Life Insurance Corporation’s Pension Plus plan is a unit-linked deferred pension plan, a type of ULIP, where the premiums paid by you are invested in debt or equity funds. The investment risk in this portfolio is borne by the policyholder as the value of investments may fluctuate depending on the performance of the market. The policy does not offer life insurance cover and once the policy matures or completes the lock-in period, you have to convert at least two-thirds of the amount into an annuity plan.
Eligibility Criteria for LIC Pension Plus
The following is the age eligibility criteria required to buy an LIC Pension Plus policy:
|Minimum age||18 years|
|Maximum age||75 years|
|Minimum vesting age||40 years|
|Maximum vesting age||85 years|
|Minimum deferment term||10 years|
Features of LIC Pension Plus
Some of the key features of the LIC Pension Plus plan are as follows:
|Plan type||Unit-linked, deferred pension plan|
|Premium payment term||Single payment, monthly, quarterly, half-yearly or yearly, through ECS only|
|Minimum premium||Rs. 15,000 per year. For single payment it is Rs. 30,000|
|Maximum premium||Rs. 1 lakh per year. No maximum limit for single payment.|
|Minimum sum assured||You won’t get any minimum sum, but there is a Guaranteed Maturity Value.|
|Cooling-off period||If the policyholder is not satisfied with the terms, the policy can be returned within 15 days.|
|Loan on policy||Not available|
|Top-up premium||You can pay extra premium in multiples of Rs. 1,000 any time during the policy term. No top-up is allowed in the last 5 years of the policy period. If the premium is being paid in annual, half-yearly, quarterly or monthly ECS mode, top-up premiums can be paid only if all premiums have been paid under the policy.|
|Investment fund types||You can choose to invest in debt funds or mixed funds. You can switch from one fund to another during the policy term.|
|Partial withdrawal||Not available|
|Lock-in period||5 years|
Benefits of LIC Pension Plus
LIC Pension Plus offers several benefits focused on increasing your retirement corpus. Some of the key advantages are:
- Guaranteed Maturity Value: If all due premiums are paid till maturity, interest will accumulate on the gross premiums at the end of each fiscal year. This interest would be 50 basis points higher than the average of the reverse repo rate prevalent on the last working day of June, September, December and March of the preceding year. It is, however, limited to maximum 6% and minimum 3%. If you have discontinued your policy, you will still get a guaranteed interest rate of 3.5%.
- Conversion to Annuity: If you surrender or discontinue a policy, or you live to see your policy mature, the amount due to you will be converted into an annuity purchase. You will be able to keep one-third of the total maturity amount if the balance amount is enough to buy a minimum amount of annuity under Section 4 of the Insurance Act, 1938. You can purchase an annuity either from the LIC or from any life insurance company registered with the IRDA – but for this you need to notify LIC 6 months in advance.
- Income Tax Benefit: This premium payments are covered under the tax exemptions through the provisions of section 80C of the Income Tax Act. The maturity amount you receive is exempt under section 10(10D).
How LIC Pension Plus Plan Works
When you buy an LIC Pension Plus, the amount you pay as premium is invested in instruments of your choice – either debt funds or mixed funds consisting of debt and equity. Your maturity benefits are dependent on the performance of your funds. The Net Asset Value (NAV) of your funds is published on a daily basis. The amount you get at the time of maturity, surrender or discontinuation of the policy is equal to the NAV of the day multiplied by the number of units in the Policyholder’s Fund Value.
If you stop paying the premium before 5 years, the fund value is credited to discontinued policy and the amount is converted into an annuity plan after the end of the 5-year tenure. If you stop paying the premium after 5 years, or surrender the policy, the fund value is used to purchase an annuity plan.
Charges Payable Under the LIC Pension Plus Plan
The following fees will be charged by the Corporation for various services in the policy:
Premium Allocation Charge: For single-premium policies the premium allocation charge is 3.3% of the premium amount. For regular policies, the rates are:
First year 6.75% 2nd to 5th year 4.5% After 5 years 2.5%
- Policy administration charge: Rs. 30 per month is charged during the first year and Rs. 30 per month increasing at 3% annually, is charged thereafter as policy administration charge.
- Fund management charges: The current rates of fund management charges are: 0.70% p.a. of Unit Fund for Debt Fund and 0.80% p.a. of Unit Fund for Mixed Fund.
- Switching Charge: Switching charge is levied if you want to switch the amount from one type of fund to another. In a policy year, 2 switches can be done for free, after which Rs. 100 will charged per switch.
Discontinuance charge: This is applicable if you decide to discontinue a regular policy (not applicable on single-premium policy). The rate of fees on regular policies are as follows:
Where the policy is discontinued during the policy year Discontinuance charges for the policies having annualised premium up to Rs. 25,000/- Discontinuance charges for the policies having annualised premium above Rs. 25,000/- 1 Lower of 10% * (Annualised Premium or Fund Value) subject to a maximum of Rs. 2,500 Lower of 6% * (Annualised Premium or Fund Value) subject to maximum of Rs. 6,000 2 Lower of 7% * (Annualised Premium or Fund Value) subject to a maximum of Rs. 1,750 Lower of 4% * (Annualised Premium or Fund Value) subject to maximum of Rs. 5,000 3 Lower of 5% * (Annualised Premium or Fund Value) subject to a maximum of Rs. 1,250 Lower of 3% * (Annualised Premium or Fund Value) subject to maximum of Rs. 4,000 4 Lower of 3% * (Annualised Premium or Fund Value) subject to a maximum of Rs. 750 Lower of 2% * (Annualised Premium or Fund Value) subject to maximum of Rs. 2,000 5 onwards Nil Nil
- Service tax: Service tax is levied as per the ongoing rate in the country.
- Miscellaneous Charge: Rs. 50 is levied if you change your premium mode – from monthly to quarterly, for instance – during the deferment term.
No rider benefits are included in the LIC pension plan, but you could include riders of your choice by paying a slightly higher premium.
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GST of 18% is applicable on life insurance effective from the 1st of July, 2017