LIC Launches Pension Plus

On the occasion of 54th anniversary of the Life Insurance Corporation, LIC launched its new product - LIC Pension Plus from 2nd September 2010.

LIC’s Pension Plus is a unit-linked deferred pension plan, which provides the customer a minimum guarantee on the gross premiums paid. The plan is without any life cover. The customer has a choice of investing the premiums in one of the two types of investment funds available. Premiums paid after deduction of allocation charge will purchase units of the fund type chosen. Within a given policy year two switches are allowed free of charge.

Anybody between ages 18 – 75 years can buy this policy. Minimum deferment term allowed is 10 years. Minimum vesting age is 40 years while the maximum vesting age allowed is 85 years. On surviving to the date of vesting, the higher of policyholder’s fund value or guaranteed maturity proceeds will compulsorily be utilized to provide an annuity based on the then prevailing immediate annuity rates. However, the policyholder may opt to commute up to one-third of the benefit to be paid as a lump sum.

Premiums can be paid through regular modes at yearly, half-yearly or quarterly or monthly (through ECS mode only) intervals over the term of the policy. Single premium payment facility is also allowed. The minimum regular premium that can be opted through modes other the ECS is Rs 15,000 per annum while the maximum allowed for regular premium is Rs 1,00,000. For the ECS mode of payment, the minimum premium is Rs 1,500 per month. The minimum single premium that can be paid is Rs 30,000 while there is no limit on the upper side. Top up facility is available under this plan which enables the customer to pay additional premiums in multiples of Rs 1,000 without any limit at anytime, during the term of the policy.

The unique feature of the plan is the minimum guarantee on contributions that it offers. As per the plan, if all due premiums are paid till maturity, a guaranteed interest shall accrue on the gross premium, including top-up premiums if any. The guaranteed interest rate shall be 50 basis points above the average of the reverse repo rate. However, it shall be subject to a maximum of 6 per cent and a minimum of 3 per cent. Currently, a minimum guaranteed rate of 4.5 per cent p.a. would be available on all premiums received up to 31st  March, 2011.

In case of death, the policyholder’s fund value shall be payable either in a lump sum or as an annuity, as desired by the nominee. The amount of annuity will depend on the payable lump sum and the then prevailing immediate annuity rates under the annuity option chosen. In case of surrender of the policy within 5 years from the date of commencement of policy, the policyholder’s fund value after deducting the discontinuance charge shall be converted into monetary terms. The proceeds of the discontinued policy shall be utilized for payment of an annuity, on completion of 5 years from the date of commencement of policy. In case, however, the policy is surrendered after 5 years from the date of commencement of policy, the policyholder’s fund value, as at the date of surrender, shall be utilized for payment of an annuity and there will no discontinuance charge.