LIC's new pension product: Added benefits, but return-generating ability limited

MUMBAI: The country's largest life insurer LIC has recently announced the launch of a traditional pension plan New Jeevan Nidhi. It comes with single as well as regular premium options.

The key difference between LIC's existing conventional pension plans and the new one is the guaranteed addition of Rs 50 per thousand sum assured for the first five years. From the sixth year, the policyholder will be entitled to bonus that may be announced by the life insurer. Policy tenure offered ranges from five to 35 years, while the minimum sum assured under the policy is Rs 1 lakh. Those between the ages of 20 and 60 years can buy this policy. At the time of vesting, you can use the corpus to buy immediate annuity or a single premium deferred pension plan from LIC.

Upside: While New Jeevan Nidhi is similar to LIC's other traditional pension plans in structure, the guaranteed addition at the rate Rs 50 per thousand sum assured for first 5 years is a plus.

Downside: Financial planners do not recommend debt-oriented instruments like traditional pension plans for creating a retirement corpus as their return-generating capability is limited.