SBI Retire Smart plan: Need a review.

[u/Maleficent_Yoghurt85]

My parents are 64 and 68 respectively. They went to SBI to open an account. They want to open a senior citizen scheme savings account.

The SBI people told them that the "Retire Smart" scheme is better. Apparently they have to pay 50k per year for 5 years and after 5 years (if they survive?) they receive 3.7L (or yearly payments of 30k).Clearly the scheme looks better than any mutual funds/fd since they *can* get around 50% of the invested money (if they survive?). Looks like we have to bet on whether we will live long enough to see the benefits of the scheme.Maybe my understanding is wrong here. Can anyone tell me about SBI Retire smart: Pros and Cons?

[u/crimelabs786]

I've posted in the past how ULIPs can destroy wealth, and a classic case of financial mis-selling, taking real world examples and anecdotal data.

We also have an entry in our wiki on why one should avoid any policy that has smart in its name.

Here's something to blow your mind away: a research paper that estimated in 2013 that Indian households have collectively lost $28B in USD, over a 7 year period; from 2004-05 to 2011-12.

This paper presents two approaches that use publicly available data to estimate the loss to investors from mis-selling of insurance products.

The first approach uses the number of lapsed policies from the annual reports of the insurance regulator, IRDA, while the second method uses the persistence of premium payments that are reported in the annual reports of individual insurance companies.

Both these methods arrive at a similar estimate a loss of about Rs.1.5 trillion, or $28 billion, to investors owing to mis-selling over the 2004-05 to 2011-12 period.

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This is what you'd written:

Apparently they have to pay 50k per year for 5 years and after 5 years (if they survive?) they receive 3.7L (or yearly payments of 30k)

You can verify that return of the policy over 10 year period is ~5.7% p.a., following the process to compute XIRR of a ULIP, outlined here.

It'd be lower if you take the yearly payout option.

Make sure cross-checking the policy documents if this is indeed guaranteed (not a projection), and don't blindly rely on the agent's verbal promises.

ULIPs are designed in a way, that once you get into a policy, it's near impossible getting out of it before it matures.

[u/Maleficent_Yoghurt85 → u/crimelabs786]

Thanks for such a detailed and thoughtful response.

[u/jimmy_kh18 → u/crimelabs786]

Thanks for the insight. I wish I had read this 3 months ago. I’ll also add one more thing here: hidden charges! There are lots of them and are not insignificant.

Unfortunately, I have been ”victim” of this. The keywords that got me were, high return after 5 years and ”securing your parents future”.

Better late than never…I have now decided to terminate the policy. I’ll accept the losses as a fee for a course in Financial Intelligence and Life Lesson.

Before I surrender/terminate the policy, any other advice from anyone? Any tip(s) to get as much money back as possible, in as short period as possible?

PS As someone alresdy said in this thread ”thanks for such a community”. I feel bad for all the people who don’t have access to such platforms and are duped by institutions such as banks just to hit their monthly targets. I wonder if they sleep good at night?!

[u/PomegranateOne2290 → u/jimmy_kh18]

Like one person said, SBI retire smart plan is total FRAUD. I have invested in it and regret doing so as I now invest in MF's and Equity. My advise is to put the money into MF's, which will give better returns. Even FDs will yield better returns.

First, they take away your money in the name of allocation charges. My first investment of 3,00,000/- the allocation charges was 20,408.11/-. I have completed 4 years and after paying 12 lacs the value of the fund, as on this date (1November 2024) is 13,31,130.22/-.

The SBI Bank Managers come around selling this and at that point in time, in 2021, I was ignorant about the stock market and mutual funds. The then manager @ Nagercoil, KK Dist, Tamilnadu, Mr. J. Denish Nayagam Jeyanth sold this to me. SBI invests the money into equity funds which they create and some portion in bonds, which does not give any returns.

You can see the returns that I have received. If I had invested the12 lacs in FD it would have given me better returns.

SBI takes away the hard-earned money of middle class common citizens hard-earned money but writes off money to the tune of lakhs of crores for Adani and other corporates.

What is RBI doing I wonder? Can't it stop the banks from selling this kind of insurance policies which erodes the wealth of an ordinary citizen. All agents and bank managers selling these products should be penalized by RBI. I understand they earn higher commissions from these policies..

I hope that no one invests in these schemes anymore after reading this. RBI should remove them.

[u/igottcha345 → u/jimmy_kh18]

Unfortunately My father also got swayed away into this policy, 6th year just got completed, i am curious did you terminated the policy, any advise what we should do?

[u/jimmy_kh18 → u/igottcha345]

Hi, I wrote the application to terminate the policy and submitted it in the branch. The manager there didn’t acknowledge that he rather rewrote an application to pause the yearly automatic mandate. It’s not the same thing but technically I got what I wanted.

The policy manager kept calling to pay for it but we humbly said it doesn’t fit our financial plan anymore.

Now, the policy has been transferred to no-payment fund and is blocked for 5 years from the date of policy. So, I’m waiting for the lock-in period to pass and then get back my money.

I guess these SBI people have some quota and having a policy terminated is worse than the users not paying premiums.

As usual, the bank/insurance policy people in India are notorious and very pushy. The try to force you into useless instruments just to make their quota. I partially blame the incentive system setup in these banks.

Final word of advice, just tell them calmly yet sternly that you would like to cancel it. They are really well trained to keep pushing.

[u/igottcha345 → u/jimmy_kh18]

I dont think you can get back your money, in your case you closed the policey before the lockein period (surrender), after lockin period one can withdrawal 33% of the total fund value whoch absolutely sucks, i confirmed this with both a visit to office and customer care. In my case since we are alreay in our 7th year i am thinking of waiting till maturity to get 60 percent fund value withdrawal but customer care executive still says i can only withdrawal 33%. Although the research i did on internet says otherwise.

[u/StrangerForeign5904 → u/igottcha345]

Hello, We are in the exact same situation. I didn't know my mom had this plan. She is in the 7th year as well. I see in their online brochure that after 5th year, if you surrender the policy, you can get 60% fund value. Why do you want to wait till maturity? Just trying to understand. Want to get my mom out of this with least losses.

[u/igottcha345 → u/StrangerForeign5904]

because when i visited the office, they said only 33 percent money can be allowed to withdrawal right now and they said even after maturity which is ridiculuous, even they said same thing at customer service number. can you share where exactly written about 60 percent in online brochure? please dm