LIC's New Pension Plus (867)

How the plan works

New Pension Plus is a unit-linked pension plan. In this policy, the investment risk in the investment portfolio is borne by the policyholder, and fund values can go up or down with the market. You choose a premium amount, a policy term and either single premium or regular premium. After deducting the premium allocation charge, each premium buys units in the fund you choose. Other charges are recovered by cancelling units or through the NAV.

There is a 5-year lock-in: you cannot fully or partly withdraw money during the first five years. Being a pension product, proceeds on vesting, surrender or complete withdrawal are paid as annuity, except for the portion that may be commuted. The plan can be bought offline through an intermediary or online at www.licindia.in.

Eligibility at a glance

Death benefit

If the life assured dies before vesting (including during the grace period), the nominee gets the higher of:

• the unit fund value on the date death is intimated, or
• the Assured Death Benefit: 105% of total premiums received, less partial withdrawals made in the two years before death.

The nominee can take the whole amount (with an option to receive it in instalments over up to 5 years) or use all or part of it to buy an immediate or deferred annuity.

Vesting benefit

At the end of the policy term, the unit fund value vests. You can:

• use the full amount to buy an immediate or deferred annuity from LIC, or
• commute up to 60% as a lump sum and use the balance to buy an annuity.

You may buy annuity from another insurer for up to the percentage allowed by the regulator (currently 50% of the proceeds net of commutation), informing LIC before vesting. If the proceeds are too small to buy the minimum annuity, they may be paid as a lump sum.

Guaranteed Additions (in-force policies only, added to the fund):

Guaranteed Additions are reduced proportionately after partial withdrawals, and are not paid on reduced paid-up policies.

Fund options

You can invest in one fund at a time and switch the entire amount between funds. Four switches per policy year are free; further switches cost ₹100 each. Discontinued policies are held in the Pension Discontinued Fund, which carries a minimum guaranteed interest rate as per regulations (currently 4% p.a.).

Charges

• Premium allocation charge (regular premium): Offline, annual premium below ₹50,000: 7% in year 1, 4.5% in years 2-5, 3.5% from year 6. Offline, annual premium ₹50,000 or more: 7%, 4%, 3%. Online: 2.5%, 1.5%, 1%.
• Premium allocation charge (single premium): 3.30% offline / 1.50% online in year 1; nil thereafter.
• Mortality charge: Nil.
• Policy administration charge: Deducted monthly in the first 5 years only. Regular premium: a small percentage of instalment premium, capped between ₹57 and ₹49 per month depending on the year. Single premium: ₹80 per month in year 1 falling to ₹67 in year 5. Nil from year 6.
• Fund management charge: 1.35% p.a. for all four funds; 0.50% p.a. for the Pension Discontinued Fund.
• Discontinuance charge: Applies only if the policy is discontinued in the first 4 years; nil from year 5.
• Partial withdrawal charge: ₹100 per withdrawal.
• Switching charge: ₹100 per switch beyond 4 free switches a year.
• Miscellaneous charge: ₹100 per alteration (e.g. change of premium mode).
• GST applies on charges. Charges can be revised within IRDAI caps with 3 months' notice.

Optional riders

No riders are mentioned in the brochure for this plan.

Loan, surrender & revival

• Loan: Not available under this plan.
• Partial withdrawal: Allowed after the 5-year lock-in, up to 3 times in the policy term, only for specified reasons such as children's higher education or marriage, buying or building a first house, critical illness treatment, disability expenses, skill development or starting a business. Each withdrawal is limited to 10%, 15% or 25% of the fund value depending on premium size, and cannot reduce the fund below one annual premium (regular) or 30% of the single premium.
• Surrender: Within the lock-in, the fund value less discontinuance charge moves to the Discontinued Fund and is used to buy an annuity (with commutation option) after the lock-in ends. After the lock-in, the fund value is used for annuity/commutation with no discontinuance charge. A surrendered policy cannot be reinstated.
• Discontinuance and revival: If a regular premium is not paid within the grace period during the lock-in, the fund moves to the Discontinued Fund and risk cover stops. After the lock-in, the policy becomes reduced paid-up. In both cases you can revive within 3 years from the first unpaid premium (or up to vesting, if earlier, after lock-in) by paying all due premiums without interest, subject to underwriting.

Other key terms

• Grace period: 30 days for yearly, half-yearly and quarterly premiums; 15 days for monthly (NACH).
• Free-look period: 30 days from receipt of the policy document. Refund is the fund value plus charges deducted, less medical costs and stamp duty.
• Settlement option: Nominee can receive the death benefit in instalments over up to 5 years; the money stays invested at the nominee's risk.
• Extend vesting date: Allowed if you are below 60, the request is made before the original vesting date (at least 3 months before), and the total term does not exceed 42 years.
• Compulsory termination: After 5 years, if the fund falls below one annual premium (regular) or 30% of single premium, the policy is terminated and proceeds used as per annuity options.
• Suicide: Within 12 months of start or revival, only the fund value is paid.