Guaranteed Pension Goal II: The Plain Plan Pays More

Is Bajaj Life Guaranteed Pension Goal II worth buying?

It is a well-built annuity with unusual range: nine payout options, available both immediate and deferred. If you need a shape that the standardised product does not offer, this is where you find it.

But on the option most people actually buy, there is a comparison worth making first. The same insurer's Saral Pension pays more income for the same money.

The comparison that should come first

Both figures are published by Bajaj Life, for a 50-year-old male with a ₹25,00,000 purchase price, on a life annuity with 100% return of purchase price - the same product shape:

Saral Pension pays ₹15,323 a year more - 9.7% more income - on identical money at the same insurer.

That is not a criticism of the product so much as a reason to ask for both quotes. Saral Pension is standardised by the regulator, so every insurer must offer it with the same two options and the same wording. It is the cheapest thing on the shelf precisely because it is the plainest.

What you pay the difference for is choice. Saral Pension offers two options. This plan offers nine.

What the nine options actually give you

Six of these are also available as a deferred annuity, which Saral Pension does not offer at all.

Options C and I are the genuinely distinct ones. Annuity certain guarantees a minimum number of years of payment regardless of when you die, which matters if you are buying young or in poor health. Family pension extends the income beyond a spouse. Neither has an equivalent in the standardised product, and if you need one, the 9.7% gap is simply the price of the feature.

If you do not need one of them, you are paying for options you will not use.

Deferring ten years more than doubles the income

This is the most striking number in the published table:

Waiting ten years lifts the annual income by 108%, from ₹1,57,950 to ₹3,29,300. Two things drive it: the purchase price compounds through the deferment period, and you start drawing at 60 rather than 50.

Where the lump sum comes from in the first place is a separate question, and our guide to the types of life insurance sets annuities against the savings products that build it.

It is worth putting next to the finding on the Saral Pension page, because they look contradictory and are not. There, buying older barely helped - 0.53% more for a decade - because return of purchase price flattens the age curve. Here, deferring more than doubles the income, because the money is working for you throughout. Age alone does little; deferment does a great deal.

What return of purchase price costs

Inside this plan, giving up the return of your capital buys extra income:

• With ROP: ₹1,57,950 a year, and the ₹25,00,000 goes to your nominee.
• Without ROP: ₹1,75,825 a year, and the capital is gone.

The difference is ₹17,875 a year. Against a ₹25,00,000 capital sum, the extra income would take about 140 years to add up to what you gave away.

That comparison ignores the time value of money and is not a full analysis. But as a first look it is stark, and it explains why the return-of-purchase-price options dominate sales. For most buyers the plain life annuity only makes sense where there is no one to leave the capital to.

Eligibility

Immediate: entry from 30 to 85. Deferred: entry from 35 to 84, vesting by 85.

Minimum annuity is ₹12,000 a year, or ₹1,000 a month, with no maximum. Income on the immediate version begins from age 51 on the published example, so a year after purchase.

What to do with this

1. Ask for both quotes from the same insurer. Saral Pension and this plan, same purchase price, same option shape. On the published figures the standardised one wins by 9.7%.
2. Then ask whether you need one of the nine options. Annuity certain and family pension have no standardised equivalent. If you need one, buy it and stop comparing.
3. Ask what deferring does to your quote. On the published table it more than doubles the income, and that is a bigger lever than anything else here.
4. Treat the capital as gone either way. Annuities are not designed to be reversed, so this is a decision to make once, slowly.
5. Remember the income is taxable as income in the year you receive it, which makes every rate above a pre-tax figure. Unlike a savings plan's maturity, there is no Section 10(10D) exemption on annuity income - see reading a benefit illustration.

FAQs

What is the annuity rate on Guaranteed Pension Goal II?

On Bajaj Life's own published table for a 50-year-old male with ₹25,00,000, the immediate life annuity pays ₹1,75,825 a year and the version with 100% return of purchase price pays ₹1,57,950. Deferred by ten years, the same options pay ₹3,58,050 and ₹3,29,300.

Is Guaranteed Pension Goal II better than Saral Pension?

On income, no, at least on the comparable option. Both are Bajaj Life products, and on a ₹25,00,000 purchase price at age 50 with return of purchase price, Saral Pension pays ₹1,73,273 against ₹1,57,950 here - 9.7% more. What this plan offers instead is nine payout options against Saral Pension's two, including annuity certain and family pension, which the standardised product does not have.

Should I choose an immediate or deferred annuity?

Deferring has a large effect. On the published table, a ten-year deferment lifts the annual income from ₹1,57,950 to ₹3,29,300, an increase of 108%, because the purchase price compounds through the deferment and the income starts later. If you do not need the income yet, that is the single biggest lever available.

Is return of purchase price worth taking?

On these figures, usually yes. Giving it up buys ₹17,875 a year more income against ₹25,00,000 of capital forgone, which would take roughly 140 years of extra income to match. The plain life annuity mainly suits someone with no one to leave the capital to.

What is annuity certain?

An option that guarantees payment for a fixed period - 5, 10, 15 or 20 years on this plan - regardless of whether the annuitant survives it, with the annuity continuing for life afterwards. It protects against dying early in the contract, and it has no equivalent in the standardised Saral Pension product.

Is annuity income taxable?

Yes, as income in the year you receive it, at your slab rate. Every rate quoted here is therefore a pre-tax figure, and comparisons against other uses of the same lump sum should be made after tax.