Skip to main content

ULIP Review: LIC Pension Plus

 

Like all other LIC products, Pension Plus also has a low-cost structure. Investors who want to invest money for their retirement and are ready to buy annuity on maturity or withdrawal should opt for this plan

 

   EVER since insurance regulator Irda has introduced new guidelines for unitlinked pension plans (Ulips), insurance companies have stopped initiating pension plans in the market. One major reason to this is the minimum guarantee attached to this plan by the regulator. This guarantee includes 4.5% of return for the current year and thereafter 50 bps over and above the average reverse repo rate. The guaranteed interest rate is subject to a maximum of 6% and a minimum of 3%. So far Life Insurance Corporation (LIC) is the only company that has introduced a unit linked pension plan post September 2010. This plan is a low-premium plan offering two investment options (funds) including debt fund and mixed fund. The debt fund is purely debt oriented, while the latter has some exposure to equity.

COST STRUCTURE:

Like all the other products offered by LIC, this product too has a low-cost structure. The premium allocation charges are lower than the previous pension plan offered by LIC. Even the policy administration charge of the product is only Rs 360 for the whole year. However, this charge increases by 3% every year. What is the best about LIC is its low-fund management charges due to its large asset base. Fund management charges have a compounding effect, so a few basis points also make a difference. Considering these charges, if the fund were to generate returns at 6% and 10 % as mandated by the Insurance Regulatory and Development Authority (Irda), the net yield in the hands of investors after factoring the above costs would be 4.7% and 8.7% (approx.), respectively per annum.

BENEFITS:

The most prominent benefit of this product is the minimum guarantee attached to the product. This guarantee fixes a lower limit of return on investments on maturity. This policy is one of the few plans that offer various premium payment modes including monthly, quarterly, half yearly and annually. It also offers single premium payment facility for those interested to make one time investment. The plan also allows one to pay additional premium for investment purpose only.

CAVEAT :

Earlier, the pension plan was considered more of an investment scheme, but after the tight regulation, it is not possible to get the invested premium as lumpsum on early withdrawal. Two third of the accumulated corpus has to compulsorily be utilised for purchasing annuity. Hence, after the lock-in period of five years, an investor, who wants to withdraw money, has to purchase annuity.

PERFORMANCE & PORTFOLIO REVIEW:

LIC Pension Plus is only a month old. This scheme currently has an asset under management (AUM) of Rs 115 crore, which is invested into debt fund and mixed fund. Both the funds are debt dominated due to the requirement of guarantee returns. Mixed fund has exposure to equity market that is also limited to 15-35%. The debt fund concentrates more towards long-term maturity corporate bonds and government bonds. Large proportion of the portfolio has bonds with 15-20 years maturity.Since the scheme has been recently launched, most of the corpus is parked in the money-market instruments. Hence it is too early to comment on the fund's performance.

DEATH/MATURITY BENEFIT:

LIC Pension Plus does not offer death benefits. So in the case of demise of the policyholder, the nominee receives only the accumulated fund, whereas upon maturity, one third of the fund is given to the investor as lumpsum, which is fully tax-free. The balance two-third has to be compulsorily invested in annuity plan from either the same company or any other insurance company. The amount invested in annuity grows with a certain fixed percentage and investors receive a series of payment on a periodic basis. For instance, say a 30-year-old healthy male invest Rs 25,000 a year in Mixed Fund of LIC Pension Plan for a period of 20 years. Assuming the rate of return of 6% and 10%, the fund value will grow up to nearly Rs 824,315 and Rs 1,316,446, respectively, receivable at the maturity.

OUR VIEW:

LIC Pension Plus is a cost-effective plan with guaranteed returns, but may not suit the people with high risk appetite. Those who wish to invest money for their retirement and are ready to buy annuity on maturity or withdrawal may opt for this plan.

 
Having said all this, watch out for LIC fund performance.

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now