LIC Varishtha Pension Bima Yojana

The plan is only available for people above 60 years of age.

Over 3.16 lakh policies of LIC Varishtha Pension Bima Yojana had been sold amounting to Rs. 6,095 crores in its earlier avatar that reflect its popularity among senior citizens. The plan offers a return of 9.3% per annum. Annuitants only need to pay a single premium to enjoy the benefits of the LIC Varishtha Pension Bima Yojana plan. The cover has a lock-in period of 15 years, though LIC allows policyholders to withdraw the sum they need by paying a fee (called exit load) on the amount withdrawn. The exit load is 2% of the amount taken out by the LIC Varishtha Pension Bima Yojana policyholder. 

Key Features of LIC Varishtha Pension Bima Yojana

It is an Immediate Annuity Plan with a single premium option where the annuity starts immediately after premium payment from the next chosen date.

• No medical check-ups are required for LIC Varishtha Pension Bima Yojana.
• LIC Varishtha Pension Bima Yojana provides early availability of Surrender Value if the annuitant is diagnosed with any Critical or Terminal Illness.
• The policyholder only needs to pay a sum equal to 2% of the amount withdrawn as exit load under the LIC Varishtha Pension Bima Yojana. If they choose to withdraw the entire amount, they will receive a sum equal to 98% of the purchase price or premium. In other words, 2% of the single premium will be exit load charges
• LIC Varishtha Pension Bima Yojana annuitants can choose from various modes of payout, viz., monthly, quarterly, semi-annually, and yearly. The first of the payouts for each of these frequencies will be respectively 1 month, 3 months, 6 months, and 1 year from the date of receipt of premium.
  • Monthly: Under this mode, the LIC Varishtha Pension Bima Yojana annuitant will receive an amount per month. People can invest up to Rs. 6.66 lakh if they want to opt for a monthly payout. The minimum purchase price starts from Rs. 66,665
  • Quarterly: Here the senior citizens holding a LIC Varishtha Pension Bima Yojana policy will receive a sum per quarter in a year, i.e. they will receive an annuity every three months or four times in a year. The LIC Varishtha Pension Bima Yojana annuitants can pay an amount from Rs. 66,170 to Rs. 6,61,690 if they want to receive a quarterly payment
  • Semi-Annually: LIC allows people who want to opt for a half-yearly payment to receive the same from the LIC Varishtha Pension Bima Yojana. The annuitants can pay any amount from Rs. Rs. 65,430 to Rs. 6,54,275 to start receiving the annuity on a semi-annual basis
  • Yearly: The annual sum is paid by LIC once a year and helps the policyholder to receive a comparatively large sum of money that they can use to pay large expenses or for other reasons such as travel. People can pay up to Rs. 6,39,610 to opt for an annual payout. The minimum sum starts from Rs. 63,960
  • All payments are made by ECS or NEFT that ensures the person receives the sum they need easily without having to go through the trouble of encashing a cheque or a demand draft.
  • LIC Varishtha Pension Bima Yojana has a lock-in period of 15 years.
  • Annuitants of LIC Varishtha Pension Bima Yojana can surrender their policy after 15 years and they will be refunded the purchase price; i.e., the premium they had paid for the policy when they took it 15 years ago.
  • Policyholders can opt for a loan against the policy after 3 years. The amount of loan taken under LIC Varishtha Pension Bima Yojana will be up to 75% of the policy amount. Interest rates will vary and will be based upon the rates decided by LIC. The policy will be assigned to LIC during the tenure of the loan.
  • The LIC Varishtha Pension Bima Yojana has a free look period of 15 days. The senior citizen will receive the whole of the premium paid by him or her less any charges for stamp duty.
  • LIC may call for proof of age at any time and if a wrong date has been entered during the application of the plan, the correct date will be put in the policy. LIC Varishtha Pension Bima Yojana will not be deemed to be called into question simply because the age of the assured person was incorrectly entered.

Benefits of LIC Varishtha Pension Bima Yojana

Annuity payouts will be paid as per the frequency chosen immediately after the premium is paid. LIC has provided an upper limit of Rs. 60,000 p.a. for the LIC Pension Plans Varishtha Pension Bima Yojana

• Regular assured income is received under the LIC Varishtha Pension Bima Yojana. Pensioners do not have to worry about whether they will receive a cheque or a demand draft as the amount is deposited in the policyholder's account
• On death, the Purchase Price is refunded under LIC Varishtha Pension Bima Yojana. That means that the beneficiaries get back the amount that was used by the pensioner to take out the policy
• Income tax benefit on the premium paid as per Section 80CCC of the Income Tax Act
• LIC Varishtha Pension Bima Yojana is initiated by the government and thus stands on equal footing with other government pension schemes for reliability
• LIC Varishtha Pension Bima Yojana can be easily combined with other pension schemes such as PF, endowment policies, mutual funds, etc. to get a stable income per month
• You receive Rs. 5,000 per month for a single premium of Rs. 6,66,665 or an annual sum of Rs. 60,000 for a premium of Rs. Rs. 6,39,610 under LIC Varishtha Pension Bima Yojana. In practical terms, this means a return of 9% and above. Considering the current interest rates for fixed deposits or savings accounts, the returns on your money from LIC Varishtha Pension Bima Yojana is much higher than these other options

LIC Varishtha Pension Bima Yojana – Product Specification:

LIC Varishtha Pension Bima Yojana – Details About Premium

This section will provide more details on the minimum or maximum amounts that can be paid under LIC Varishtha Pension Bima Yojana, sample pension rates, and annuity rates. This will help you get a realistic picture of how much you need to pay and the amounts you will receive.

LIC Varishtha Pension Bima Yojana – Maximum and Minimum Premium Amounts

Under the LIC Varishtha Pension Bima Yojana plan, the amount of the single premium varies depending on how frequently the pension needs to be paid. For instance, if the pension has to be paid on a monthly basis, then the premium is more than when it has to be paid quarterly. This means that the premium is less for the annual pension payments.

LIC Varishtha Pension Bima Yojana – Sample Pension Rates

The sample pension rates under the LIC Varishtha Pension Bima Yojana provide an idea of how much pension a policyholder will receive on payment of a certain amount. For ease of reference, a sum of Rs. 1000 is taken as premium paid under the LIC Varishtha Pension Bima Yojana.

How Plan Works?  

As we have discussed, that this plan comes with an option of a single premium payment which is required to be paid at the starting of the policy. It is an annuity plan for senior citizens that does not come with a life cover. The amount of pension depends on how much money is invested. One should also be aware that is an immediate pension policy where the annuity starts instantly if you have paid the premium. In addition to this, you are not required to submit any type of medical certificate or report as this policy does not provide any health coverage. 

For Example, If Kamal buys LIC Varishtha Pension Pension Bima Yojana for Rs. 5 lakhs of sum assured at 60 years of age. The buying amount will be Rs. 515450 including Rs. 15,45- as tax. Kamal selected an annual option of payout. This indicates that for a plan with a sum assured of Rs. 5 lakh and 9.38 percent ROI, the pension amount will become Rs. 46,903. 

LIC Varishtha Pension Bima Yojana – Annuity Rates

The above sample pension rates for LIC Varishtha Pension Bima Yojana can be further elaborated for larger premium amounts. Let us look at the annuity rates for Rs. 100,000, Rs. 250,000 and Rs. 500,000.

LIC Varishtha Pension Bima Yojana – Policy Details

Grace Period: The grace period is not applicable.

Policy Termination or Surrender Benefit: The policy can be surrendered after 15 years where the purchase price is refunded. On diagnosis of a Critical or Terminal Illness, the policy can be surrendered before 15 years and 98% of the Purchase Price is refunded.

Free Look Period: If you would not be satisfied with the coverage and terms and conditions of the policy, you have the option of cancelling the policy within 15 days of receipt of the policy documents, provided there has been no claim.

Inclusion

The loan is available under the plan after the completion of 3 years up to a maximum of 75% of the Purchase Price. The interest on the loan will be recovered from the annuity payments.

LIC Varishtha Pension Bima Yojana – Documents Required

On signing up and during the tenure of LIC Varishtha Pension Bima Yojana

The policyholder has to fill up an ‘Application form/ proposal form’ with accurate medical history along with the address proof and other KYC documents. The LIC Varishtha Pension Bima Yojana pensioner must also submit Existence Certificates at specified time intervals. These certificates are to be submitted in the proforma of LIC.

On surrender of LIC Varishtha Pension Bima Yojana policy

LIC Varishtha Pension Bima Yojana pensioner should submit the following documents:

• Discharge form
• Original policy document
• Proof of medical treatment of pensioner or his / her spouse if the policy is surrendered within the lock-in period of 15 years
• Proof of age if this detail has not been clarified earlier

For payment of death benefits under LIC Varishtha Pension Bima Yojana

The documents that need to be submitted include:

• Claim forms: These should be in a format specified by LIC
• Original policy document
• NEFT mandate form: Claimant should provide all necessary bank details including bank name, account number, account type, and IFSC code
• Proof of death or proof of title: Claimant can submit whichever document is applicable
• Proof of age: This is required if the proof of age of the pensioner is not mentioned under the policy

Introduction to Annuities

Annuities are payments received by the pensioner/investor for payment of a certain sum or sums of money over a prior period. Annuities help secure a continuous payment for a person that helps him or her to take care of their living expenses and other costs. In that sense, annuities can be compared to pensions, though, unlike pensions, you may opt to receive the annuity on different payout frequencies. For instance, under LIC Varishtha Pension Bima Yojana you have the option to receive annuities on an annual, semi-annual, quarterly, and monthly basis. You can choose a yearly payout for larger expenses that you need to pay such as tax, travel, home repainting, or repair. The half-yearly payouts can be used for similar larger expenses say traveling to children’s place twice a year if they stay in a different city. Similarly, you can choose quarterly or monthly payments.

You can also choose to receive annuities much earlier than the age from which pensions generally accrue. However, the regular nature of the payment means that people generally opt to use annuities as pensions when they have stopped working and there is no regular salary income.

1. How to Choose an Annuity

   There is a bewildering range of annuity options in the market including LIC Varishtha Pension Bima Yojana. The ones you choose will depend on a few factors such as your needs, the premium you can afford, the type of returns you seek, and so on. Let us look at some of these in brief detail.

2. Check your needs

   Your needs will determine how much of an annuity you will need. LIC Varishtha Pension Bima Yojana provides a maximum pension benefit of Rs. 60,000 per year or Rs. 5,000 per month. So, if your needs are higher, then you ought to ensure that you have alternative sources of income. You can opt for an immediate annuity plan from LIC like LIC Jeevan Akshay that will pay you additional income. If you are in the 20-50 age group, you can also put the money in pension funds in India like the PPF, EPF, NPS, etc. in addition to opting for mutual funds or postal pension schemes. You can buy a LIC Varishtha Pension Bima Yojana plan the next time it is re-launched.

3. Take into account possible increase in expenses

   Inflation will ensure that the real value of money will decrease over time. That means what you can buy today for Rs. 100 will be more than what you can buy next year for the same amount. In pension terms, it means that you will need more money to sustain your current lifestyle. Also, with retirement and age, certain expenses will increase. For instance, you may end up traveling more or will need more regular health checks. This will increase your monetary requirements and will increase your costs.

4. Take into account a possible decrease in expenses

   Just as you will factor in an increase in expenses, you need to deduce how much your cost of living will decrease. You may, for example, not have to pay off a house loan anymore. Other factors such as regular travel costs (from home to office and back) will reduce. You will also be eating out less as you will spend more time at home and will likely prefer a healthier lifestyle.

5. Give yourself some extra money to travel or entertainment

   As mentioned, give yourself some extra money for travel and entertainment. With the improvement in healthcare services and more awareness of health, people are opting for healthier living. This means you will be likely to be as sprightly at 80 as you are at 40 or 50. This may translate into more holidays and more entertainment expenses than when you are working. You may join clubs or sports or go for international holidays. Take these costs into account when you decide how much you need.

6. Healthcare costs are a big factor

   Healthcare costs are a big expense and with private care becoming more preferred due to the quality of services, these costs will only increase in the future. Everything from regular checkups to surgeries will be more expensive in the future. Take these factors into account when you choose an annuity plan like LIC Varishtha Pension Bima Yojana.

7. Don’t rely on a single source of income

   Experts suggest that people ought to have more than one source of income at old age to minimize risks. Accordingly, choose an annuity besides LIC Varishtha Pension Bima Yojana like LIC Jeevan Akshay. Also, save money for a pension over your working life in pension schemes such as PPF, EPF, and NPS, traditional life insurance endowment policies, mutual funds, and so on to make sure, you have multiple streams of revenue coming in.

LIC Varishtha Pension Bima Yojana -FAQs

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