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Life Insurance Corporation of India (LIC) is owned by the Indian Government. LIC maintains top rank in the list of Indian Insurance Companies. The bill was passed in 1956 by the Parliament of India to form a Life Insurance Corporation under which more than 245 private companies were merged. It provides multitude of plans under different categories suitable for each individual. They have kept in mind every individual’s needs.
One of the plans is LIC Varishtha Pension Bima Yojana. As the name suggests, it is a pure pension plan for retired people. This product comes under Annuity type. Under annuity, people get a pension for the regular interval. This payment mode is to be decided by you. It’s a smart retirement investment plan.
The policy premium term is a single premium. At the beginning of the plan, you have to pay the premium of your choice. After deciding this you will be eligible for a regular pension. There is no life risk covered under this plan, as it’s a pure annuity plan and whatever you invest you will get it as a pension. The law for this has been passed by PM Narendra Modi and cabinet in the month of January 2017. Due to this senior citizens will be benefitted. It is an immediate pension plan. So if you pay the one shot premium of your choice, the annual payment will start from that moment. You don’t have to submit any medical certificate for this plan as it does not cover media claims or life risk.
Death Benefit: Unlike other LIC plans, you don’t get any death benefit under this plan. Once you pay the premium your money back starts in the form of pension. If you choose to get payments even after your death, your spouse will be benefited out of it. Your spouse gets the remaining pensions after you.
The rate of Pension: The rate depends on the type of annuity chosen by the policyholder or the annuitant. There are 7 active types of plans under annuity product. But once decided and one shot premium paid, you cannot change the plan as it is a one-time payment and the benefits start immediately.
Profit of Participation: The policy should be eligible and it should incur profit for the Corporation. Then the policy is entitled to Simple Reversionary Bonus. For this, the policy should be active and in force. The Reversionary bonus will be calculated based on the premium paid.
Rider Benefit: There is no riders benefit available under this plan, as it is a pure pension based annuity plan.
You can start the policy premium from the age of 60 years till as long as you want. It is a single premium term plan. There is no age of policy maturity. You will get the benefit as money back. The policy can be continued even after your death on your wish. Your spouse will be benefited out of it. The minimum premium is 63,960 INR and the maximum you can pay under this policy is 6, 39, 610 INR.’
The pension starts immediately once you pay the premium. The payment mode for pension depends on you on what you select. You can select Yearly pension, half-yearly pension, quarterly pension or a monthly pension. The minimum amount of pension or annuity will be 6000 INR approximately. And the maximum will go till 60,000 INR approx. The amount will vary depending on the taxes applicable.
Tax Benefit: Similar to other policy schemes, the LIC Varishtha Pension Bima Yojana Policy provides benefits in income tax. The premiums are tax exempted Under the Section 80 C of Income Tax Act. Only the pension you receive is taxable. So you need not pay any tax on your premium.
Loan Facility: You can take a loan against your LIC Varishtha Pension Bima Yojana policy in need. But for this the policy should be more than 3 months old or the free look period of the policy should be over. The amount of loan is decided based on the age of the policyholder when the policy was started. The maximum loan you can get against the policy is 75% of the single premium paid.
Policy surrender: There is provision to surrender the policy in need. If the policy is surrendered within 15 years of policy opening then the policyholder will get up to 98% of single premium paid. You are only eligible to surrender the policy before 15 years in the case of critical illness of self or spouse. After completing 15 years, if the holder surrenders the policy then he will get up to 100% returns on the single premium paid. There are many calculators available online to calculate the estimate of surrender policy. This can be calculated using online calculators.
Mr. Ashish purchases Varishtha Pension Bima Yojana policy with the sum assured of Rs. 5, 00,000 in the year 2017 at the age of 60 years. The pension mode of the plan is yearly.
By using a premium calculator, you can calculate the benefit details.
The purchase details will be as follows:Purchase Price is of 5, 00,000 INR on which the Service Tax will be of 15, 450 INR. So the Total premium to pay will be 5, 15, 450 INR.
The Pension details will be as follows:
Pension Type: Yearly
The rate of interest: 9.38 percent.
The rate of interest: 9.38 percent.
Pension Amount: 46, 903 INR.
So for the policy of 5, 00,000 INR the rate of interest per annum will be 9.38 percent. And based on this, the Policyholder or the Annuitant will receive 46, 903 INR per annum as a pension.
The policy is a great tool to have a tension-free retirement as you get a steady flow of money as and when you need it the most.