A pension scheme for the self employed, professionals and the salaried class.

One needs to make financial provisions to cover both - the risk of dying early as well as the risk of living too long. Statistics prove that with increased longevity, a man's retired life today is nearly half of his active life. LIC's pension plan Jeevan Suraksha helps ensure a pleasant and self-reliant life, even after retirement.

PLAN TYPE

Jeevan Suraksha is available in three types to suit individual needs

1. Pension with life cover
2. Pension without life cover
3. Pension with endowment type

PENSION OPTIONS

The Pension will be payable monthly starting at the end of the chosen deferment period (waiting period) as per the option exercised by the purchased in all the above types of Plan. The following options are available in the plan.

• Life Pension
• Guaranteed Pension
• Pension with return of Purchase price *

Life Pension

Pension for life during the life time of the purchaser.
Pension to the purchaser for his/her life time. If the purchaser dies after the commencement of the pension, the spouse (nominated by the purchaser) will be paid pension at half of the rate during his/her life time.
Pension for life time to the purchaser; purchase price will be returned to the legal heirs/nominee on death of the pensioner.

BENEFITS UNDER DIFFERENT PLAN TYPES

Benefits under plan with life cover

On vesting date( at the time of start of pension)

1.Option to commute 25% of the notional cash option including terminal bonus, if any, free of tax.
2.Pension as per the option selected on the balance notional amount, if commutation is exercised; otherwise full pension.

On death of the purchaser (before the end of deferment period)

The spouse will be eligible for a life pension with a guarantee period of 15 years. The amount of pension will be a minimum of 50% of the target pension. The percentage can go upto 95% depending upon the duration of the policy at death, age of the proposer at entry, deferment period, etc.

In case there is no spouse named by the purchaser to receive the pension, a lumpsum amount known as the proportionate notional cash option will be payable to the nominee.

Benefits under plan without life cover

On vesting ( at the time of start of pension)

1.Option to commute 25% of the notional cash option including terminal bonus, if any, free of tax.
2.Pension as per the option selected on the balance notional amount, if commutation is exercised; otherwise full pension.

On death of the purchase ( before the end of the deferment period )

Duration at Death Benefit Payable to nominee/legal heir

Terminal Bonus under Plan Types (A) and (B)

One-time bonus, if any, will be attached to the notional cash option at the end of the deferment period under without and with life cover plans.

Benefits under endowment type

On vesting ( at the time of start of the pension )

1.Option to commute 25% of the basic sum assured together with Guaranteed addition and loyalty addition, if any , free of tax.
2.Pension as per the option selected; on the balance amount, if commutation is exercised, otherwise full pension.

On death of the purchaser (before the end of deferment period)

1.The spouse can exercise an option to commute 25% of basic sum assured and accrued guaranteed addition , free of tax.
2.The remaining basic sum assured and accrued guaranteed addition , if commutation is exercised; otherwise full amount will be utilized to purchase pension for spouse as per option selected.
In case, there is no spouse named by the purchaser to receive pension, all the benefits will be payable in lumpsum to the nominee.

GUARANTEED ADDITIONS

Guaranteed Additions at the rate of Rs.75 per thousand of the basic Sum Assured will accrue at the end of each policy year for which premiums are received and shall get attached to the Endowment type plan.

LOYALTY ADDITION

Based on the results of actuarial valuation also an additional amount called the Loyalty Addition, if any, declare by the Corporation on the expiry of the deferment period, shall become payable provided the policy is in full force. This benefit is available only under the Endowment type.

OTHER FEATURES

• Contributions under Jeevan Suraksha upto Rs.10,000 p.a. will be eligible for tax exemption under Sec. 80 CCC(1) of the Income Tax Act, 1961.
• Commuted value upto 25% as allowed under the plan is free of tax.
• PLAN PARAMETERS

Note : Option for single premium is also available under without life cover plan with minimum entry age of 30 years.

Life Insurance Corporation: Frequently asked questions by Non-resident Indians

The Central Government has established the Public Provident Fund for the benefit of the general public to mobilize personal savings any member of the public (whether a salaried employee or a self-employed person) can participate in the fund by opening an PPF a/c in a post office, any branch of State Bank of India or its subsidiaries or in specified nationalized bank. A PPF account can also be opened by NRIs.

• A minimum of Rs 100 per year and a maximum of Rs 60,000 per annum can be deposited in this account.
• The PPF Account carries a compound interest at the rate of 9.5 %, p.a.
• The accumulated sum is repayable after 15 year.
• Conditions apply to the withdrawal of money during the period of 15 years. Withdrawal of money from the PPF Account can be made only after the 5th year. Thereafter for each subsequent year one single withdrawal is permissible. The amount that can be withdrawn cannot exceed half of the balance at the end of the 4th year immediately before withdrawal or at the end of the preceding year, whichever is lower.
  Calculate your Returns-PF Calculator

An investment of Rs 10,000 every year for the next 15 years, is made in the PPF account, it will mature after 15 years at Rs 308520.00.

Notes:
Interest is totally exempt from income-tax under section 10 (15)(i) of the Income Tax Act, 1961.

1. A PPF Account can be opened for a minor son/daughter and spouse; amount deposited.
2. An individual falling in the high income bracket can deposit a maximum of Rs 60,000.
3. Section 88 confers tax rebate at 20 pc of one's contribution to various specified investments, PPF being one of them.
4. There is no tax liability at the time of withdrawal.
5. The account holder may opt for continuing the account for a further block period of 5 yrs at a time (obviously he / she will need to continue to deposit money every year for these five years also).
6. Finally, the balance in the PPF account cannot be attached even under decree of court.

There’s still some hope left — the Public Provident Fund (PPF) scheme remains the best investment option. Reason: the 9 per cent tax free return, which no other instrument today provides in the market. So, even if you are in the highest income bracket, don’t lose putting that Rs 60,000 every year.
While the post-tax returns on income funds would currently range between 7-8 per cent, RBI bonds would provide you with 8 per cent. On the other hand, bank fixed deposits would fetch you just 5-6 per cent post-tax. This makes PPF the favourite by a long shot. The only compromise an investor has to make while investing in PPF is liquidity. But, then, you have to pay some price for getting better returns.
Although the budget has partially taken away benefits under Section 88 from PPF investments, the interest income on PPF continues to remain tax-free. On the other hand, it has brought dividend income from companies and mutual funds under the tax purview.
Also, according to the new norms, the administered interest rates on small savings like PPF will now be benchmarked to the average yields of government securities of equivalent maturity. The average yield of 10-15 year government paper during 2001-02 is in the range of 8.5 per cent.
As the interest rates on small savings need to be fixed at half a percentage point above the yield on securities of equivalent maturity, the returns on PPF are now fixed at 9 per cent. This would be reset annually.
Even without taking into consideration the Section 88 rebate, the current 9 per cent tax-free return works out the highest among all categories of instruments. This is applicable not only for the person earning less than Rs 1.5 lakh (getting the maximum Section 88 benefit) but also an individual who falls in the highest income bracket of above Rs 5 lakh and gets no benefits at all.
The reason — every extra rupee of interest earned by him would be subject to a 31.5 per cent tax which would bring down the post-tax return substantially.
So, while the person in the highest income bracket has every reason to think that he should not invest in PPF as there is no Section 88 benefit, the stark reality is that there is no instrument in the market can still match a 9 per cent tax-free rate of PPF.
The returns on bank deposits for a five-year term currently stand at around 8 per cent. For the individual in the 31.5 per cent tax bracket (including surchage of 5 per cent), the effective yield on the deposit works out to 5.5 per cent while for a person in the 21 per cent tax bracket, the yield works out to 6.32 per cent. Likewise, the post-tax rates on the post offcice monthly income scheme for an individual in the 31.5 per cent slab works out to 6.2 per cent. If one goes for income funds, the dividends received would be taxed as per the income slab of the investor. Even if one opts for the growth option, one still cannot escape the 10 per cent capital gains tax.
Assuming income funds are able to generate a return of around 8-9 per cent, looking at the current interest rate scenario, the post-tax return would work out to a lower 7-8 per cent
Single premium policies, the nearest competitors to PPF, are also not that attractive post-budget, largely because of a 5 per cent service tax imposition. The returns on these policies have gone down substantially after imposition of the tax.
In case of Bima Nivesh, the premium on a 10-year policy for say Rs 1 lakh would work out to Rs 89,781 against Rs 85,506 earlier. This has bought down the return from 7.93 earlier to 7.4 per cent now. But it’s still nowhere close to PPF returns.

TREAT INSURANCE AS JUST THAT : A LIFE COVER

Not as a nest egg for retirement or as a tax saving instrument. Life Insurance Corporation (LIC) sells a few plans, such as Jeevan Dhara, Jeevan Akshay and Jeevan Suraksha, as savings plans for retirement. The cover in all these schemes has two components - a monthly pension and a guaranteed lump-sum payment in the event of the insured person’s death. In other words, interest and return of capital. You have several options within each scheme, with minor variations in the design of pension periods and life cover. In some plans, LIC offers pension for life but gobbles up the capital.

You may also choose a plan without a life cover, offering only a pension. Should you go in for one of these? Not really, if your objective is to save, since the returns on these plans are unattractive compared with what you might get elsewhere. Consider this. Jeevan Suraksha, for example, has five options. The minimum age of entry to the policy is 25 years and the maximum, 60 years. You can opt to receive pension when you turn 55. Tax breaks are available under section 80 CC of the Income Tax Act on contribution to the pension plan.

But the pension itself will be fully taxable. If you are in the 30% tax bracket and set aside Rs 250 a month in Jeevan Suraksha, it amounts to investing Rs 175 a month, allowing for the tax break. This, over 30 years, according to LIC’s tables, will grow to a corpus of Rs 5.84 lacs, without a life cover and even less with one. On this capital, LIC pays about 13% a year as pension, fully taxable. If you check out the public provident fund, the Unit-Linked Insurance Plan of the Unit Trust of India and systematic investment plan of a good mutual fund, you will find the return at least two-three percentage points higher.

This reasoning holds good for other saving plans in LIC’s bag, too, like Jeevan Balya and Jeevan Sukanya meant for children’s future needs. A similar logic applies to the tax breaks you get in opting for a life cover. Whatever cover you go for, you will get some tax break anyway. And the maturity amount, if you survive the full term of the policy, is exempt from income tax. But treat these as incidental.

Not as a nest egg for retirement or as a tax saving instrument. Life Insurance Corp (LIC) sells a few plans, such as Jeevan Dhara, Jeevan Akshay and Jeevan Suraksha, as savings plans for retirement. The cover in all these schemes has two components -- a monthly pension and a guaranteed lump-sum payment in the event of the insured person's death. In other words, interest and return of capital. You have several options within each scheme, with minor variations in the design of pension periods and life cover. In some plans, LIC offers pension for life but gobbles up the capital.

You may also choose a plan without a life cover, offering only a pension. Should you go in for one of these? Not really, if your objective is to save, since the returns on these plans are unattractive compared with what you might get elsewhere. Consider this. Jeevan Suraksha, for example, has five options. The minimum age of entry to the policy is 25 years and the maximum, 60 years. You can opt to receive pension when you turn 55. Tax breaks are available under section 80 CC of the Income Tax Act on contribution to the pension plan.

But the pension itself will be fully taxable. If you are in the 30% tax bracket and set aside Rs 250 a month in Jeevan Suraksha, it amounts to investing Rs 175 a month, allowing for the tax break. This, over 30 years, according to LIC's tables, will grow to a corpus of Rs 5.84 lacs, without a life cover and even less with one. On this capital, LIC pays about 13% a year as pension, fully taxable. If you check out the public provident fund, the Unit-Linked Insurance Plan of the Unit Trust of India and systematic investment plan of a good mutual fund, you will find the return at least two-three percentage points higher.

This reasoning holds good for other saving plans in LIC's bag, too, like Jeevan Balya and Jeevan Sukanya meant for children's future needs. A similar logic applies to the tax breaks you get in opting for a life cover. Whatever cover you go for, you will get some tax break anyway. And the maturity amount, if you survive the full term of the policy, is exempt from income tax. But treat these as incidental.

There is none. When you scout around for the right life insurance policy, your insurance agent will try to convince you about the merits of going for one with profit, a policy that offers a `bonus'. Remember, the agent is only trying to increase his income. A `with-profit' policy will cost you more. Since the agent's commission is worked out as a certain percentage of your premium, he is obviously interested in selling it to you to earn a few more bucks. But is there any profit to be made?

Let's check it out with an example. You are 20 and want to invest in a `with profit' endowment assurance policy. You want to take a cover of Rs 1 lacs for 25 years. Your annual premium will work out to be Rs 3,746. This is about Rs 1,770 more than what you would pay on a `without profit' policy. In 1997-98, LIC's bonus rate on an endowment policy for 25 years was Rs 71 (on every Rs 1,000 of the sum insured). This means, on maturity of the policy, you will earn Rs 1.78 lacs (Rs 71 x 100 x 25) as bonus.

But remember, you will have to pay an additional Rs 1,770 a year over the normal premium for 25 years to earn this. If you invest this amount elsewhere at a 12% return, you will earn about Rs 2.64 lacs at the end of 25 years. So, a bonus tag in a policy will fetch you Rs 86,000 less than what a conservative investment would earn. Doesn't it make sense to prefer a low-premium policy?

You can't afford to forget about life insurance, just because you have taken a life insurance policy. It's only too tempting to do so, particularly if your bank deducts premium regularly from your account and sends it to LIC. Since life insurance is a long-term product, over the years, you might get so used to this routine deduction that you may tend take it for granted and ignore reviewing life insurance cover in your financial planning exercises in the future. Assumptions concerning the financial needs of your family, the state of your health, anticipated inflation rate and the financial performance of your other investments may all change a few years later.

You must remember that these are variables and are closely linked to your risk cover. Ideally, you should review your life insurance cover every year and check whether any of these variables has changed. Also, an increase in the number of dependents in your family on your income is going to raise the stakes. For example, if you had one child when you took an insurance policy but now have another, you may have to rework the numbers and take an additional cover.

Right now, you have no option but to go to LIC if you want to take a life cover. Lack of competition has had a damaging effect on LIC's functioning. Consider this. An average Indian lives much longer today than he did two decades ago. This means that he should pay less for a life cover since the chances are that he will live longer than he did back then. But on a whole range of policies that LIC offers, there has been no change in premium rates since 1980, when mortality tables were last computed on insured lives. There has been some tinkering in bonus rates but not at regular intervals.

In life insurance, the consumer is certainly not the king. Moves to let the private sector and foreign firms into the insurance sector have been repeatedly aborted. But it is almost certain that they will get in -- if not today, certainly tomorrow. When that happens, you will not only have new insurers but also more products to choose from. Even LIC's own service standards may improve. Premium rates may be realistically revised. Chances are that all this will happen within the next two years, if not earlier. If all your insurance needs are tied up by then, you won't have any room to manoeuvre and you won't benefit. A tip: keep some portion of your insurance risk uncovered so that you will be able to dictate terms to insurers who will be competing to woo you.

The ultimate beneficiary of your insurance is not you, but your dear ones. They should know what you have done for them. Share the details. Consult them when planning a policy. Leave clear instructions about your policies and, more important, let your spouse know where you have kept the papers. Inform your family of its rights. For example, LIC is expected to settle a claim within six months of someone filing it. Your kin will thank you for making your death a non-event for them, at least financially.

REVIEW YOUR INSURANCE NEEDS REGULARLY

You can’t afford to forget about life insurance, just because you have taken a life insurance policy. It’s only too tempting to do so, particularly if your bank deducts premium regularly from your account and sends it to LIC. Since life insurance is a long-term product, over the years, you might get so used to this routine deduction that you may tend take it for granted and ignore reviewing life insurance cover in your financial planning exercises in the future. Assumptions concerning the financial needs of your family, the state of your health, anticipated inflation rate and the financial performance of your other investments may all change a few years later.

You must remember that these are variables and are closely linked to your risk cover. Ideally, you should review your life insurance cover every year and check whether any of these variables has changed. Also, an increase in the number of dependents in your family on your income is going to raise the stake. For example, if you had one child when you took an insurance policy but now have another, you may have to rework the numbers and take an additional cover.