Recently LIC launched it’s first online policy with launching new version of pension plan “Jeevan Akshay VI”. Let us look at it’s features and how it is beneficial.
Before that I want to give you small glimpse on few terminologies used in pension plans.
Annuity-In simple term you can say it as a Pension, where you will get regular income till the specified period or conditions. Two types of annuity are their 1) Immediate Annuity-In this case your pension starts immediately. 2) Deferred Annuity-In this case your annuity starts after certain period. (Suppose your current age 40 yrs and if your annuity will start from the age of 60 years).
Jeevan Akshay VI is the immediate annuity plan where you pay lump sum one time to purchase this plan and your annuity starts from next month.
1) Minimum age is 30 years and maximum is 85 years of age.
2) Minimum purchase price is Rs.1,00,000 for off line and Rs.1,50,000 for online purchase. But no maximum limit.
3) This policy does not acquire paid up value.
4) No Surrender Value under this policy.
5) No loan available under this policy.
6) If your purchase price is Rs. 2.50 lakh or more, you will receive higher amount of annuity due to available incentives. In addition of this, for policies sold online, a rebate of 1% by way of increase in the annuity rate shall also be available.
7) Annuity will be payable on monthly, quarterly, half yearly or yearly base according to your choice.
Types of Annuity available-
- Annuity payable for life at a uniform rate. Under this plan on death of annuitant annuity ceases.
- Annuity payable for 5, 10, 15 or 20 years certain and thereafter as long as the annuitant is alive. Under this plan on death of annuitant during the guaranteed period – annuity is paid to the nominee till the end of the guaranteed period after which the same ceases. But if death occurs after guaranteed period then annuity stops immediately.
- Annuity for life with return of purchase price on death of the annuitant. Under this plan on death of annuitant, annuity ceases and the purchase price is paid to the nominee.
- Annuity payable for life increasing at a simple rate of 3% p.a. Under this plan on death of annuitant annuity ceases.
- Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant. Under this plan on death of annuitant, annuity ceases and 50% of the annuity is payable to the surviving named spouse during his/her life time. If the spouse predeceases the annuitant, the annuity ceases.
- Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant. Under this plan on the death of annuitant, annuity ceases and full annuity is payable to the surviving named spouse during his/her life time. If the spouse predeceases the annuitant, the annuity ceases.
- Annuity for life with a provision of 100% of the annuity payable to spouse during his/ her life time on death of annuitant. The purchase price will be returned on the death of last survivor. Under this plan on death of annuitant, annuity ceases. Full annuity is payable to the surviving named spouse during his/ her life time and purchase price is paid to the nominee after the death of the spouse. If the spouse predeceases the annuitant, the annuity ceases and purchase price will be paid to the nominee.
How much you get by one time investment of Rs.1,00,000?
From the above table you notice that persons who are at their younger will receive less annuity than the older. Eventhough this plan provides facility to enter at the age of 30 yrs but when you calculate for purchaser of this annuity as 60 years then it looks bit attractive. For example if you opt the annuity type 1, age 60 years and investable amount is Rs.25,00,000 then you will receive monthly pension as Rs.19,479 throughout your remaining life span.
Now if we calculate the returns for the annuity type 1st and considers post retirement life as 20 years (means purchaser who is currently at 60 years of age and his life expectancy 20 years from current age means till the age of 80 years) then return on his investment will be around 6.90%. Now let us see the annuity type 4th by using the same annuity purchaser data, where every year your annuity will increase by 3%, then return on your investment will be 7.03%
But remember two things in mind, whatever the annuity you will receive in this plan is taxable as per current tax slabs for individual and it will not support the inflation adjusted returns. Hence if we consider the both factors then it is a big no no…plan. Eventhough from the annuity type 4 we can assume that inflation will be dealt to the some extent, but still if you consider post tax returns then it will definitely eat your annuity returns drastically.
It is really a good plan for investors who want some steady income throughout their remaining life span without bothering about taxation and inflation. Also one more positive point is, if you invest in this plan then you will diminish the interest rate risk. Because instead of investing in this plan, if you invest in monthly income plans, then you are not sure the same interest you will receive after maturity too. But in this plan you no need to bother, because whatever market interest rate, you receive stable income.
Remember too that, always invest your retirement accumulated corpus into secured products rather than risky products. Because if your age is 60 years then you are not in a position to take the same risk what 30 years of age investor can take by investing in equity oriented schemes. So think twice and decide to proceed further based on your requirement.