ULIP Review: Edelweiss Tokio Wealth Ultima scores well on fund performanceEdelweiss Tokio Wealth Optima is portrayed as a ‘new age’ ULIP but comes with some very ‘old age’ charges including a hefty premium allocation charge. Its funds have done well but returns can dwindle once you factor in all the charges. Here are some details on this ULIP.

Policy Term

The ULIP has two variants. One variant matures when you hit 70 years and another matures when you hit a 100 years of age. The minimum policy term is 10 years. However, you do not have to pay premiums for all 10 years. You can opt for a limited premium payment term of 5 years. It also has an option ‘little champ’ add-on feature. If you select this feature, the policy will continue even after your demise and your child will get the policy benefits. Opting for the feature is likely to come with additional costs as well.

Death Benefit (Sum paid to your nominees if you pass away)

10 times annual premium, 105% of fund value, whichever is greater

Maturity Value

The value of the ULIP funds. This is derived by multiplying Net Asset Value (NAV) with the number of units.

Charges

Charges % of Premium
Premium Allocation Charge 6% for Year 1,

4% for Years 2 to 5,

nil after that

Policy Administration Charge Years 1 to 5 – 1.65%,

nil after that

Fund Management Charge 0.5% – 1.35%
Discontinuance Charge 6% subject to a maximum of Rs 6,000 (Year 1)

4% subject to a maximum of Rs 5,000

3% subject to a maximum of Rs 4000

2% subject to a maximum of Rs 2000

Mortality Charge Levied on Sum-at-Risk as per a complex formula. This charge typically falls as fund value grows due to investment returns
Switching Charges None
Premium Redirection Charge None
Partial Withdrawal Charge None

Investment Strategies

Self Managed: You select the ULIP funds yourself

STP (Life based): It allocates money between specific equity and debt ULIP funds based on your age and the policy term remaining

STP (Profit based): Begins with equity investment. Moves money to debt once predetermined profit targets are met.

You can also opt for a Systematic Withdrawal Plan from ULIP funds if your policy term is more than 10 years, after the 10th year.

At withdrawal, you can either take your money as lump-sum or in installments over 1-5 years. These can be monthly, quarterly, half-yearly or annual installments.

Additions and bonuses

  • The policy will add 0.25% of the average daily value of the fund for the year, after the 6th year as a guaranteed addition.
  • The policy will add 0.15% of the average daily value of the fund for the year, after the 6th year as loyalty addition. No loyalty additions if premium paying term is five years.
  • The policy will add ‘booster additions’ every five years, starting from the end of the fifth year of the average value in the fund for the past five years. It will be 2.75% at the end of the 10th and 15th year and 3% at the end of the 20th year.

ULIP Fund Performance

The ULIP funds of Edelweiss Tokio Wealth Optima have done well with four out of five funds beating their benchmarks over the past five years. The fifth fund – Equity Midcap only has a one-year history and it has also beaten its benchmark.

Name Type 5 year return Benchmark return Outperform?
Equity Large Cap Fund 60-100% in equities, rest in debt 17.6% 13% Yes
Equity Top 250 Fund 60-100% in equities, rest in debt, focus on top 250 companies 20% 14.7% Yes
Equity Midcap Fund 80-100% in equities, rest in debt, focus on mid-cap companies 20.2%* 19.3%* Yes
Managed Fund 0-40% in equities, rest in debt. Asset allocation is the focus. 12.7% 9.9% Yes
Bond Fund 0%, in equities, 100% in debt. Focus on the accumulation of income through investment in fixed income 9% 8.5% Yes

Source: Edelweiss Tokio Fund Factsheet for February 2018. * One-year returns.

RupeeIQ Take:

This ULIP has delivered good fund performance. However, it is saddled with high charges. Its basket of investment strategies is passable but lacks certain features like a systematic transfer plan variant which transfers premium money automatically each month from a debt to equity fund in the ULIP. However, HDFC Click2Invest and Bajaj Allianz Goal Assure have lesser charges and so would be a better deal.

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.