. 1 lakh. Short-term capital gains (STCG) are taxed at 15%.

For debt funds, LTCG is taxed at 20% with indexation, and STCG is taxed as per your income slab. It's essential to consider these tax implications when planning your SWP.

Costs and Charges
ULIPs have higher costs due to the insurance component and various charges. These charges can eat into your returns over time. Mutual Funds have lower costs, primarily the expense ratio. By investing through a Certified Financial Planner (CFP), you can benefit from professional advice and potentially better fund selection.

Direct Mutual Funds have lower expense ratios than regular plans. However, investing through a CFP can provide personalized advice, which can enhance your returns and help in achieving your financial goals.

Liquidity and Flexibility
Mutual Funds offer better liquidity compared to ULIPs. You can redeem your Mutual Fund units partially or fully at any time. ULIPs have a lock-in period, typically five years, limiting liquidity.

The flexibility in Mutual Funds allows you to switch between funds without charges, unlike ULIPs which may have switching charges. This flexibility can help you adapt your portfolio to changing market conditions and personal circumstances.

Benefits of Staying with ULIP
Your ULIP has performed well, doubling in value. Continuing with the ULIP can provide continued life cover and potential tax benefits. If you value the insurance component and the current performance, staying invested might be beneficial.

However, consider reviewing the fund performance periodically and reassess the charges. If the charges start to outweigh the benefits, it might be time to consider switching.

Transitioning to Mutual Funds
Switching to Mutual Funds with an SWP can provide a steady income and potentially higher returns due to lower costs. Here's how you can proceed:

Evaluate Your Goals: Ensure that Rs. 75,000 monthly is realistic based on your corpus and expected returns.
Select Funds Carefully: Choose a mix of equity, balanced, and debt funds to match your risk profile.
Plan Withdrawals: Set up an SWP to provide the desired monthly income. Review and adjust periodically.
Consult a CFP: A Certified Financial Planner can help optimize your portfolio and ensure it aligns with your goals.
Transition Strategy
If you decide to switch, do it gradually to avoid market timing risks. Redeem your ULIP in phases and invest in Mutual Funds systematically. This strategy can help mitigate market volatility.

Ensure that your new investments are diversified. A mix of large-cap, mid-cap, and debt funds can provide stability and growth. Regularly review and rebalance your portfolio to stay aligned with your goals.

Final Insights
Your ULIP has done well, and it offers insurance cover and tax benefits. However, the high charges can impact long-term returns. Mutual Funds with an SWP offer flexibility, potentially higher returns, and lower costs.

Evaluate your goals, risk profile, and tax implications carefully. Consult a Certified Financial Planner to help make an informed decision. A gradual transition to Mutual Funds can provide the desired monthly income and better long-term growth.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8058 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 31, 2024

Asked by Anonymous - Dec 29, 2024Hindi
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Sbi life smart previlege plan
Ans: The SBI Life Smart Privilege Plan is a unit-linked insurance plan (ULIP) offering life cover and investment options. Let’s analyse its features, benefits, limitations, and suitability from a Certified Financial Planner’s perspective.

Key Features of SBI Life Smart Privilege
Premium Payment Flexibility

Offers single or regular premium payment options.
You can choose to invest as per your convenience.
Investment Fund Options

Provides the choice of multiple funds, such as equity, debt, and balanced funds.
You can switch between funds based on market conditions or goals.
Partial Withdrawals

Allows partial withdrawals after the 5th policy year for unforeseen needs.
Life Cover

Offers a sum assured to provide financial security to dependents.
Tax Benefits

Premiums qualify for deductions under Section 80C.
Maturity proceeds may also be tax-free under Section 10(10D), subject to terms.
Advantages of SBI Life Smart Privilege
Dual Benefit: Combines life insurance with market-linked returns.
Flexibility: Offers fund switching and top-up premium options.
Professional Fund Management: Funds are managed by expert professionals.
Market Participation: Provides an opportunity to benefit from equity market growth.
Limitations of SBI Life Smart Privilege
High Costs

ULIPs involve charges like premium allocation, fund management, and mortality charges.
These reduce overall returns compared to direct mutual funds.
Lock-In Period

Mandatory 5-year lock-in for ULIPs restricts liquidity.
Early surrender leads to penalties or reduced returns.
Limited Transparency

Returns depend on fund performance, which may not be predictable.
Lower Flexibility in Insurance

Term insurance offers better coverage at a lower cost.
Tax Benefits Caveats

If annual premium exceeds Rs. 2.5 lakh, proceeds are taxable.
Better Alternative: Mutual Funds with Term Insurance
Instead of ULIPs like SBI Life Smart Privilege, consider:

Mutual Funds for Investments

Mutual funds are transparent, cost-effective, and provide better long-term returns.
Choose actively managed funds aligned with your financial goals.
Term Insurance for Protection

Term plans provide higher life cover at a lower premium.
This ensures adequate financial security for your family.
Why Mutual Funds Are Superior
Low Expense Ratios

Mutual funds have significantly lower costs compared to ULIPs.
No Lock-In for Most Options

Except for ELSS, most mutual funds provide liquidity without lock-in.
Customisable Portfolio

You can diversify investments across equity, debt, and hybrid funds.
Higher Returns

Actively managed funds have the potential for better market-linked returns.
Suitability of SBI Life Smart Privilege
SBI Life Smart Privilege may suit individuals who:

Prioritise insurance and investment in one product.
Can handle higher costs and lock-in.
Lack time or expertise to manage mutual funds and insurance separately.
However, for most investors, separating investment and insurance yields better flexibility, transparency, and returns.

Final Insights
While SBI Life Smart Privilege offers dual benefits, the high costs and limited flexibility make it less attractive. Opt for mutual funds for investments and term insurance for life cover. This strategy ensures better returns and financial protection.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Asked by Anonymous - Feb 22, 2025Hindi
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I am a 31-year-old woman, married for 5 years, with a 3-year-old daughter and a 1-year-old son. I got married in 2019 at the age of 26, while my husband was 28. Both of us are entrepreneurs and have been running a coal business. Unfortunately, when COVID hit in 2020, our business faced significant challenges, and we have struggled to recover since then. As a result, we moved in with my in-laws. During this transition, I had my daughter and son. We've been actively trying to start a new business, but it hasn't quite come together yet. My husband recently found a job that he loves, although it doesn't pay well enough to allow us to move out. He seems content in this position because it's close to home and aligns with his passion. However, I feel frustrated because when I suggest he look for a higher-paying job to improve our situation, he is hesitant since he’s focused on pursuing what he loves. Living with my in-laws has been challenging, as our relationship has had its difficulties from the start. I'm concerned that they are unintentionally affecting my children's perspective on parenting, and they aren't able to care for the kids regularly so I can explore job opportunities, including remote work. I often feel trapped and hopeless but recognize that leaving this situation isn’t viable financially. Returning to live with my parents is also not an option due to the complicated dynamics there. Despite these challenges, I want to find a way to navigate my feelings of isolation and make progress. I would appreciate any advice or constructive suggestions on how to improve our situation and create a more supportive environment for my family and myself. Thank you.
Ans: Hello mam
I am sorry to hear about the loss your business made in covid. That time was a real challange for all of us.
Lets focus on your problem now. Mam, as now you are living with your in laws, I am sure your husband must be feeling bery secure and happy. But you may have some challanges. Diffrence of opinion always occur in joint families specially when parenting of kids are involved coz they want to raise your kids according to them which can sometime create conflicts Between the family members. Tou can discuss the matter with your husband without blaming anyone and then with his help you can talk to your in laws to support a little bit so that you can also search further for a job. This will increase your satisfaction level and you ll be happy in your family.
Think about it and try this out. I am sure it will work. Plz do tell me your feedback. Take care !
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Dr Upneet kaur
Reach me : https://www.instagram.com/dr_upneet

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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