Invest Wisely: Lic Pension Fund Guide

The Life Insurance Corporation of India (LIC) offers a range of pension plans to help prospective insurance buyers plan their retirement. LIC pension plans are designed to provide a regular income stream to policyholders after retirement. These plans help individuals accumulate a corpus during their working years, which is then used to provide a steady income during retirement. LIC offers four different pension schemes that provide a steady flow of income to the individual in their golden years. The LIC Saral Pension Scheme, for instance, offers an annual interest rate of around 5% for policyholders. The LIC New Pension Plus plan allows investors to invest their money in various market-linked funds to generate increased returns. The LIC Pension Fund, sponsored by LIC, has been appointed by the Pension Fund Regulatory and Development Authority (PFRDA) as one of the three Pension Fund Managers (PFM) under the New Pension System (NPS) to manage the pension contributions of government employees.

LIC's New Pension Plus

There are two premium options: single premium and regular premium. In the case of the regular premium, the premium-paying term is equal to the policy term. The policy also provides four fund options with varying levels of equity/debt allocation, and you can switch between them.

At the vesting date, you can use the entire proceeds to buy an annuity or commute up to 60% of the proceeds and buy an annuity with the balance 40%. The policy also allows you to buy an annuity from other insurers, in which case only up to 50% can be commuted, and the rest should be used to purchase an annuity. The annuity can be immediate or deferred.

The policy also allows partial withdrawals during the policy period, and the vesting date (end of the policy period) can be extended subject to some conditions. In the case of a death benefit, the policy will pay out either 105% of the premium paid or the market value of the investments under the policy, whichever is higher.

The policy is locked in for the first five years. After the lock-in period, it can be surrendered at any time, but at least 40% of the proceeds must be used to buy an annuity. LIC's NPP offers four options for investments with varying levels of equity and debt:

• Pension Bond Fund: This is a low-risk fund that invests 60-100% in G-Sec/Govt Guaranteed Securities/Corporate Debts and 0-40% in short-term investments such as money market instruments. It does not invest in Listed Equity Shares.
• Pension Secured Fund: This fund provides a lower to medium-risk investment option. It invests 50-90% in G-Sec/Govt Guaranteed Securities/Corporate Debt, 0-40% in short-term investments, and 10-50% in Listed Equity Shares.
• Pension Balanced Fund: This fund provides a medium-risk investment option. It invests 30-70% in G-Sec/Govt Guaranteed Securities/Corporate Debt, 0-40% in short-term investments, and 30-70% in Listed Equity Shares.
• Pension Growth Fund: This is a high-risk investment option. It invests 0-60% in G-Sec/Govt Guaranteed Securities/Corporate Debt, 0-40% in short-term investments, and 40-100% in Listed Equity Shares.

LIC's Jeevan Akshay-VII

The benefits of the LIC's Jeevan Akshay-VII plan vary depending on the annuity option chosen. The options include:

• Immediate Annuity for life
• Immediate Annuity with a guaranteed period of 5, 10, 15, or 20 years, and life thereafter
• Immediate Annuity for life with a return of the purchase price
• Immediate Annuity for life, increasing at a simple rate of 3% per annum
• Joint Life Immediate Annuity for life, with a provision for 50% of the annuity to the secondary annuitant on the death of the primary annuitant
• Joint Life Immediate Annuity for life, with a provision for 100% of the annuity payable as long as one of the annuitants survives
• Joint Life Immediate Annuity for life, with a provision for 100% of the annuity payable as long as one of the annuitants survives and a return of the purchase price on the death of the last survivor

LIC’s New Jeevan Shanti

LIC's New Jeevan Shanti is a single-premium deferred annuity pension plan that provides a guaranteed income for life to secure the policyholder's financial future after retirement. The plan offers two annuity options: a deferred annuity for single life and a deferred annuity for joint life.

Eligibility Criteria

To be eligible for the LIC New Jeevan Shanti plan, the following conditions must be met:

• Minimum Vesting Age: 31 years (completed)
• Maximum Vesting Age: 80 years (completed)
• Minimum Deferment Period: N/A
• Maximum Deferment Period: 20 years (subject to vesting age)
• Minimum Purchase Price: Rs. 1,50,000 (subject to the minimum annuity)
• Maximum Purchase Price: No limit

Benefits of LIC New Jeevan Shanti

The LIC New Jeevan Shanti plan offers a range of benefits, including:

• Guaranteed income for life: Policyholders will receive annuity payments for their entire lifetime.
• Flexibility in death benefit payout: The nominee can choose to receive the death benefit as a lump sum or in installments for 5, 10, or 15 years.
• Option for dependent persons: The plan can be purchased for a dependent person with a disability, with a minimum purchase price of Rs. 50,000. If the policyholder passes away, the death benefit will be used to buy an immediate annuity for the dependent.
• Incentive on high purchase price: Higher purchase prices (above Rs. 5 lakhs) will earn you extra annuity rates.
• Surrender value: Policyholders can surrender their policy at any time and receive a Guaranteed Surrender Value (GSV) or Special Surrender Value. The GSV can be calculated using the formula: GSV = (GSV Factor × Purchase Price) - Total Annuity Paid Until Surrender.
• Loan facility: Policyholders can apply for a loan against their policy benefits after completing 3 months of the policy term. The maximum loan amount is 80% of the surrender value.
• Free-look period: There is a 15 to 30-day free-look period during which policyholders can review the policy documents and raise any concerns. If the policyholder is not satisfied, LIC will cancel the policy and refund the purchase price.

Exclusions

LIC's New Jeevan Shanti plan does not cover death claims arising from suicide within the first 12 months of the policy. In such cases, nominees will receive 80% of the premium or surrender value, whichever is higher.

LIC Saral Pension Plan

The LIC Saral Pension Yojana is a Standard Immediate Annuity plan, launched under the guidelines of the Insurance Regulatory and Development Authority of India (IRDAI). The plan offers a regular flow of income after the retirement of the policyholder to ensure financial independence.

Eligibility Criteria

To be eligible for the LIC Saral Pension Yojana, individuals must be between 40 and 80 years old.

Features

The LIC Saral Pension Yojana is a non-participating, single premium, non-linked, immediate annuity plan. The plan offers two annuity options:

• Life annuity with 100% return of purchase price: It provides an annuity for a lifetime with a 100% return on the buying price.
• Joint life annuity: 100% annuity is paid to the other spouse in case of the primary annuitant's demise. If both pass away, then 100% of the purchase price will be given to the nominee.

The frequency of annuity payments can be chosen by the insured, with LIC offering annual, half-yearly, quarterly, and monthly modes. The minimum annuity is Rs. 12,000 per annum, with no maximum limit.

Benefits

The LIC Saral Pension Yojana offers several benefits:

• Under a single-life annuity, 100% of the purchase price is paid to the nominee after the annuitant's death.
• Under joint-life annuity, if the spouse is alive, they will receive the same annuity amount upon the annuitant's demise. If the spouse also passes away, 100% of the purchase price will be given to the nominee.
• The annuity amount is payable under survival benefits.
• A loan under the scheme is allowed after 6 months from the policy start date. The maximum loan amount is subject to the condition that the annual interest amount does not exceed 50% of the annual annuity amount.
• The policy can be surrendered at any time after 6 months from the inception date if the annuitant, their spouse, or any of their children is diagnosed with a critical illness.

How to Invest

The LIC Saral Pension Yojana can be purchased both online and offline. Individuals can buy this policy through a LIC agent offline, at the nearest LIC office, or by visiting the official LIC website.

LIC Pension Plus Plan

The LIC Pension Plus Plan is a unit-linked insurance plan that allows investors to invest their money in various market-linked funds to generate increased returns. Investors can choose to invest a lump sum as a single premium or invest a fixed sum at regular intervals, be it monthly, quarterly, half-yearly, or yearly. The invested amount can be annuitised to create a regular stream of income post-retirement.

The LIC Pension Plus Plan offers four different fund options ranging from equity to debt and a mix of both, allowing investors to choose based on their risk tolerance. One of the key benefits of this plan is the Guaranteed Additions that LIC of India makes to the fund value at specific policy years. These additions are assured and made irrespective of any market fluctuations.

To be eligible for the LIC New Pension Plus Plan, individuals must meet certain criteria. The age at maturity/vesting and the premium payment term are important factors to consider. For a single premium, the payment is made one time, while for a regular premium, the payment term is the same as the policy term. The minimum and maximum investment amounts may vary depending on the payment frequency chosen.

The LIC Pension Plus Plan is a popular choice for those seeking to secure their financial future during retirement. It offers flexibility in investment options and provides the potential for higher returns by investing in market-linked funds.

Frequently asked questions