On its 54th anniversary, Life Insurance Corporation of India has gifted a new scheme namely LIC pension plus to its people. It is a unit linked deferred pension plan as it provides the insurer the minimum guarantee on the entire premium paid. The interesting aspect of this plan is that there is no life cover during the entire term of the policy. This is first of its kind policy from LIC, India’s leading personal life insurance company to come up with a plan without insurance in its plan.The salient features of this plan are:The policy uses the fund value to offer a pension based on the current annuity rates under the chosen annuity option. The policy has a guaranteed return with minimum rate
Benefits of Pension Plus:
Some of the benefits of the policy are as follows:The policy offers two choices of fund – Debt Fund and Mixed Fund.
The policy can be purchased by anyone between 18-75 years of age.
The minimum maturity time of the policy is 10 years.
The policy offers guaranteed maturity benefits and death benefits.
The policy offers a minimum guaranteed return of 4.5 per cent.
The minimum premium is Rs. 1500 per month while minimum single premium is Rs. 30,000.
This new policy is associated with the Insurance Regulatory and Development Authority’s (IRDA) latest ULIP guidelines. It basically offers two fund options – Debt fund and Mixed fund. Under the Debt fund, more than 60% of the policy amount will be invested in government securities and the remaining 40 % will be invested into money market instruments, whereas within the Mixed fund plan, more than 45% of the policy amount will be invested in government securities, 40% of the amount will be invested into money market instruments, and the remaining 15-35 % will be invested into equities.Various ChargesFund options of the policy
Benefits of Pension Plus:
Some of the benefits of the policy are as follows:The policy offers two choices of fund – Debt Fund and Mixed Fund.
The policy can be purchased by anyone between 18-75 years of age.
The minimum maturity time of the policy is 10 years.
The policy offers guaranteed maturity benefits and death benefits.
The policy offers a minimum guaranteed return of 4.5 per cent.
The minimum premium is Rs. 1500 per month while minimum single premium is Rs. 30,000.
This new policy is associated with the Insurance Regulatory and Development Authority’s (IRDA) latest ULIP guidelines. It basically offers two fund options – Debt fund and Mixed fund. Under the Debt fund, more than 60% of the policy amount will be invested in government securities and the remaining 40 % will be invested into money market instruments, whereas within the Mixed fund plan, more than 45% of the policy amount will be invested in government securities, 40% of the amount will be invested into money market instruments, and the remaining 15-35 % will be invested into equities.Various ChargesFund options of the policy
of interest of 4.5 per cent, where one-third of the corpus can be withdrawn post maturity. In case if one is thinking of surrendering of policy within 5 years from the date of its commencement, the policy holder can obtain the amount equivalent to the fund value after deducting the policy discontinuance charge. And in case of surrender of the policy after 5 years from the date of commencement of policy, then the policy fund value can be used for payment of an annuity and there will be no deduction of policy discontinuance charge.
Premium Allocation Charge: This is the percentage of the premium deducted towards charges from the premium received. The balance constitutes that part of the premium which is utilized to purchase (Investment) units for the policy. The allocation charges are as below: For Single premium policies: 3.3%
For Regular premium policies:
For Regular premium policies:
Premium | Allocation Charge |
First Year | 6.75% |
2nd to 5th Year | 4.50% |
thereafter | 2.50% |
Allocation charge for Top-up: 1.25%Policy Administration charge: Rs. 30/- per month during the first policy year and Rs 30/- per month escalating at 3% p.a. thereafter, throughout the term of the policy shall be levied.Fund Management Charge –It is a charge levied as a percentage of the value of units at following rates:
0.70% p.a. of Unit Fund for “Debt” Fund
0.80% p.a. of Unit Fund for “Mixed” Fund
Fund Management Charge shall be appropriated while computing NAV. Switching Charge –This is the charge levied on switching of monies from one fund to another. Within a given policy year 2 switches will be allowed free of charge. Subsequent switches in that year shall be subject to a switching charge of Rs. 100 per switch. Discontinuance Charge – The discontinuance charge for regular premium policies is as under:
Overview
0.70% p.a. of Unit Fund for “Debt” Fund
0.80% p.a. of Unit Fund for “Mixed” Fund
Fund Management Charge shall be appropriated while computing NAV. Switching Charge –This is the charge levied on switching of monies from one fund to another. Within a given policy year 2 switches will be allowed free of charge. Subsequent switches in that year shall be subject to a switching charge of Rs. 100 per switch. Discontinuance Charge – The discontinuance charge for regular premium policies is as under:
Year | Discontinuance charges for the policies having annualized premium up to Rs. 25,000/- | Discontinuance charges for the policies having annualized premium above Rs. 25,000/- |
1 | Lower of 10% * (AP or FV) subject to a maximum of Rs. 2500/- | Lower of 6% * (AP or FV) subject to maximum of Rs. 6000/- |
2 | Lower of 7% * (AP or FV) subject to a maximum of Rs. 1750/- | Lower of 4% * (AP or FV) subject to maximum of Rs. 5000/- |
3 | Lower of 5% * (AP or FV) subject to a maximum of Rs. 1250/- | Lower of 3% * (AP or FV) subject to maximum of Rs. 4000/- |
4 | Lower of 3% * (AP or FV) subject to a maximum of Rs. 750/- | Lower of 2% * (AP or FV) subject to maximum of Rs. 2000/- |
Overview
LIC Pension Plan seems to be like another ULIP plan from LIC as per the new guidelines by IRDA which is more customer friendly. If one is interested in a new ULIP plan then one can go for it, else they can just stick with any of the Mutual Funds or NPS (New Pension System.)Should you go for it?Although this is a new ULIP with lower charges, but low exposure to equities and allocation charge for 2.5% for the entire policy term after 5th year makes it work like high cost mutual fund. If planning for the retirement is the core purpose of taking this policy, then NPS is much cheaper and better option.
