LIC Guaranteed HNI Pension Plan

7/27/2019 LIC Guaranteed HNI Pension Plan

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Bhushan Sheth



Immediate Annuity : Invest One time, Pensionfrom next year◦ Pros : Fixed Pension Rate (Currently 7.4%)

◦ Cons : Taxable Annuity

Deferred Annuity : Invest for 20 Years,Commutation and Pension after 20 Years◦ Pros : Deferment allows building of corpus

◦ Cons : Pension Rate applicable will be market rate

applicable 20 years hence; Taxable Annuity



This is India’s one and only Deferred PensionPlan with a Guaranteed Pension rate

Pre Tax Pension rate works out to be as highas 9% (depending on age and amount of investment), but it is fixed for lifetime

Best suited for HNIs in age group of 35-45looking to invest for 15-20 years

Plans offer commutation, Lifetime Pension,Lifetime Insurance and further variablebenefits (Lifetime = Up to age 100)



Age 40, Face value of plan : 5 Crores Premium : 24.11 Lacs payableannually for 20 years

Lets understand the following threepoints:◦ Maturity and Pension

◦

Insurance Benefits◦ Exit Clause



1. After 20 Years : Commutation of 5 Crores

(Variable and Tax Free) PLUS

2. From 21st Year : Lifetime Pension of 27,50,000 p.a.(Guaranteed and Tax Free) PLUS

3. From 21st

Year : Lifetime Insurance Cover of 5 Crores(Guaranteed and Tax Free) PLUS

4. From 21st Year : Increase in Lifetime Insurance Cover of 10%every 10 years (Variable and Tax Free)

5. Consider the scenario where if you re-invest 5Crores fromPoint1 and earn additional pension of at least 20Lacs p.a. : willmean your total pension will be about 48Lacs p.a. i.e. 4Lacs permonth (Assumed Pension Rate of 4%)



During the premium payment phase:◦ 5 Crores (Guaranteed and Tax Free) PLUS

◦ Annualized Portion of Point 1 (i.e. 25Lacs p.a.)(Variable and Tax Free)

During the pension phase : As per point 3 & 4of previous slide



Exit during Premium payment phase:◦ 1st to 3rd Year : Zero Value

◦ 4th to 7th Year : Loss Making Value

◦ From 8th Year : Approximate Proportionate Value

From 4th Year : Either liquidate OR Reduce Face value

Exit During Pension Phase:◦ Relinquish benefits under point 2, 3 & 4 of Pension and

Insurance Benefits◦ Get a Settlement Value of 4.5 Crores

(Guaranteed and Tax Free)◦ Partial Exit possible



Investment : 24.11 Lacs p.a. for 20 Years =4.82Cr.

Returns (assuming human life as 90):◦ After 20Yrs : 5 Crores

◦ Pension for 30Yrs : 8.25 Crores

◦ Insurance at age 90 : 6.5 Crores

◦ Total : 19.75 Crores

Yield : Min 6.2% Tax Free

Thus a pre tax rate of 9% is achieved



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LIC Guaranteed HNI Pension Plan