LIC has been in existence for more than 60 years after having been established in September 1956. The company, which was earlier the only life insurance provider in India, has maintained its status of a market leader. It has the largest market capitalization and enjoys the largest customer base too.
LIC offers a range of life insurance plans to customers which take care of their varying insurance needs. Pension plans are also a popular product offered by LIC which helps individuals plan for their retirements. Let’s understand the concept of pension plans and find out about the plans offered by LIC.
What are the pension plans?
Pension plans are retirement oriented life insurance plans. They aim to create a retirement corpus and provide you with a source of regular income even after you have stopped working. There are two types of pension plans. Let’s understand each type to know exactly what pension plans promise –
- Deferred annuity plans
These plans are those which allow you to accumulate a retirement corpus over a period of time. You can invest in deferred pension plans when you are working. The premiums that you pay would accumulate into a corpus which you would get when the plan matures. On maturity, the corpus accumulated promises to pay you lifelong incomes.
- Immediate annuity plans
These plans are for those who have a lump sum amount in hand and want to receive periodic fixed incomes from the amount. Immediate annuity plans promise lifelong annuities at a fixed rate thereby providing you with a non-stop source of income.
Benefits of pension plans
Pension plans promise the following benefits to policyholders –
- They create an earmarked corpus for retirement savings which comes in handy after you retire.
- Deferred pension plans are also offered as unit-linked insurance plans. Through these plans, you can create a substantial retirement corpus as you would earn market-linked returns.
- Premiums paid towards pension plans are allowed as a deduction under Section 80CCC of the Income Tax Act. You can claim a deduction of up to INR 1.5 lakhs and lower your tax liability while planning for retirement at the same time.
- Immediate annuity plans pay guaranteed incomes lifelong allowing you to meet your expenses after retirement.
- Joint life annuities are also available under immediate annuity plans which pay annuities for yourself and your spouse too.
- Deferred annuity plans give you 1/3rd of the accumulated corpus as cash when the plan matures.
- This benefit is tax-free and you can use the benefit for any financial need
LIC pension plans
LIC offers three types of pension plans which are described below –
1. Pradhan Mantri Vaya Vandana Yojana
This pension scheme was launched by the Government of India to provide senior citizens with a savings scheme which also gives them regular incomes. This scheme is available till 31st March 2020 and is currently being sold only through LIC. The features of the scheme are as follows –
- You can buy the scheme online through LIC’s website
- There is no limit on the maximum entry age
- This is a ten-year saving scheme wherein pension is paid to the senior citizen during the plan duration
- Pensions can be received annually, half-yearly, quarterly or monthly as you wish
- In case of death, the purchase price paid for the plan is refunded to the nominee
- If the policy matures, you get the purchase price along with the last pension instalment
- If you need funds for a critical illness or terminal illness, you can surrender the policy. On surrender, 98% of the invested amount is refunded back
- You can also avail policy loans after the first three years have been completed. Loans are available for up to 75% of the purchase price.
Eligibility parameters of Pradhan Mantri Vaya Vandana Yojana
|60 years onwards
|Term of the plan
|Yearly purchase price
|Minimum – INR 144,578Maximum – INR 14,45,783
|Monthly pension amount
|Minimum – INR 1000Maximum – INR 10,000
Sample pension rates
Here are the sample rates of pension which you can avail at different frequencies if you pay a purchase price of INR 10 lakhs –
2. LIC’s New Jeevan Nidhi Plan
This is a traditional deferred annuity plan wherein you can create a retirement corpus over the policy duration through premium payments and then receive annuities when the plan matures. The features of the plan include the following –
- The plan is a participating pension plan which allows it to participate in bonus declarations made by the company
- Guaranteed additions are also added to the corpus which enhances the benefits payable under the plan
- On maturity of the policy, the sum assured, accrued guaranteed additions and vested bonuses are paid as the maturity benefit
- The maturity benefit can be used to buy an immediate annuity policy or a single premium deferred annuity policy
- You can also commute 1/3rd part of the maturity benefit and receive it in cash.
- If the insured dies, the sum assured, accrued guaranteed additions and vested bonuses are paid
- LIC’s Accidental Death and Disability Benefit Rider is available as an optional cover. The rider promises an additional sum assured in case of accidental death or disablement
- You get premium discounts if you choose to pay the premiums annually or half-yearly. The discounts are 2% and 1% respectively
- High sum assured rebate is also available if you choose coverage of INR 3 lakhs and above
- The policy allows both single premium and regular premium payments.
Eligibility parameters of LIC’s New Jeevan Nidhi Plan
|20 years to 60 years
|Term of the plan
|5 years to 35 years
|Minimum – INR 1 lakhMaximum – no limit
|Monthly pension amount
|Minimum – INR 1000Maximum – INR 10,000
Sample premium rates of LIC’s New Jeevan Nidhi Plan
Given below are the sample rates of premiums payable for different combinations of age, term and premium payment term. The sum assured is considered to be INR 2 lakhs.
|Term 10 years
|Term 20 years
|Term 30 years
|Term 10 years
|Term 20 years
|Term 30 years
3. LIC’s Jeevan Shanti Plan
Jeevan Shanti Plan is a flexible annuity plan which allows you to avail annuities immediately after buying the policy or after some years. The plan, therefore, gives you a choice between immediate or deferred annuity payments. The features of the plan are as follows –
- Only a single premium is required to buy the plan
- You can buy the plan online too from LIC’s website
- There are ten annuity options that are available under the plan. You can choose any option as per your income requirement
- You can choose to avail single life annuity only for yourself or joint-life annuity which would pay annuities to your spouse too
- Under deferred annuity option, guaranteed additions are added to the purchase price which enhances the pension amount
- In case of death during the deferment period, the purchase price and accrued guaranteed additions are paid. The death benefit, however, would be a minimum of 110% of the purchase price
- The death benefit can be taken by the nominee in a lump sum or in instalments. The nominee can also opt for the death benefit to be received as annuity payments.
- If a higher purchase price (single premium) is paid, you can get an increase in the annuity payable
- There is also a 2% increase in the rate of the annuity if the policy is bought online
- Policy loans can also be availed under the plan under specific annuity options.
Annuity payment options under LIC’s Jeevan Shanti Plan:
The following annuity pay-out options are available under the plan –
- Annuity payable for life
- Annuity payable for a guaranteed period of 5 years and thereafter for the life
- Annuity payable for a guaranteed period of 10 years and thereafter for the life
- Annuity payable for a guaranteed period of 15 years and thereafter for the life
- Annuity payable for a guaranteed period of 20 years and thereafter for the life
- Annuity payable for life and return of purchase price on death
- Annuity payable for life which increases at 3% every year
- Joint life annuity payable for the life of the primary annuitant. After the death of the primary annuitant, 50% of the annuity would be paid to the secondary annuitant till his/her lifetime
- Joint life annuity payable for the life of the primary annuitant. After the death of the primary annuitant, 100% of the annuity would be paid to the secondary annuitant till his/her lifetime
- Joint life annuity payable for the life of the primary annuitant. After the death of the primary annuitant, 100% of the annuity would be paid to the secondary annuitant till his/her lifetime. On the death of the second annuitant, the purchase price would be refunded back
Eligibility conditions of LIC’s Jeevan Shanti Plan
|30 years to 100 years
|Minimum – INR 1.5 lakhsMaximum – no limit
|1 year to 20 years
|Minimum:Yearly – INR 12,000Half-yearly – INR 6000Quarterly – INR 3000Monthly – INR 1000Maximum – depends on the purchase price paid
Sample annuity rates of LIC’s Jeevan Shanti Plan
If a 45 years old male pays a purchase price of INR 10 lakhs, here are the sample annual annuity rates payable at different options of annuity payments. The following details have been assumed for calculation purposes –
- Immediate annuity option has been selected by the annuitant.
- The age of the secondary annuitant is 35 years for joint life annuities.
|Option I – Life annuity
|Option II – Life annuity guaranteed for 5 years
|Option III – Life annuity guaranteed for 10 years
|Option IV – Life annuity guaranteed for 15 years
|Option V – Life annuity guaranteed for 20 years
|Option Vi – Life annuity with return of purchase price
|Option VII – Increasing life annuity
|Option VIII – Joint life annuity with 50% annuity for the secondary annuitant
|Option IX – Joint life annuity with 100% annuity for the secondary annuitant
|Option X – Joint life annuity with 100% annuity for secondary annuitant and return of purchase price
How to apply for LIC pension plan?
As stated earlier, you can buy some LIC pension plans online from the website of LIC itself. Other plans can be bought through a LIC agent or from the branch office of the company.
Alternatively, you can compare and choose the best pension plan and even purchase it online through Turtlemint. Turtlemint offers you the ease of buying pension policies through its digital platform. Here are some simple steps which you would have to take to buy the desired pension plan –
- Visit www.turtlemint.com/life-insurance and choose ‘Pension/Retirement’ option
- Provide your gender, date of birth, annual income, smoking preference, retirement age, investment horizon, investment frequency and investment amount
- You would then be shown the list of pension plans which fulfil the details that you have entered
- You can compare the available plans and choose the most suitable one for your retirement
- Lastly, you can buy the plan from Turtlemint’s website itself by filling up an online application form and paying the premiums online.
Documents required to apply for LIC pension plans
You would have to provide the following documents to apply for LIC pension plans –
- Identity proof
- Age proof
- Address proof
- Proposal form
- Income proof
- Bank details, etc.
Making a claim under LIC pension plans:
Deferred annuity plans pay a death claim if the insured dies during the deferment period. To make a death claim, the nominee should take the following steps –
- He should fill up a death claim form which is Form number 3783. Part A of the form is required to be filled
- The death certificate issued by the municipal authority should be submitted to LIC
- The original policy document would also be required
- Other documents like police FIR, post mortem report, panchnama, etc. might also be required if the insured died due to an accident
You can also make claims through Turtlemint. Turtlemint has a claim handling department which follows the claim process on your behalf and gets your claims settled at the earliest. To make your claims through Turtlemint, you should call their toll-free number 1800 266 0101 or send an email to email@example.com to intimate about the claim. Someone from the company’s claim department would get in touch with you and get your claims settled in no time.
In case of a deferred annuity plan, when the plan matures, a part of the vesting benefit can be commuted. Commuting the vesting benefit means withdrawing 1/3rd part of the benefit in a lump sum. This withdrawal is called commutation of pension. Commutation of pension is tax-free under Section 10 (10A) of the Income Tax Act, 1961.
Suicides are usually excluded under LIC pension plans. If the insured commits suicide and dies within a year of policy purchase, 80% of the premium paid is refunded. In case of suicides within a year of revival of a lapsed policy, higher of 80% of the premiums paid or the available surrender value is paid. However, under immediate annuity plans, there are no exclusions. In the case of suicidal death, 100% of the purchase price is refunded back.
The purchase price is the premium paid to buy LIC pension plan.
Vesting means the maturity of the policy that you have bought. Vesting is applicable in case of deferred annuity plans where there is a deferment period before any benefit is paid. Once the deferment period comes to an end, the policy is said to vest.
Yes, the annuities that you receive from a pension plan are considered to be your income. They are added to your taxable income and are taxed at your income tax slab rate.