Is there an investment opportunity in PSP Projects shares?

A retired life with pension benefits is always desirable. But with government jobs increasingly becoming scarce, it is advisable that one should provide for one’s own pension. The paramount concern while choosing a pension scheme is safety of the money and with government guarantee, Life Insurance Corporation of India (LIC) stands like a godzilla in the market. And while choosing a pension scheme, who can be a better example than former Finance Minister and President Pranab Mukherjee, one of the astute financial minds in modern India.

Mukherjee bought only one LIC policy – Jeevan Akshay – in his life and that was a Jeevan Akshay policy. While Money9 is not revealing the quantum invested, for anyone contemplating a pension policy it is worth having a look at the scheme the former Chanakya of Indian finance chose for himself.

It was a single premium policy where the purchaser would be entitled to pension payment till he/she reaches the age of 100 years.

“One can invest a minimum of Rs 1 lakh in Jeevan Akshay policy. Pranab Mukherjee bought a policy where pension payment started immediately after purchase. One can also settle for a deferred annuity model,” said Debasish Dutta, the agent who sold the former President the policy.

Jeevan Akshay – Immediate Pension

Immediate pension means the purchaser would start receiving pension when he/she buys the policy. If one wants pension from the age of 60, one can buy it at the age.

But one can also buy it at any age between 30 years and 100.

If one purchases a policy of Rs 10 lakh, the total amount one has to pay one time is Rs 1018000 that includes GST at the rate of 1.8%.

While purchasing the policy one has to select the mode of pension payment which can be yearly, half yearly, quarterly and monthly.

If one takes the pension annually, he/she would get Rs 52,750 a year. In case of half yearly, quarterly and monthly payment options, the pension amounts would be Rs 25,975, Rs 12,875 and Rs 4,263 respectively.

Various options are available for the purchaser. However, two options are popular. One, where the buyer settles for immediate annuity with return of the original sum (Rs 10 lakhs in this case) to the nominee of the policy after the purchaser expires. In the second option the policy is bought in the name of a person and his/her spouse and even after the death of the first annuitant, the second annuitant continues receiving the same amount, and in the event of death of the second person, the full original amount is paid to the nominee.

The former President, too, opted for a model where the original amount was paid to his son and daughter after he passed away on August 31, 2020.

Jeevan Shanti – Deferred Option

The earliest age when one can purchase this policy is 30 years. Anyone who is more than 79 years cannot purchase this policy.

In this scheme, the purchaser pays up the single premium but opts to wait for a few years before he/she starts receiving the pension. The deferment period can be a minimum of one year and a maximum of 12 years, which means if one wants to get pension payment from 60 years, he can purchase the policy when he is 48 years old at the earliest and at 59, the latest.

In this case, too, let’s assume the purchaser buys a policy of Rs 10 lakh. Like Jeevan Akshay, he pays the same amount Rs 10,18,000, including GST.

In this case, however, the amount of pension will depend on how long the purchasers chooses to defer the pension. If he/she defers it for one year, he will get a pension of Rs 53,500 (in case of annual payment), or Rs 26,236 (half yearly payment), Rs 12,990 (quarterly) or Rs 4,287 (monthly).

If he/she chooses to receive the pension 12 years after the purchase, the amount can go as high as Rs 91,400 (annual mode), or 44,807 (half yearly), or Rs 22,180 (quarterly) or Rs 7,319 (monthly) for the same policy of Rs 10 lakh.

The pension amount varies between these two extremes in case of deferment of pension for periods within 1 and 12 years.