LIFE INSURANCE CORPORATION

Pension Plus

Submitted to :-

C.A. Nishant Mishra

Submitted by:-

Amit Rawat

Amitabh Anand

Monika Sharma

Shachi kapoor

IILM institute for higher education, lodhi road

New Delhi
Why pension plans?

Retirement Plans provide us with financial security so that when our professional
income starts to ebb, we can still live with pride without compromising on our living
standards. By providing us a tool to accumulate and invest our savings, these plans
give us a lump sum on retirement, which is then used to get regular income through an
annuity plan. Given the high cost of living and rising inflation, employer pensions alone
are not sufficient. Pension planning has therefore become critical today.

India’s average life expectancy is slated to increase to over 75 years by 2050 from the
present level of close to 65 years. Life spans have been increasing due to better health
and sanitation conditions in the country. However, the average number of years of
employment has not been rising commensurately. The result is an increase in the
number of post-retirement years. Accordingly, it has become necessary to ensure
regular income for life after retirement, so that you can live with pride and enjoy your
twilight years.

Priorities at different stages of life:-

However, skyrocketing costs can throw even a well-laid plan off balance. With costs
rising every day, you can just imagine how high they will be when you are ready to hang
up your boots. So, what should you do to counter this? It’s time to plan your retirement
and that too sooner than later.

The above illustration shows how with each passing year your annual savings
requirement would increase. For instance, if you are 30 years old and plan to retire at
60, then, with a current annual expenditure of Rs. 3,00,000/- , you would need a corpus
in excess of Rs. 2,00,00,000/- to maintain your living standards, assuming you live till 85
years and the inflation rate is 4%. To build this retirement corpus, you need to invest Rs
3,60,000/- per annum in a retirement plan that offers 8% returns per annum. In case you
delay planning your retirement by 5 years then the investment amount would increase
to Rs 6,90,000/- per annum.

Why LIC pension plus?

It is a unit linked deferred pension plan which offers investment of contributions during
the term of the policy. The plan is without risk cover. The allocated premium will be
utilized to purchase units as per the selected fund type. The plan has a guaranteed
return of 4.5% p.a if all premiums are paid on time. The plans gives you the benefit of
annuity from the maturity proceeds.
BENEFITS:-

 Benefits payable on death before vesting In case of death of the policyholder within
the deferment term, the Policyholder’s Fund Value as at the date of booking the liability,
shall be payable to the nominee. The benefit may be chosen either in lump sum or in
the form of annuity as desired by the nominee. The nominee can also take the proceeds
partially as a lump sum and the balance as an annuity subject to the terms and
conditions for payment of an immediate annuity applicable at that time.
 Conversion to annuity: The benefit amount, payable in case of surrender or
on discontinuance of premium or on vesting, shall compulsorily be utilized to
provide an annuity subject to the following conditions:
The policyholder will have an option to commute upto a maximum of one third
of the

i. Higher of Policyholder’s Fund Value and Guaranteed Maturity Proceeds,

in the event of vesting, or

ii. Proceeds of the discontinued policy, if policy is discontinued or

surrendered within 5 years from the date of commencement of policy, or

iii. Policyholder’s Fund Value, if policy is discontinued or surrendered after

5 years from the date of commencement of policy,

whichever is applicable. The commutation will be allowed provided the balance amount
is sufficient to purchase a minimum amount of annuity as per the provisions of section 4
of Insurance Act, 1938 as applicable on the date of payment of annuity.

The balance amount shall compulsorily be utilised to provide an annuity based on the
then prevailing immediate annuity rates under the relevant annuity option.
ELIGIBILITY CRITERIA:-

CHARGES AND FREQUENCY OF CHARGES

Allocation charge for Top-up: 1.25%

1.Premium Allocation Charge:
This is the percentage of the premium appropriated towards charges from the premium
received. The balance known as allocation rate constitutes that part of the premium which is
utilized to purchase (Investment) units for the policy.
The allocation charges are as below:
Single premium: 3.3%
Regular premium:
ii. Other Charges
a) Policy Administration Charge
The Policy Administration charge of Rs. 30/- per month during the first policy year and Rs
30/- per month escalating at 3% p.a. thereafter, throughout the term of the policy will be
 deducted on monthly basis by canceling appropriate number of units out of Policyholder’s
Fund Value.
Premium Allocation Charge
First Year 6.75%
2nd to 5th Year 4.50%
thereafter 2.50%

b) Fund Management Charge Fund Management Charges (FMC) are dependent on type of
Fund and are deductible on the date of computation of NAV at the following rates:

 0.7% p.a. of Unit Fund for “Debt” Fund

 0.8% p.a. of Unit Fund for “Mixed” Fund

The NAV, thus declared, will be net of FMC.

c) Switching Charges This is a charge levied on switching of monies from one fund to another.
This charge will be levied at the time of effecting switch at the rate specified under Para 11 (a)
below.

e) Discontinuance Charges
FEATURES:-

 If premiums are not paid within days of grace life assured has to exercise option to
 Revive the policy or
 Withdraw the policy.
 Revival: Payment of Arrears without Interest.
 Withdrawal : On Withdrawal, Monetary Value is due. 1/3rd of the Monetary Value
can be commuted, Balance is used for Annuity.

 Withdrawal before 5 years: Monetary Value is calculated on the date of

termination. The amount so calculated will earn interest @3.5% p.a.
from date of withdrawal to completion of 5 years and will be due only
on completion of 5 years from the date of commencement.
 Withdrawal after 5 years : Fund Value is due.

 Top-up (Additional Premium) : You can pay additional premium in multiples of

Rs.1,000 without any limit at anytime during the term of policy. Top-up shall not be
allowed during the last 5 years of the contract. In case of yearly, half-yearly,
quarterly or monthly (ECS) mode of premium payment such Top-up can be paid only
if all premiums have been paid under the policy.

 Switching: You can switch between the two fund types during the policy term
subject to switching charges, if any.

 Partial Withdrawal: No partial withdrawal of units will be allowed under this plan.
ADVANTAGES
 Tax Benefit:- under this plan employee or policy holder get the tax benefit under
80ccc

 Minimum interest is Guaranteed which is 4.5%. This protects against fluctuation

of interest due to policies of the government in the distant future

 Since individuals in Private Employment and those engaged in Business do not

have pension security, Pension Plus fulfils their need for a secured future

 Being Market Linked, the plan has possibility of getting excellent returns

 Easy Purchase, As LIC going online we can easily buy these plan and also get
the benefit of wide network of LIC agent

 Convenient modes of payment , Single Premium mode also available

This give you the freedom to pay your payment

 Compulsory purchase of Annuity ensures channelization of funds for specific
purpose.

 Regular income from the commencement of annuity. As there are guaranteed

return so if you are choose this plan you can get regular income

 You can also enter in this policy till the age of 75 year

 You also get the death benefit in this policy and in case of death your nominee
get the fund value of your policy

 The minimum premium is Rs. 1500 per month while minimum single premium is
Rs. 30,000
DISADVANTAGES
 In this plan they did not give you freedom to withdraw your investment partially so
if you need money you have only option to withdraw your whole amount.

 Aggressive funds are not available. Only two funds are available for investment ,
As there are investing in bonds also it gives less return as compare to stock
market or mutual fund

 As this is a unit linked plan so it also has the risk of the market

 No loans will be provided against policy, As we can get the loan against other
LIC policy.

 No assignments are allowed.