Guaranteed Income Schemes like Tata AIG’s Fortune Guarantee Plus are often marketed as safe, predictable financial products. However, these schemes often fail to deliver when evaluated against alternatives. Here’s a breakdown:

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Key Features of These Schemes

Fixed Contributions: Invest a specific amount annually for a defined term (e.g.,2.5L/year for 10 years).

Fixed Returns: Receive annual payouts for a subsequent period (e.g.,2.5L/year for 15 years) with a final lump sum at maturity.

Implied Returns: These typically range between 3%-5% annually, pre-tax.

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Pros of Guaranteed Income Schemes

Predictable Returns: You know the exact amount you’ll receive over the term.

Low Risk: Backed by large insurers, minimizing default risk.

Tax Efficiency: Some plans may offer EEE (Exempt-Exempt-Exempt) status under Indian tax laws.

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Cons to Watch Out For

Low Returns:
- After factoring in inflation, your real return is often negative or close to 0.
- Comparable to Fixed Deposits but with less flexibility.

Locked-In Investment:
- Long-term commitment with penalties for early withdrawal or stopping premiums.
- Illiquid investment—breaking the policy mid-term often results in heavy losses.

High Fees:
- Administrative costs and agent commissions significantly erode returns.

Misaligned Marketing:
- Aggressive selling by bank relationship managers (RMs) prioritizing their incentives.

Mixing Insurance with Investment:
- These plans combine life insurance with savings, leading to mediocre outcomes in both.

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Better Alternatives

1. Fixed Deposits (FDs):

• Current rates: ~6%-7% per annum.
• More flexible and liquid.
• Breaking an FD is far easier than exiting a guaranteed income plan.

2. Index Funds & Mutual Funds:

• Long-term equity investments deliver ~10%-12% annual returns.
• SIPs (Systematic Investment Plans) in diversified equity funds can outperform these schemes.

3. Public Provident Fund (PPF):

• Guaranteed returns (~7.1% currently).
• Tax benefits and complete safety for long-term wealth creation.

4. Term Insurance for Protection:

• Separate life insurance with a term plan to secure your family’s financial future.

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Golden Rule of Investing

Never Combine Insurance with Investment. Opt for pure investment products and separate insurance plans for better returns and flexibility.

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What Others Say

• Low Returns: Investors report effective returns of 3%-5%, which fail to even match inflation.
• No Flexibility: Breaking the plan or modifying contributions mid-term results in penalties or subpar payouts.
• Aggressive Selling: These plans are often pushed by RMs prioritizing commissions rather than customer needs.

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Bottom Line

Guaranteed Income Schemes are rarely worth it unless:

• You prioritize absolute safety over returns.

• You’re in a high-tax bracket and need EEE tax benefits.

For most individuals, index funds, FDs, or PPF offer better returns, flexibility, and long-term growth potential.

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