On Wednesday, 1st September, 2010 Life Insurance Corporation (LIC) announced that it will launch a new unit-linked pension scheme, Pension Plus with minimum guaranteed return of 4.5 per cent on Thursday 2nd Sept, 2010.

According to T S Ramakrishnan, LIC senior divisional manager, “The new scheme comes with lots of benefits, Minimum rate of interest of 4.5 per cent is guaranteed on new unique pension plan and after maturity, one-third of the corpus can be withdrawn as a lumpsum amount".

He also said that, “The remaining two-thirds would be paid in either monthly or half-yearly installments after maturity, which would be decided by the policy holders”.

The new pension plus policy is connected with the Insurance Regulatory and Development Authority's latest ULIP guidelines.  LIC offers new plans with two choice debt fund and mixed fund. Under the Debt fund, more than 60% of the amount would be invested in government securities while the other 40 percent would go into money market instruments.

Under the Mixed fund plan, more than 45 percent money would be invested in government securities; however 40 percent would go into money market instruments and 15-35 per cent into equities. This plan can be purchased by any one between 18-75 years of age. And Pension plus minimum maturity time is 10 years.

LIC new plan comes without any life cover. Premiums paid after deduction of allocation charge will purchase units of the Fund type chosen. 2 switches are allowed free of charge within a given policy year. To provide an annuity based on the prevailing immediate annuity rates, Guaranteed Maturity Proceeds will compulsorily be used.

Policy holders can pay premium amount through regular modes at yearly, half-yearly or quarterly or monthly intervals over the term of the policy. The minimum regular premium that can be selected through modes other the ECS mode is Rs 15000 per annum while the maximum allowed for regular premium is Rs 1,00,000.  Rs 1500 per month is the minimum premium for the ECS mode of payment. The minimum single premium is Rs 30000, however there is no limit on the upper side. With this plan, policyholders also get benefit of Top up facility which allows the customer to pay additional premiums in multiples of Rs 1000/- without any limit at anytime, during the term of the policy.

The main features of the plan:

According to the plan, if all due premiums are paid till maturity, then a guaranteed interest shall accrue on the gross premium, including Top-up premiums if any. The guaranteed interest rate shall be 50 basis points over the average of the overturn repo rate. At present, a minimum guaranteed rate of 4.5% per annum would be available on all premiums received up to 31st March, 2011.   

In case of Death, The Policyholder’s Fund Value shall be due either in a lump sum or as an annuity, which will depend on the payable lump sum and the 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 taking the Discontinuance Charge shall be converted into monetary terms. If policy holder surrenders after 5 years from the date of commencement of policy, then the policy fund value shall be used for payment of an annuity and there will no Discontinuance Charge.

LIC offers several pension plans including Jeevan Nidhi, Jeevan Dhara, Jeevan Akshay and Jeevan Suraksha. All pension plans is available with some guaranteed interest.   

Jeevan Nidhi: Jevan nidhi pension plan comes with profits Deferred Annuity. This plan accumulated amount would include of sum assured, guaranteed additions and bonuses. It also gives participation in profits, benefits on vesting and annuity options. It gives Rs 50 guaranteed additions per thousand sum assured for each completed year, for the first five years, while pension plus gives fix 4.5 percent guaranteed rates.

Jeevan Akshay: It is an instant pension plan that could be purchased through the payment of a lump of amount. It offers the annuity payments for the stated amount for the entire life time of the annuitant, while LIC pension plus offers annuity based on the prevailing immediate annuity rates. Both pension plans offers similar payment modes such as monthly or quarterly or half yearly or yearly.

Jeevan Dhara and Jeevan Suraksha: It is deferred pension plan which gives the policyholder to make provision after the selected term for a regular income. In these plans, the premiums can be paid either yearly or half-yearly or quarterly or monthly or by means of salary deduction through out the term of policy and even till the early death. At maturity, the policyholders can encash up to a maximum 25% of the maturity proceeds as a tax-free lump sum.

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