Here's all you need to know about LIC's Saral Pension Plan

LIC's Saral Pension Plan is an easy to understand pension product.

Addressing the increasing needs of pensions and insurances in the country, Life Insurance Corporation of India (LIC) has introduced the Saral Pension Scheme with effect from July 1, 2021.

Described as a standard immediate annuity plan according to Insurance Regulatory Development Authority of India (IRDAI) guidelines, the plan is open for individuals in the age bracket of 40-80 years, with its terms and conditions remaining the same across all insurers.

What makes this scheme distinct is that it is a non-linked, non-participating, single premium, individual immediate annuity plan. That means that the policyholder will neither receive any bonuses or add-ons as declared by the insurer during the tenure of the policy nor will the policy be affected by market movements or underlying asset performances. Since this is also an immediate annuity plan, a single lump-sum contribution by the individual will be streamlined into a regular income for the stipulated time of the scheme. 

The policyholder will have two options of annuity to choose from:
A. Life annuity with 100 percent return of purchase price on individual’s death. 

B. Joint life last survivor annuity with 100 percent return of purchase price on death of the last survivor of annuitants. However, in case the spouse has passed away earlier than the formerly surviving annuitant, the purchase price will be payable to their nominees or legal heirs. 

Notably, there is no ceiling on the maximum purchase price, with the annuity rates guaranteed at the start of the policy. The annuity will be payable throughout the lifetime of the policyholders. As for the beneficiaries, they can choose between yearly, half-yearly, quarterly, and monthly modes of payment. However, the minimum purchase amount is set at Rs 12,000. This implies a breakdown of Rs 1000/month, Rs 3000/ Quarter, Rs 6000/ 6 months, and Rs 12000 per annum.

Since it is an immediate annuity plan, the insurer has mandated for loans to be available anytime post six months from the date of policy commencement. However, the maximum loan amount will be based on such that the effective annual interest payable on the loan does not go beyond 50 percent of the annual annuity payment of the policy. As for the interest charged on the loan, it will be calculated at the 10-year government securities rate per annum, which is published on April 1st of every financial year. 

 Despite no bar on the purchase price, exceeding Rs 5,00,000 could invite an incentive by means of increasing the annuity rate in the policy. What is also great is that the policy is inclusive of transgenders as well. 

“LIC inspires confidence when it comes to life insurance products. The Saral Pension Plan is also an easy to understand pension product that will greatly benefit people who have limited understanding of pensions and retirement planning,” said Aparna Sharma, a home-maker and a LIC policyholder who intends to purchase this scheme