The Life Insurance Corporation of India (LIC) has recently launched a new non-participating, unit-linked, individual pension plan called ‘New Pension Plus’. According to the state-owned insurance group, the policy helps individuals in building corpus by systematic and discipline savings, which can be converted into regular income by the purchase of an annuity plan on completion of the term.
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Here are key things to know about LIC’s ‘New Pension Plus’ plan and see if it is worth investing in or not:
How can you purchase it?
You can purchase the plan either as a single premium payment policy or a regular premium payment. The premium will be paid under the regular payment option during the policy term.
This plan can be purchased offline through agents/other intermediaries and directly through the website www.licindia.in.
How can you choose the premium?
Under a regular premium policy, the premium is payable over the policy's term. The policyholder has the option to choose the amount of premium payable and policy term subject to minimum and maximum limits of premium, policy term and vesting age.
The policyholder can choose to invest premiums in one of the four types of funds available. However, each premium paid by the policyholder will be subject to a premium allocation charge. The balance amount, known as the allocation rate, constitutes that part of the premium which is utilised to purchase the units of the fund chosen by the policyholder in the policy.
Four free switches for change of funds in a policy year are available.
What are the guaranteed additions available?
LIC indicates that this pension plan comes with guaranteed additions, which are payable under an in-force policy .e. if all due premiums have been paid. The guaranteed addition on regular premium ranges from 5 percent to 15.5 percent and on the single premium payable up to 5 percent on completion of a certain policy year.
The number of guaranteed additions can be utilised to purchase units as per the opted fund type.
The guaranteed additions as a percentage of annual premium or ‘Annualized Premium’ (in case of Regular Premium policy) or Single Premium, as mentioned in the table below, will be added to the unit fund at the end of the 6th, 10th and each policy year from 11th year and onwards till the expiry of the policy term provided all due premiums have been paid, and the policy is in force.
| End of policy year | Guaranteed Additions perannum (as a percentage of oneAnnual Premium) | Guaranteed Additions perannum (as a percentage of oneSingle Premium |
| 6th | 5% | 4% |
| 10th | 10% | 5% |
| 11th to 15th | 4% | 1.25% |
| 16th to 20th | 5.5% | 1.5% |
| 21st to 25th | 7% | 2% |
| 26th to 30th | 8.7% | 2.5% |
| 31st to 35th | 10.7% | 3% |
| 36th to 40th | 13% | 3.75% |
| 41st to 42nd | 15.5% | 4.5% |
(Source: LIC)
How will the NAV be computed?
The NAV will be computed on a daily basis and will be based on investment performance, and fund management charge of each fund type.
Is partial withdrawal allowed?
Partial withdrawal of units is allowed after five years lock-in period subject to the following:
a. Higher education of children.
b. Marriage of children.
c. For the purchase or construction of a residential house.
d. For treatment of critical illnesses of self or spouse.
e. Any other reason as per the IRDAI Circular/Guidelines/Regulations issued from time to time.
It is allowed only up to three times during the entire term of the policy term. The maximum quantum of each partial withdrawal should not exceed the following percentage of the unit fund value at the time of partial withdrawal:
For Regular Premium policies:
| Annual premium | % of Unit Fund Value |
| Less than Rs. 50,000/- | 10% |
| Rs.50,000/- and above but less than Rs. 1,00,000/- | 15% |
| Rs.1,00,000 and above | 25% |
For Single Premium policies:
| Single premium | % of Unit Fund Value |
| Less than Rs.2,00,000/- | 10% |
| Rs.2,00,000/- and above but less than Rs. 5,00,000/- | 15% |
| Rs.5,00,000 and above | 25% |
So, is it worth investing?
This is a unit-linked plan, and the portion that is invested in bonds and equities can provide decent returns. However, experts opine that it is always better to keep the insurance and investments separate from the financial planning perspective.
Investors can buy a pure term insurance plan and alternatively invest in pure investment products.
First Published: Sept 7, 2022 2:13 PM IST
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