LIC is one of the most trusted insurance companies, which is majorly owned by the government. LIC is named as the largest life insurer in India with revenue of $97.26 billion and a profit of $553.8 million in 2022 and was rated 98th on the Fortune 500 list in 2022.
For the purpose of its expansion and providing value to its customers with a sense of ease & financial stability in lives, LIC came up with a new pension plan called Saral Pension Plan.
Investing in such a plan allows you to invest a lump sum corpus in one go, and you will be able to get an annuity for your lifetime. The amount of annuity will depend upon the amount of money you are planning to invest.
According to the LIC's policy agreement, annuity rates are guaranteed, and payments are made for the policyholder's lifetime.
Mode of payment refers to the frequency of the annuity payment that would be chosen by you at the time of making an investment. The available modes of payment are yearly, half-yearly, quarterly, and monthly.
How much do you need to invest to get ₹58,950 yearly?
According to the brochure shared on the LIC's website (www.licindia.in), the average investment rate of returns (IRR) under these types of schemes is generally 5.10%, in the case you invest somewhere else.
In the case of single annuitant
As it is a single premium plan, you need to invest your corpus in one go and you will get a pension on pre-decided intervals regularly till your death. According to the sales brochure shared by LIC, you have to invest ₹10 lakhs as a single one-time premium in order to get ₹58,950 yearly as pension till your death. At the time of your death, you will also receive 100% of the purchase price you have paid.
Note- Single premium amount did not include duties and taxes, you have to pay them separately.
In the case of joint annuitant
According to the sales brochure, if you have opted for a joint pension policy, then you will get the pension of ₹58,250 yearly.
However, the minimum annuity will be:
The eligibility criteria to invest in LIC saral pension scheme is:
- Minimum age - 60 years
- Maximum age - 80 years
- Minimum purchase price - It depends on the amount of annuity decided by the annuitant.
- Maximum purchase price - no limit
Benefits offered by the LIC to its policyholders
It is the most crucial part of a policy that you need to know before making an investment.
Being a single policyholder, you will receive an annuity after the one-time premium payment as per the chosen mode of payment as long as you are alive. At the time of your death, your annuity will cease immediately, and your legal heir or nominee will receive 100% of the purchase price of the policy.
As a joint policyholder (joint policy can be taken with your spouse), you and your spouse will receive an annuity as long as you both are alive. At the time of the first one's death, the alive one only is entitled to get their portion of the annuity. The purchase price will be paid only after the death of the last survivor of the policy.
However, only death benefits are available; no maturity benefits are available under this scheme.
Surrender of the policy
The policy can be surrendered at any time after six months from the date of commencement, and you will receive 95% of the purchase price. The policy expires when the surrender value is paid.
Following deductions will be made while calculating the purchase price:
- Stamp duty
- Outstanding loan, if taken on the basis of this policy
- The interest on the above-mentioned loan
Loan based on policy
Once the insurance has been in effect for six months, the policy loan may be availed at any time. The maximum loan amount permitted by the policy must be determined so that the effective annual interest rate paid on loan will not be greater than 50% of the annual annuity payment permitted by the policy.
If you choose the joint-life option, you can apply for the loan now, and your spouse can apply for it after your death.
Free look period
You will get a free look period of 30 days from the date of getting the receipt in electronic or physical form. A free look period is allotted for the circumstance where you do not agree with any of the terms and conditions or charges you have to pay at the time of making the investment or any deductions at the time of receiving the annuity or purchase price.
You have 30 days to have a look at all the documents provided by the insurance company in which all the terms and conditions are written. If you disagree with any of those, you will have an option to return the policy to the insurance company and get a refund of the premium you have paid.
It is essential to be financially independent enough to survive on your own expenses. Retirement is the one at which you need the finance most as you can't work as much as you used to do at your young age. Such a policy will be able to help you in getting a regular annuity through which you can bear your expenses independently.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com
Disclaimer: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision.