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Do Long-term Investments in Saving Plans Ensure Better Returns?

A Guaranteed Savings Plan or GSP is a non-participating policy that helps individuals achieve their long-term goals by offering an assured return on their savings.

  • 6,891 Views | Updated on: Mar 20, 2024

Retirement planning is one of the most important things that we do as younger versions of ourselves. One retires from work, not life. Our goal is to achieve financial security and stability during our work-life’s peak days of activity. Retirement is about living your life with dignity and having enough monthly income to maintain a smooth lifestyle easily.

Why Should You Consider Guaranteed Savings Plan for Long Term Investmen

Importance of Retirement Planning

Financial independence

Old-aged people often feel like a burden on their families due to financial dependence. Financial independence ensures higher self-worth and better interpersonal relations.

Medical emergencies

Healthcare expenses are non-negotiable, unlike other financial goals. Since inflation in the healthcare sector is growing at an alarming rate, it is crucial to plan for unexpected emergencies.

Better health

Financial stress is responsible for many diseases such as diabetes, heart disease, migraine headaches, anxiety, depression, insomnia, etc. If you have planned your post-retirement life already and secured your finances, it will protect you from stress, hence contributing to better health.

Fulfill your post-retirement goals

With the right retirement plan, you can achieve all your goals, including traveling, children’s higher education, marriage, etc.

Fight inflation

Holding money in a bank account is insufficient to fight inflation today. Therefore, assured return investment plans help you generate significant returns to meet your expenses.

Also, it is suggested to start investing for retirement at a younger age. This is cost-effective and averages out the overall impact of the market volatility.

Savings Plan - Overview

There are many plans in the market for retirement savings; however, the goal of most individuals is to save maximum for their retirement years. Also, since it’s about retirement, dependency on high-risk investments is hardly a choice.

Guaranteed Savings Plans are the best life insurance plans with guaranteed returns for those looking for a retirement policy. In addition, the features of the Guaranteed Savings Plan make it an excellent long-term investment option, alongside making it quite popular among people looking for such investment.

The best Guaranteed savings plans or GSP available in the market can also serve as the best long-term savings tool. Investment in this guaranteed return investment plan can be planned for meeting retirement expenses in addition to the basic pension. You can also plan it to support the cost of higher education or as a personal investment for other futuristic purposes.

Let’s understand what a Guaranteed Savings Plan is and why are GSPs considered good for long-term investment. Let us first understand what GSP is and then maybe move on.

What is Guaranteed Savings Plan?

A Guaranteed Savings Plan or GSP is a non-participating policy that helps individuals achieve their long-term goals by offering an assured return on their savings coupled with a secured insurance cover against uncertainties of life. These plans offer life insurance with guaranteed returns and are traditional. They do not involve the policyholder directly in investment activities like ULIPs.

You are eligible for a lump sum amount or a regular payment as a monthly or annual income over a given time at the time of maturity and other benefits. These are guaranteed payments that the insurer has to pay you.

In addition to this, they serve as tax saver plans. The premiums paid up to ₹1.5 lacs per annum are exempt under Section 80C of the IT Act, 1961.

Hence, the policyholder can avail themselves of the tax benefits as per current income tax laws prevailing in India.

Once the plan matures, the policyholder receives the final amount. The total amount is the sum of all the premiums along with interest. In case of the policyholder’s unfortunate demise, the beneficiary gets the death benefit.

Furthermore, the interest paid here is much higher than the conventional types of life insurance. (Note: The policy should be ongoing and not matured.) The terms and conditions for a savings plan might vary according to the bank or service provider. The minimum age limit is from 0 to 60, while the maximum age ranges from 18 to 75 years.

However, it is important to read all the policy-related documents before opting for life insurance plans with guaranteed returns like the GSP.

Documents required to apply for a Guaranteed Savings Plan

  • Application form
  • Proof of identity
  • Proof of address
  • Salary and occupation proof
  • KYC documents
  • Medical documents are required sometimes to show a detailed medical history.

Why are GSPs Considered Good for Long-Term Investment?

When you talk about Guaranteed Savings Plan, it’s understood that it is an endowment plan with guaranteed returns. Now, why should you consider guaranteed savings plan a good option for long-term investment?

This is the best-guaranteed return plan as the total amount you receive is higher than other types of life insurance.

Total Maturity Benefits = Basic Sum Assured (BSA) + Guaranteed Addition (GA) + loyalty addition (LA)

A very straightforward answer is that the longer you stay invested in GSP, the better returns you get. If you look at the policy terms and guidelines of most of the insurance providers, you get the option to opt for a policy term of 14,15,16, or 20 years, with different premium payment terms. You need to specify the time duration of maturity for the savings plan before signing up.

You can choose to pay the premiums according to your preferences. You can pay a lump sum in a single shot to avoid the hassle or pay the premiums at regular intervals.

Now, if you do the math on all of these policy terms and the time you have invested in GSPs, you will get enough idea of the long-term benefits of GSP compared to a shorter tenure. This makes it one of the best investments for people planning to invest for long-term financial goals like retirement. GSPs help you leap ahead in your financial capabilities and fulfill your future milestones. So choose the best investment plan with guaranteed returns and secure your post-retirement life.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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