Are Hidden Charges Eating Into Your Variable Investment Returns?

Somewhere in our lives, full of busy schedules, we try really hard to take out some quality time for ourselves and for our family. But, many of us forget that some time also has to be spent on planning and ensuring a good future for ourselves, even after our retirement, so that we can continue enjoying our life without worrying about getting the ends to meet.

Where to Start?

But, as laymen, investors do not have a complete knowledge of all the investment instruments available in the market. Some prefer to rely on the word of a close friend and some go by the advertisements of the insurance companies to invest their hard earned money. What this usually does is, that it keeps then forever on their toes, wondering what kind of returns they should realistically be expecting from their investments.

Investors always prefer a low cost endowment plans, in which the future growth rate can meet a fixed target amount, and a decreasing life insurance amount, to ensure that the target amount will be paid as a minimum in case of death.

Hence, it is very essential to have atleast a basic knowledge of the different investment plans available along with basic knowledge of the pros and cons of each. They should also be aware of the things to look out for before opting for any plan.

Latest Trends:

Nowadays, Variable Annuity is gaining popularity as an attractive plan for investments and good returns. It is an investment plan that guarantees at the end of its accumulation stage, a minimum return. But, a part of the returns varies depending upon the performance of the portfolio.

However, these plans often come with some hidden charges that do remain ‘Hidden’. Hence, investors must be aware of the amount they will be charged in return of the various services provided by the insurance firm. Such charges of any insurance plan often eat up into the net earning of the beneficiary.

What to Look Out For?

  • Surrender Charges – Investors have to pay some charges in case they withdraw from their plan within a certain period.  This charge is often used for paying a commission to the financial professional for selling the investment plan to the customer. It is important to discuss with the agent or the service provider about the minimum period before which the policy cannot be withdrawn.
  • Mortality Risk Charge – Some variable annuity plans comprise of these charges, which are calculated as a certain percentage of the account value. It is meant to compensate the service provider for the risks it bears under the annuity contract.
  • Administrative Fees – Some companies also deduct some amount to cover their administrative work, such as record keeping.
  • Underlying Fund Expenses – Investors end up paying some charges for the fees and the expenses imposed by the mutual funds underlying the investment. These charges are collected indirectly; hence need to be assessed more carefully.
  • Other Charges – The special services offered by the variable annuity plan such as guaranteed income benefit and stepped-up death benefit carry additional charges.

Investors should ask their financial advisor to explain to them, all the charges that may apply. They must also read between the lines of the contract and seek clarification, wherever there is a scope for ambiguity.


We say that every penny saved is every penny earned. But, the reverse is also true, every penny paid is every penny lost. Before opting for any plan, investors must spend some quality time with their calculator and come down to the final returns they will receive at the end of the term of the plan. Such small efforts can go a long way in ensuring a comfortable future for investors.

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