Life Insurance Corporation (LIC) introduced a ULIP based investment with insurance plan called LIC Pension Plus. The new LIC Pension follows the strict rules by IRDA that come into effect from September 1 2010. LIC Pension Plus plan is designed in such a way that to accumulate wealth during a persons lifetime until pension, and let him live in a tension free life after the retirement. The minimum premium period of the policy is 10 years and maximum 40 years. At the end of the policy term, the fund value will be paid with guaranteed maturity benefits, either as a lump sum or in the form of installments. Unfortunately there is no life cover with this policy. However, in the event of any mishap during the policy term, the exiting fund value will be cashed to the relatives. The LIC Pension Plus plan assured a 4.5% yearly return as per IRDA norms.
LIC Pension Plus plan terms, features, return and benefits:
The premium collected from an investor is converted into units, and a NAV is set for the units. The premium is then invested into various funds. There are two fund options in LIC Pension plus, debt and mixed funds. The debt fund invests the premium after charges in government securities and bonds with lower risks. The mixed fund invests the premium after charges in equity funds as well as the debt funds. The Equity fund option will give more returns, but the fund value will be affected by the up and downs in stock markets. There is also an option to switch between funds based on preferences. Earlier There was no surrender charge with LIC ULIP products. However, due to the new IRDA rules and its expected effect in profit margins, LIC introduced surrender charges for their new Pension Plus ULIP product. LIC Pension Plus plan has a surrender charge ranging from 2-10% for premature withdrawal or cancellation of policy- but there is no surrender charge after the policy year five. The entry age to LIC Pension Plus is 18 years and maximum of 75 years. The minimum amount of premium required in Pension Plus regular plan is 1500 (monthly) -15000 (yearly) and maximum one lakh. There is no limit for the single premium plan.
The charges associated with Pension Plus is much smaller when compared with old ULIP plans from LIC. The premium allocation charge for LIC Pension Plus regular plan is 6.75% for the first year, 4.5% from 2nd to 5th year and 2.5 % thereafter until the maturity. For single premium, it’s only 3.5 % and for any top-up on premium its 1.25%. The policy administration charge in this plan is 30 RS. Fund management costs 0.7% for debt fund and 0.8% for the mixed fund options. The NAV of a LIC Pension Plus unit is currently at the starting point 10.00, and its likely to increase in the coming days.