While earning money, we tend to forget to make provision for the old age. There are a multitude of old age pensions to choose from in order to secure your future. There is one plan that allows you to start buying premium at the age of 30 onwards (LIC Jeevan Nidhi) so as to create a corpus by the time you grow older. The corpus thus created helps you to buy annuity or lump sum as the case may be. Alternatively, you can pay a lump sum now (under a plan called LIC Jeevan Akshay) for buying annuity for the rest of your life or for a limited period.
However, there is another option of buying an annuity later at the old age. The plan known as Pradhan Mantri Vaya Vandana Yojana (PMVVY) allows you to purchase a plan at the age of 60 or above for buying annuity immediately afterwards. (Also read: NPS, PMVVY, PPF or SCSS: Which one is best?)
LIC Insurance Plans: PMVVY Vs Jeevan Akshay Vs Jeevan Nidhi
A. Pay Lumpsum Now and Start Getting Pension (Pradhan Mantri Vaya Vandana Yojana: PMVVY): This plan allows you to pay a sum of money any time after the age of 60 and you tend to get a pension that ranges between Rs. 1,000 per month and Rs. 5,000 per month. Launched in May 2017, LIC has been given the sole privilege to run the scheme.
The minimum age is 60 years and there is no maximum entry age. To be able to get a pension or Rs. 1,000 per month, the subscriber need to pay Rs. 1,50,000 and for a monthly pension of Rs. 5,000 per month, the immediate purchase price is Rs. 7,50,000. The purchase price and pensions can be bought in any of the time formats, monthly, quarterly, half yearly and yearly.
At the time of maturity after 10 years, pensioner stands to receive the purchase price of Rs.1,50,000 or Rs. 7,50,000 (or whatever the purchase price, as the case may be) along with final pension instalment.
Surrender or loan: One can surrender the policy in exceptional circumstances. The surrender value will be 98% of the purchase price. The loan facility is also available after completion of three policy years. The maximum loan that can be granted shall be 75% of the purchase value.
B. Pay Lumpsum now, Start Getting Pension for life (Jeevan Akshay): The LIC Jeevan Akshay policy entitles the insured to buy an annuity plan at the young age, thus entitling him/her to receive annuity for the rest of the life. However, there is an option to buy the short term annuity also such as for 5 years, 10 years, 15 years or 20 years.
The minimum purchase price of policy is Rs. 1,00,000 while the minimum age of entry is 30 years. For every Rs. one lakh, the pensioner is entitled to receive Rs. 4,630 to Rs. 6,490 if the age of pensioner is 30. For a 40-year old pensioner, the annual annuity is anywhere between Rs.5,010 and Rs. 6,820. Likewise, the amount of annuity differs depending on the tenure of policy and the age of pensioner.
The policy can be surrendered if the pensioner is diagnosed from any critical illness or he is being migrated to another country permanently. The policy can’t be used to raise a loan.
C. Pay Regular Premium Now, Get pension At The Old Age (Jeevan Nidhi): The insurance plan offers deferred annuity on expiry along with the death cover. Unlike the PMVVY, Jeevan Nidhi can be purchased at a young age such as 30. The policy doctrine is that you keen depositing the money in regular intervals (annual) and keep building a corpus throughout your life. And as you grow old, you stand to receive an annual pension (also known as annuity).
From the sixth year onwards, the insured is also entitled to receive extra bonuses.
On the expiry of the policy, the insured has the option either to buy an immediate annuity or to purchase a single premium deferred pension product.
This means, if an insured is entitled to receive Rs. 5 lakh from LIC at the time of expiry of the policy, the insured can either buy annuity for Rs. 5 lakh that will give him a fixed sum every year (say Rs. 50,000 for next 10 years) or the insured can use Rs. 5 lakh for buying another pension plan that will fetch him the benefits (annuity or lumpsum as the case may be) at a later date.
However, if the amount accumulated at the time of expiry of the policy is too small to buy an annuity then the amount is returned to the policy holder as lumpsum.
Death benefit: The LIC’s pension plan has a death cover also. The total death cover is at least 105% of the total premiums paid (excluding taxes and premiums paid). The proceeds are meant to be given to the nominee at the time of death of insured that will accrue include basic sum assured, along with guaranteed addition. The money can be given in lumpsum or annuity.
However, in case of accidental death, the accident benefit sum assured will be payable as lumpsum along with death benefit. In case of disability (that happens within 180 days from the date of accident), the basic sum assured with be paid in equal monthly instalments spread over 10 years and the future premiums will be waived.