LIC Jeevan Shanti : Guaranteed Pension for Life : Plan review by Grow Wealth Advisors

The demand of financial products with guaranteed payouts is increasing now a day due to volatility in the market. To tap this opportunity, LIC has launched “Jeevan Shanti”, a new Single Premium guaranteed pension plan. It offers the guaranteed pension for life with options like an immediate pension or deferred pension.

LIC do have a pension product in form of Jeevan Akshay VI, but it is an immediate annuity plan.  There was need of a plan which have deferment period between investment date and pension start date. Some prefer this either due to higher interest that comes with a deferment period or deferring the Tax Liabilities etc

Before going into details of this plan, first let’s understand what is an ‘annuity’?

Annuity is defined as a fixed sum of money paid to someone each year, typically for the rest of their life. In Indian life insurance industry, annuity is known as ‘pension’

Now there are two types of annuities

Immediate

Deferred

Immediate Annuity: as the name suggest, annuity or pension begins immediately after payment of premium. This means if you pay lump sum money this month, from next month pension payout will start.

Deferred Annuity:  in this case, the annuity/pension will start after gap of few years as chosen by customer. This gap is known as deferment period. This is suitable for people who are earning today and want guaranteed pension after a certain age. Note in LIC Jeevan Shanti, the interest rate can go up to 21% as deferment period increases.    

Now summarize eligibility conditions of this plan

	Criteria	Immediate Annuity	Deferred Annuity
	Min Age at Entry	30 Years	30 Years
	Max Age at Entry	85 years (completed) except Option F	79 years (completed)
		100 years (completed) for Option F
	Min Deferment Period	Not Applicable	1 year
	Max Deferment Period		20 years subject to Maximum Vesting Age
	Min Vesting Age		31 years (completed)
	Max Vesting Age		80 years (completed)

Minimum annuity condition is Rs 1000 for monthly mode, 3000 for quarterly mode, 6000 for half-yearly mode and 12000 for annual annuity.

Joint Life: The joint life annuity can be taken between any lineal descendant/ascendant of a family (i.e. Grandparent, Parent, Children, Grandchildren) or spouse or siblings

Minimum purchase price i.e min premium (without GST) is Rs 1.5 Lacs. Note in cases of Divyang beneficiary this is relaxed to Rs 50,000

The various annuity option available are as below

1.     Immediate Annuity

Option A: Immediate Annuity for life.     
Option B: Immediate Annuity with guaranteed period of 5 years and life thereafter.          
Option C: Immediate Annuity with guaranteed period of 10 years and life thereafter.        
Option D: Immediate Annuity with guaranteed period of 15 years and life thereafter.        
Option E: Immediate Annuity with guaranteed period of 20 years and life thereafter.        
Option F: Immediate Annuity for life with return of Purchase Price.          
Option G: Immediate Annuity for life increasing at a simple rate of 3% p.a.         
Option H: Joint Life Immediate Annuity for life with a provision for 50% of the annuity to the Secondary   Annuitant on death of the Primary Annuitant.          
Option I: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives.       
Option J: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives and return of Purchase Price on death of last survivor.

2.     

        Deferred Annuity

Option 1: Deferred annuity for Single life           
Option 2: Deferred annuity for Joint life

Additional annuity for higher premium cases

To incentivize high premium case, LIC has offered attractive additions for high value premiums (2 lacs+) 

Surrender

One of the main grievances in existing LIC Jeevan Akshay pension plan is that no surrender option was there. Now listening to its customers, LIC has added this option in Jeevan Shanti. The policy can be surrendered after 3 months from policy issuance. Note the surrender is applicable for below plan-option combinations only.

Under Immediate Annuity Plan-

Option F

Option J

Deferred Annuity Plan-

Option 1

Option 2

Death Benefits

Now let’s see this plan with an example

Purchase Price:                 Rs. 10 lakh (excluding applicable taxes)        
Age of Annuitant at entry : 45 years (lbd)           
Annuity Mode:                    Yearly        
Deferment Period:              20 years (applicable for Deferred Annuity only)         
Age of Secondary Annuitant at entry:35 years (applicable for Joint life annuity only)

Annuity Option	Annuity Amount (Rs.)
Immediate Annuity
Option A: Immediate Annuity for life	74,300
Option B: Immediate Annuity with guaranteed period of 5 years and life thereafter	74,200
Option C: Immediate Annuity with guaranteed period of 10 years and life thereafter	73,900
Option D: Immediate Annuity with guaranteed period of 15 years and life thereafter	73,500
Option E: Immediate Annuity with guaranteed period of 20 years and life thereafter	72,900
Option F: Immediate Annuity for life with return of Purchase Price	65,400
Option G: Immediate Annuity for life increasing at a simple rate of 3% p.a	56,200
Option H: Joint Life Immediate Annuity for life with a provision for 50% of the annuity to the Secondary Annuitant on death of the Primary Annuitant	71,100
Option I: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives	68,300
Option J: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives and return of Purchase Price on death of last survivor	64,900
Deferred Annuity
Option 1: Deferred annuity for Single life	206,600
Option 2: Deferred annuity for Joint life	227,200

Summary

This plan is suitable for every investor and a must have in portfolio. Simple because, this pln can lock interesr rate for next 30-40 years at least for younger investors which is a great thing given the fact tht interest retes will come down in next 5-10 years or so. Every investor have 10-40% of his money locked up in FD or income funds. This money or at least part of it can be invested in Jeevan Shanti.