ING Life retirement planning – A flawed response to Moneylife article on a flawed product

ING Life retirement planning advertisement in ET Wealth made misleading assumptions. ING responded to our article. Here are ING’s faulty responses defending the flawed retirement path it advertised. Is IRDA listening?

Upton Sinclair has written: “It is difficult to get a man to understand something when his salary depends on his not understanding it.” This applies wonderfully to all financial services companies and their intermediaries.

The latest example is the response of ING Life to our article on Monday based on a full-page advertisement in ET Wealth offering “advice” on retirement planning, their traditional product—New Best Years—and throwing at you some numbers to help you retire “on your terms”. Our article pointed out the unrealistic assumptions made by ING, leading to questionable solutions. Please read

Today, we received response from ING Life which we present here verbatim along with Moneylife responses.

Moneylife Comment 1: Inflation is assumed to be 5% every year till retirement. Is this realistic in current scenario? This is used to arrive at estimated annual expenses at the time of retirement. Moreover, with longevity today, people can easily live more than 20 years after retirement. The increase in the estimated annual expenses over those years is not mentioned in the calculation. It means that the plan assumes your expenses at retirement to continue unchanged till you die possibly after 20 years.

ING Life’s response: We have been conservative with regards to increases in cost of living as we expect long term inflation to be lower than 5% in line with historic average inflation rates but have assumed 5% for this example. In addition, we have assumed a conservative annuity rate of 5.1%. Together these conservative assumptions will compensate for any inflation in the 20 years.

It should also be noted that the customer (on his retirement) can purchase an inflation adjusted life annuity which protects him/her against inflation that may be available at a future date. Currently, this is not available in the market.

Moneylife’s response
– The inflation rate in India was last reported at 9.36% in October of 2011. From 1969 until 2010, the average inflation rate in India was 7.99%. These are official figures and possibly wrong. For most people in the urban areas, inflation is higher. Wonder what numbers led ING Life to inflation of less than 5% historic average.

There is no historical basis for assuming an inflation of 5%. Projecting an inflation rate of 5% is shooting in the dark. This is another example of financial services companies working without a robust historical database and/ or method of arriving at statically valid assumptions.

Also, why is ING Life even talking about inflation adjusted life annuity when such a product has never been in the market?

Moneylife Comment 2: The advertisement specifies that the customer has the option to choose an annuity plan from ING Life or from the open market at the time of vesting. This is not true after the new pension guidelines from IRDA last month. The customer has to continue with same insurance company for the annuity phase of the product. There is no flexibility.

ING Life’s response: We have clearly mentioned that this product is valid only till 31 December 2011. As per guidelines, annuity can be purchased from open market if one buys an accumulation pension product before 31 December 2011. The new pension guidelines will be applicable from 1 January 2012 only.

Moneylife response - IRDA pension guidelines (8 November 2011) clearly specify that it is applicable from 1 December 2011. All existing products which do not meet the guidelines shall be withdrawn from 1 January 2012. This seems to be limited-time kind of deal offered to customers even though technically the new guidelines are already effective. Any limited time offer is always tempting to naive customers and amounts to mis-selling.

Moneylife Comment 3: The rate of return during the accumulation phase is assumed to be 10%. This number is used for estimating investments you need to make into your policy until retirement, to meet the estimated fund value, if you start savings today. Considering the guarantee of capital specified in the new pension guidelines from Insurance Regulatory and Development Authority (IRDA), it is highly unlikely that 10% rate of return can be achieved. Most of the investments will have to be in the debt market irrespective of it being pension ULIP or pension traditional.

ING Life’s response: ING New Best Year’s fund provides guarantee on account value rather than on total premium paid and therefore allows greater flexibility to invest in aggressive instruments (including some equity). The assumption of 10% interest rate is in line with IRDA’s guidance on using interest rate of 10% and therefore we wanted to be consistent in our approach. Products sold after 1 January 2012 will be more restrictive in terms of investment options because of the guaranteed that must be provided.

Moneylife response - IRDA wants insurance companies to give benefit illustrations of 6% and 10%; not just 10%. ING did not give the 6%illustration, probably because it is not appetising. ING New Best Year is a traditional pension product. How does guarantee on account value allow greater flexibility to invest in aggressive instrument (including some equity)? The product guarantees total contributions after deducting charges on death or maturity. Providing such a ‘guarantee’ can never allow aggressive investment. Capital protection investments have high debt exposure and giving 10% rate of return over long-term is nearly impossible—unless of course interest rates shoot up, in the wake of much higher inflation. In that case, even 10% will be low.

Moneylife Comment 4: The average bonus rate from ING Life in the last five years has been 8.33% on the accumulated funds (premium minus charges), not on the premium paid. The actual returns will be lower and hence achieving 10% return with capital guarantee product is close to impossible in pension products. Moreover, 8.33% is the average of last five years; the bonus rate in the next 20-30 years can be vastly different.

ING Life’s Response: The illustration was shown to highlight how much a person needs to save for his/her retirement and therefore has no relation with the bonus declared by New Best Years. The table titled “Want to make your retired years as the best years” is a generic example to illustrate a possible real life situation irrespective of which pension product he chooses. These calculations are given to make people aware of their pension needs on a reasonable set of assumptions. In addition, we have clearly mentioned the assumptions used for these calculations and in no manner they are related to the product return. On the other hand, the illustration of our product is given in a separate section “See Question in the advertisement: Can you please illustrate how this plan works?”, where an 8% scenario is used.

Moneylife’s response – The bonus declaration is not on premium; but premium minus charges. For example, the charges for ING Life New Best Year (as specified in benefit illustration) are 11.66% for first year and 3% for each year thereafter. The management fee is 1.5%-2.5% of fund value. All the charges eat into the returns which will be much lower than 8.33%. Again, if you show 10% in advertisement, a conservative 6% calculation should also be shown to be a possibility as the regulator requires.

Moneylife Comment 5: It comes up with estimated value of your retirement fund required to meet the estimated annual expenses. The issue here is it never mentions that annuity is taxable. With the possible annuity interest rate they give, when we consider the annuity being taxable, you will not be able to meet your estimated annual expenses.

ING Life’s response: We agree that tax has not been allowed for, because one cannot forecast the tax slabs & tax rates that may be applicable at that point in time. In addition, the current tax slabs for a senior citizen are reasonable enough to allow either zero tax or a low tax on small part of annuity income (after allowing for tax slabs) which is sufficient to manage expenses. We consider that the similar will be the situation on retirement as well.

Moneylife’s response
– Since ING is “educating” a prospective customer, it could have added one more fine print in the advertisement that annuity is taxable. There are high net worth individuals with huge corpus in pension funds. Customer education is also important; not just slick advertisement to rake in business from susceptible readers in garb of safe advice.





5 years ago


I had typed out a long message and when I pressed the submit button after entering the security code, it said message could not be posted due to security code not matching. Two things here.

What is the need to mention the secuirty code? I mean, if you want boarders to post messages, make their life simple.

Two, if you really feel security code is important, change the software such that if the security code does not match for whatever reason, the typed out message is retained in the comment section and a new security code appears.

Could you please look into this?



In Reply to manoja 5 years ago

good suggestion. will surely look into it.

For now, you can type the message, do copy and then submit. If there is any problem, you can paste the message and resubmit.

Nagesh Kini FCA

5 years ago

The so-called 'clarifications' in response by ING are not only flawed but warrant punitive action from the Insurance Regulator IRDA.
The assumptions of 5% inflation and 20 years of post-retirement longevity both beat logic and to expect the aging insured to go back to them is the height of deception.
It requires immediate action from IRDA for mis-selling plain and simple.

Madhur Kotharay

5 years ago

ING has been dishonest. From 1981 to 2010, the inflation CAGR is above 8%.

There are only 6 years of these 30 years, when the inflation has been below 5%.
2000: 4.5%
2003: 3.8%
2004: 3.7%
2005: 3.6%
2006: 4.7%

And don't forget:
1992: 13.7%
2010: 14.9%

These two years itself were bad enough to nullify the effect of sub-5% inflation on the averages.

With Indian affluence, especially the rural incomes being on the rise, our inflation will be structurally higher in the years to come.

My guess: 8% inflation will be the norm. RBI is fighting a battle that will come at a grave expense, by destroying growth. Given that India is resource-poor country and our oil burden is so high, there is no possibility of inflation staying low for long stretches of time, except the times of severe economic downturn.

Deepak patil

5 years ago

I fully second the issues raised by Moneylife in the issue even though I have been and am an active insurance advisor.
I have never ever felt the need to misrepresent facts the way the Company (and even some people in the Company I represent) puts forth.
It is such weak arguments that the Company gives by way of replies that earn a bad name for the entire sector.
I must also add that I charge fees for the advice I render IN ADDITION to the commissions that I earn and about which I DO reveal to clients.



In Reply to Deepak patil 5 years ago

I agree. The company would have done better by not responding or accepting mistakes.


5 years ago

The only way to avoid this type of complicated products is just to stop the hybrid products like - ULIP (Insurance + investment), Pension Plans etc.

Insurance companies need to offer only insurance - to cover the risk - no more assured return plans. But who will bell the cat? IRDA is part and parcel of the insurance companies and IRDA will not work against the interests of the inurance companies.

Other option is to bring the ULIPs and other hybrid plans which involve equity related investments under the purview of SEBI.


nagesh kini

In Reply to PPM 5 years ago

If i'm not mistaken IRDA has won over SEBI in the spat on this issue.


5 years ago

Someone told me to ask this question to the Fund Manager/Insurance salesman when buying a retirement plan'Who's retirment are you talking about..your or mine?
By hawking such a misrepresented product...someone surely is going to have a happy retirement..question is who?


Debashis Basu

In Reply to arvind 5 years ago

No surprise there.
Financial services businesses are designed for employees who sell. Not for those who buy. Not even for the shareholders of these companies.
There is plenty of evidence of this

No proposal for mechanism to regulate Internet content: Government

“The government does not regulate content and there is no proposal to formulate any mechanism to regulate the content on the Internet,” minister of state for communications and IT Sachin Pilot informed the Lok Sabha

New Delhi: Amid a raging controversy over monitoring of the Internet, the government today said there is no proposal to formulate a mechanism to regulate content on the world wide web, reports PTI.

“The government does not regulate content and there is no proposal to formulate any mechanism to regulate the content,” minister of state for communications and IT Sachin Pilot said in a written reply to a question in the Lok Sabha.

He said during the April 2010 to November 2011 period, a total of 57 incidents of misuse of social networking sites in terms of publishing objectionable content pertaining to political leaders, religions, national security and individuals were reported to the Indian Computer Emergency Response Team (CERT-In).

Last week, telecom minister Kapil Sibal had met officials of leading Internet firms, including Google, Facebook and Microsoft, with a view to put a halt to offensive and defamatory content on the Internet, a move that sparked off controversy.

Different and strong views have emerged on the government’s move to police the Internet.

Social networking sites have emerged as an online platform that enables users to share ideas, activities and express views/opinions on specific topics. Such sites can be accessed by all sections of societies.

“Most of such sites are hosted outside the country.

Morphed photographs of our national leaders and other celebrities have been uploaded on some social networking sites,” Mr Pilot said.

The government has notified the Information Technology (Intermediaries Guidelines) Rules, 2011, under Section 79 of the Information Technology Act, 2000. These rules provide for intermediaries to observe due diligence and safeguards, he said.


Weakness may continue: Wednesday Closing Report

If the Nifty goes past today’s low it may hit 4,660

Brushing aside the decline in headline inflation for November, the choppy market settled lower on bleak global cues. The weakening of the rupee to an all-time low of 53.80 to a dollar also added to the woes. Although today the Nifty managed to keep itself above yesterday’s low, it closed in the negative. The fall has been on lower volume of 51.33 crore shares on the National Stock Exchange (NSE). If the index breaches 4,750 decisively, the fall may extend to 4,660. To regain strength, the benchmark will not only have to keep itself above today high of 4,840 but beyond 4880.   

The market opened lower on weak global cues. Wall Street closed in the negative in the absence of any stimulus announcement from the Federal Reserve in its two-day meeting which began on Tuesday. Tracking the US and the still to be resolved European crisis, markets in Asia, including India, opened lower this morning. The Nifty opened at 4,789, down 12 points, and the Sensex lost 39 points to resume trade at 15,964. Oil & gas, power, PSU, metal and capital goods stocks pulled the market down in initial trade.

Select buying amid volatile trade pushed the indices into the positive a short while later. Reports of headline inflation for November easing to 9.11% enabled the market touched the day’s high. At the highs, the Nifty hit 4,840 and the Sensex went up to 16,133.

However, the gains were short-lived as market witnessed a sharp fall half an hour later with the indices entering into the red. Choppy trade saw the benchmarks fluctuating between negative and positive in the second half of trade. Profit booking by institutional investors in post-noon trade resulted in the market declining further and touching its intraday low at around 3pm. At the day’s low, the Nifty fell to 4,750 and the Sensex went back to 15,855. The indices closes near those levels with the Nifty declining 37 points to 4,763 and the Sensex settling at 15,881, down 121 points from its previous close.

The advance-decline ratio on the NSE was in favour of the decliners at 498:1129.

Among the broader indices, the BSE Mid-cap index tanked 0.95% and the BSE Small-cap index declined by 0.81%.

Barring the BSE Fast Moving Consumer Goods index (up 0.23%), all other sectoral gauges closed lower. BSE Realty (down 2.42%); BSE Metal (down 2.16%); BSE Power (down 2.09%); BSE PSU (down 1.63%) and BSE Consumer Durables (down 1.44%) were the top losers.

The top-five Sensex stocks were Sun Pharma (up 1.68%); ITC (up 1.17%); Bharti Airtel (up 0.71%); Jaiprakash Associates (up 0.25%) and Wipro (up 0.08%). The declining stocks were led by Tata Power (down 3.98%); Tata Steel (down 3.94%); DLF (down 3.58%); Mahindra & Mahindra (down 3.53%) and Coal India (down 2.76%).

The main gainers on the Nifty were Sun Pharma (up 1.55%); ITC (up 1.44%); Ambuja Cements (up 0.86%); Bharti Airtel (up 0.84%) and JP Associates (up 0.75%). Tata Steel (down 4.46%); Reliance Infrastructure (down 4.19%); Tata Power (down 4.14%); M&M (down 3.94%) and BPCL (down 3.88%) settled at the bottom of the index.

Markets in Asia closed lower as the US Federal Reserve on Tuesday failed to announce any new stimulus to boost the economy and added that downside risks still remain. The fears of downgrade in sovereign ratings for European countries by global ratings agencies also weighed on investors.

The Shanghai Composite declined 0.89%; the Hang Seng fell 0.50%; the Jakarta Composite slipped 0.32%; the KLSE Composite was down 0.87%; the Nikkei 225 fell 0.39%; the Straits Times declined 0.50% and the Seoul Composite shed 0.34%. Bucking the trend, the Taiwan Weighted rose 0.38%.

Back home, foreign institutional investors were net sellers of equities to the tune of Rs560.80 crore on Tuesday. On the other hand, domestic institutional investors were net buyers of shares totalling Rs481.93 crore.

State-owned Indian Oil Corporation (IOC) is in talks with L&T-Tata Steel-owned Dhamra Port Company for setting up a 5 million tonnes per year LNG terminal in Orissa. The proposed LNG import and regasification facility at Dhamra port will be besides the Rs4,320 crore terminal IOC is planning to set up at Ennore in Tamil Nadu. IOC settled skidded 3.05% to close at Rs268.40 on the NSE.

Jewellery exporter and retailer Rajesh Exports plans to ramp up its retail chain ‘Shubh Jewellers’ to 550 outlets in south India by 2014, and is eyeing revenue of over Rs20,000 crore from retail alone by 2014-15.

The company hopes to acquire 8% share in the Indian retail gold jewellery trade, which would translate into retail revenue of about Rs25,000 crore, making it the biggest player in the Indian retail space,” the company said on Wednesday. The stock gained 0.11% to close at Rs133.15 on the NSE.

Pesticides manufacturer, Excel Crop Care, on Wednesday said that following the Supreme Court order to allow export of unused stock of endosulfan, the company would be able to ship 1,188 kilolitres of the chemical. The export is allowed subject to fulfilment of and compliance with specific conditions, it added. The stock tumbled 9.67% to settle at Rs131.25 on the NSE.


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