LIC New Pension Plus (plan no. 867) – Should you invest?

LIC has introduced a new pension plan, LIC New Pension Plus 867. This is a non-participating, unit-linked insurance plan that again comes with the fancy word “guaranteed addition”. The plan says LIC would provide guaranteed top-ups between 5% and 15% of the annual premium. What are the features of LIC Pension Plus? Who can benefit from this plan? Should you invest in LIC New Pension Plus 867 or avoid? We will come back to this retirement plan in this article.

Read also : Best term insurance plans to buy in 2022

LIC New Pension Plus Plan No 867 – Features of this plan

LIC launched this plan from 5^e September 2022.

• It is a unit-linked, non-participating pension plan that aims to build a corpus with systematic savings converted into regular income at retirement after subscribing to the annuity plan.
• One can take the option of immediate or deferred pension.
• This pension plan can be purchased with a single premium or regular premium option. Under regular premiums, one must invest for the full term of the policy.
• This pension plan offers the possibility of extending the accumulation period or the deferment period within the same policy with the same conditions.
• An investor can invest in 4 different funds at his disposal.
• Investors have an option for 4 free transfers between funds within a policy year.
• This plan offers guaranteed additions of 5% to 15.5% of the annual premium at specific intervals.
• For premiums paid, there would be premium allocation charges. The balance would be used to buy the units of the fund chosen by the investor.
• Partial withdrawal of units (10% to 25%) is allowed 3 times during an insurance period.
• Investors can purchase this plan online or offline from agents or by visiting any of the LIC branches.

LIC New Pension Plus 867 – Eligibility for this plan

Here are the eligibility criteria.

• The minimum entry age is 25 and the maximum entry age is 75.
• The minimum vesting age is 35 and the maximum is 85. This means that pension income can be drawn between the ages of 35 and 85.
• The duration of the policy is from 10 years to 42 years.
• Under single premium, the minimum investment is Rs 1 Lacs.
• Under the regular premium plan option, the minimum premium is Rs 3,000 (monthly), Rs 9,000 (quarterly), Rs 16,000 (half-yearly) and Rs 30,000 (annually).
• The minimum and maximum sum insured would depend on the amount of the premium, method of payment, seniority and age of the individual.

Read also : How good is the LIC Bachat Plus insurance plan?

LIC New Pension Plus – Various funds available in this plan

Here are the 4 fund options available to investors.

1) Retirement Bond Fund:

• 60% to 100% in bonds and government securities or in corporate debt and
• 0% to 40% in money market instruments
• Zero capital investment

2) Guaranteed pension fund:

• 50% to 90% in bonds and government securities or in corporate debt and
• 0% to 40% in money market instruments
• 10% to 50% in equity

3) Balanced Retirement Fund:

• 30% to 70% in bonds and government securities or in corporate debt and
• 0% to 40% in money market instruments
• 30% to 70% in equity

4) Pension Growth Fund:

• 0% to 60% in government bonds and securities or corporate debt and
• 0% to 40% in money market instruments
• 40% to 100% equity

LIC New Pension Plus – What are guaranteed supplements?

LIC indicates that this pension plan is accompanied by guaranteed top-ups. The guaranteed addition would depend on the premium mode. Let’s get into more information about this.

1) For the regular Premium mode plan

• 6th year – 5%
• 10th year – 10%
• 11-15 years old – 4% each year
• 16-20 years old – 5.5% each year
• 21-25 years old – 7% each year
• 26-30 years old – 8.75% each year
• 31-35 years old – 10.75% each year
• 36-40 years old – 13% each year
• 41-42 years old – 15.5% each year

By way of illustration, if we take the Rs 1 Lac annual premium plan with 42 years of seniority, we would get Rs 2.91 lacs as a guaranteed addition to the total premiums of Rs 42 lacs (Rs 1 Lac x 42 years ).

2) For Single Premium mode plan

• 6th year – 4%
• 10th year – 5%
• 11-15 years old – 1.25% each year
• 16-20 years old – 1.5% each year
• 21-25 years old – 2% each year
• 26-30 years old – 2.5% each year
• 31-35 years old – 3% each year
• 36-40 years old – 3.75% each year
• 41-42 years old – 4.5% each year

LIC New Pension Plus – Positive Factors

• This pension plan is a unit-linked plan. The excess amount beyond the bonus allocation would be invested in government and corporate bonds and equities. This part can provide higher returns compared to regular bank FDs.
• Units can be partially withdrawn in an emergency.
• One can extend or postpone the insurance period with the same terms and conditions.
• LIC has been a trusted brand for decades.

LIC New Pension Plus – Positive Factors

• There are various assignment fees, such as premium assignment fees, policy administration fees, fund management fees, partial withdrawal fees, termination fees and other fees. These premium allocation fees may erode part of the investments and only the balance would be invested.
• The guaranteed additions shown between 5% and 15.5% are very low when you see the actual returns. As an example given earlier, an investment of Rs 1 lac every year for 42 years of tenure would yield Rs 2.9 lacs compared to a total investment of Rs 42 lacs.
• LIC pension plans typically offer low returns.

How to calculate the premium in this plan?

You can use the Lic new pension plus 867 calculator on the LIC website to calculate the premium amount based on various parameters.

Read also : Best LIC Term Insurance Plans for 1 Crore

LIC New Pension Plus Plan No 867 Review – Should You Invest?

Once you have gone through the above plan, you will have noticed that this plan is the replica of the National Pension Scheme (NPS) where one can opt for investments in government bonds, corporate bonds and shares.

Investments in corporate bonds and equities are risky. On the other hand, investments in government bonds offer low returns while there is no credit risk or default risk and safe investments.

LIC plans typically offer low returns. Guaranteed additions are the fancy word used by insurance companies to attract investors. However, the actual returns are low in this pension plan.

Investors who trust the LIC brand and are super excited about low returns can opt for such pension plans. Otherwise, one can avoid the new pension plan over this LIC.

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Suresh KP is the founder of Myinvestmentideas. He is NISM Certified – Investment Advisor and NISM Certified – Research Analyst. He has analyzed financial markets for the past 20 years. He can be contacted at [email protected]

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