LIC Jeevan Shanti Annuity – Should You Buy

Often, new products from LIC are widely promoted. This has been the case with the new Single Premium Annuity Plan – Jeevan Shanti. This is billed as a non-participating, non linked plan – which has to be the case with annuity plans. A key feature of the plan is the deferred annuity option. In this short article we would look at the major features of the plan and suggest situations where this plan is useful.

Annuity Plan

An annuity plan provides periodic, steady income over many years. This article provides an introduction to annuity plans and where it can be used. Annuity Plans

Many insurance companies in India provide annuity plans. LIC too has sold the popular Jeevan Akshay VI plan for many years. Jeevan Shanti provides many of the features found in the other annuity plans. It also has some additional features that could make it a better choice in some situations.

There are a variety of pension plans sold in India. Some of these are billed as providing deferred annuity. This can be confusing to buyers. For appropriate comparison, we would consider only Single Premium plans – these are the truest forms of Annuity Plans. You ‘buy’ the plan with single, large, payment; you then receive annuity based on the options chosen by you.

Most of the pension plans in India require periodic purchases over many years to build up a corpus. At the end of the ‘term’, the corpus is used to actually buy a Single Premium annuity plan.

Jeevan Shanti – Special Features

• Deferred Annuity – For LIC, the biggest feature is the deferred annuity option. The start of the annuity can be deferred by a maximum of 20 years. The annuity amount is guaranteed at the time of purchase. During the deferment period, the corpus accrues guaranteed additions.
• Annuity for two generations – Unlike many other plans, Jeevan Shanti permits the joint life (basically the second beneficiary of the plan) to be children or grandchildren. (The minimum age of 30 applies to joint life too.)  So a 55-year old person can buy the plan to get annuity plan for herself and her child.
• Incentive for larger corpus – The annuity rate is higher if the purchase price is 25 lacs or more. A corpus upto 15 lac can be used for PMVVY that has better returns. Jeevan Shanti then becomes more attractive for larger corpus.
• Discounts for online and NPS –  The annuity is 2% higher for NPS subscribers and online purchases.  (If you wonder about the connection between this plan and NPS, you have not yet looked at the catches in NPS!)

Suitability

Some of the special features of this plan have been noted above. However none of them make this plan a better option compared to other non-annuity products – e.g SWP from mutual funds, Fixed deposits, etc.  For people who have to buy annuity plans (and this includes NPS subscribers) this plan has some interesting features that make it better than many other plans. Before deciding on the plan, you should ask the company about the specific annuity rates applicable to your situation – purchase price, age, annuity option, etc. Unlike many private insurers, LIC does not provide online calculators for annuity plans.