LIC rolls out Pension Plus on new Ulip platform

The Life Insurance Corporation (LIC) of India has launched a new unit linked pension plan — LIC Pension Plus — based on the new rules put in place by the market regulator for products launched on or after September 1.

Anyone aged over 18 years and up to 75 years can invest in the scheme. The pension drawing age can vary between 40 years and 85 years. However, you need to have saved for at least 10 years before you can start drawing pensions.

One can invest any amount between `15,000 and Rs 1 lakh annually or in a single installment starting `30,000.

The money can be invested in one of two funds —- debt or mixed. The debt fund will invest 60-100% in government guaranteed debt securities, government or in corporate debt papers, while the balance 40% or less is in shorter term money market instruments.

In the mixed fund, on the other hand, the first two investment options mentioned above would be at least 45% and up to 40%, respectively, while 15-35% would be invested in equity markets.

Each year, certain charges are deducted from the premium paid. The premium allocation charge is deducted from the premium paid, which is 6.75% in the first year; 4.5% in the 2nd to 5th policy year; and 2.5% in later years. In single premium policies, the deduction is 3.3%.

The scheme also charges `30 per month towards policy administration costs in the first year, which increases by 3% each year. It also makes a fund management charge of 0.7% annually for debt funds and 0.8% annually for mixed funds.

One can change between the two funds free of cost twice a year. Beyond this, for every switch made in the same policy year, one has to pay `100.

If under any circumstance the policy holder discontinues paying the premium, the amount becomes subject to deduction of discontinuance charge (applicable only if premium is stopped before the 5th policy year) and the balance is converted to an
annuity. An annuity is a plan wherein the savings pooled under a pension plan are used to provide a regular pension amount to the buyer or his spouse.

“This fund will earn a minimum interest rate of 3.5% per annum from the date of discontinuance of the policy to the date of completion of 5 years from the commencement of the policy,” as per scheme details.

No withdrawal is allowed during the term of the policy and any amount paid out is compulsorily used to purchase annuity.
If all the premiums are paid till maturity, then a guaranteed interest of 3-6% is given at the end of each financial year. This interest rate is 0.5% higher than the average reverse repo rate declared by the Reserve Bank of India at intervals of preceding year.

Once you have completed the savings period, upon maturity, you have to buy an immediate annuity either from LIC or from any other annuity provider. If you opt for taking it from another life insurance company, inform LIC six months before you start drawing pension.

Of the fund value collected and the guaranteed maturity amount, you can withdraw a maximum of one-third the fund value as lump sum only if the rest of the money is sufficient to buy the annuity.