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Life Insurance Corporation (LIC) has launched an immediate pension scheme called Saral Pension Plan, which pays out a pension at the assured rate of return. The pension will be lifelong and there is no maximum limit on the amount one can invest. It is a non-linked, non-participating, single premium plan and those who are between 40 years to 80 years can opt for this plan.

The policy has been launched at a time when senior citizens are feeling the brunt of declining interest rate, as they mostly depend on bank fixed deposits for regular income. But for those who are looking for an alternative and want to invest their funds for the long term, pension plans could be a good get. Especially when it is expected that in the long-run inflation will fall and also interest rates, as India moves to be a developed economy.

“It is a guaranteed plan that confirms the income of a person after retirement as per their choice and it is economic to invest for people to secure their future,” said Naval Goel Founder & CEO, PolicyX.com.

How to earn Rs 51,650 pension?

According to the brochure shared on the LIC’s website, if an individual invests Rs 10 lakh in LIC Saral Pension Plan he or she will earn Rs 51,650 yearly pension that works out to Rs 4,304 per month. In the case of joint life, the yearly pension works out to Rs 51,150.

Comparison

Experts say the other similar pension plans will give the approximately same amount of pension. “Generally a person needs to invest Rs 11 laks one time to earn 5000 pension monthly immediate pension and for a 10,000 monthly pension, the one-time amount to pay is Rs21.50 lakh. The average IRR (net yield) of these plans is 5.10%,” said Goel.

Annuity options

The plan offers an immediate annuity plan through two options. You can get a lifetime pension with the return of purchase price (amount invested initially) and joint-life (last survivor annuity) with the return of purchase price on death of the last survivor.

Return of purchase price

Under option 1 which covers single life, the purchaser will continue getting annuities as long as the person is alive. On the death, the nominee or legal heirs will be paid the full purchase price.

Under option 2, which covers joint life. there is two types of death benefit options. After the first death 100% of the annuity payments continue to be paid as long as one of the annuitants is alive. However, on the death of the last survivor, the annuity payments will be stopped and the purchase price will be payable to the nominee or legal heirs.

Loan

The loan can be taken against the policy after 6 months of signing-up for the policy.

Taxability

Before investing in pension plans remember that it will be a taxable amount and will be chargeable as per your income tax slab.