LIC New Jeevan Nidhi Review – Pension with Tension

By
Hemant Beniwal
37

LIC, much like in the past, have started rolling new products in the last few months of financial year. This time it has launched a deferred traditional pension plan LIC New Jeevan Nidhi. Although, changes in pension plan norms by IRDA have deterred many private companies to enter in this market, LIC has continued with its trend. The new product very well complies with these norms and so is assumed to be more cost effective now. But traditional insurance plans have been in the news for their lower returns and so it will be wise enough to review LIC New Jeevan Nidhi before making a decision.

Below are the new norms which IRDA has stipulated in pension plans-

  • A pension plan may have a life insurance cover i.e. the option to include rest with the company
  • There has to be a minimum guarantee in the plan for death benefits or surrender
  • The policyholder will have to compulsory buy the annuity from the same company

Let see how LIC Jeevan Nidhi fares after meeting these criteria.

LIC New Jeevan Nidhi – Basic Features

Minimum Entry Age 20 yrs
Maximum Entry age 60 yrs
Minimum Vesting age 55 yrs
Maximum Vesting Age 65 yrs
Minimum SA Rs 10000 for regular premium
  Rs 15000 for single premiums
Maximum SA No Limit
Policy term 5-35 yrs
Premium Payment Monthly/Qrtrly/Half Yrly/Yrly/Single
Rebates 1-5% as per mode of premium or SA limit

Benefits Payable in LIC Jeevan Nidhi

Payable to Policyholder/Nominee Options to the Policyholder/Nominee
On Vesting SA + Guaranteed Additions + Revisionary Bonus + Final Bonus (If any) 1. Purchase an Immediate Annuity2. Purchase a new single premium deferred pension plan
On Death First 5 years- SA + Guaranteed AdditionsAfter 5 years- SA + Guaranteed Additions + Revisionary Bonus + Final Bonus (If any) 1. Lumpsum2. Annuity3. Lumpsum & Annuity

Guaranteed Additions– LIC has kept guaranteed additions only for first five years and at the rate of Rs 50 per thousand in Jivan Nidhi

Bonuses- Since there is guaranteed additions for first five years, the bonus i.e. participation in profits starts from 6th year and paid as per the policy terms

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Surrender Value in case of LIC New Jeevan Nidhi

LIC, much like in other products, offers here also either a Guaranteed Surrender value at 30% of all paid premiums   or a higher special surrender value as per its discretion. The only difference in this product is that guaranteed additions are also paid along with this surrender value and the company gives an option to the policyholder to utilize these proceeds to purchase an annuity (Immediate or Deferred).

What You Actually Earn in New Jeevan Nidhi ?

Returns

The net returns in traditional products are lower or at best equals inflation due to the cost associated. In this product also the net yield to investors is not very high which is surely a deterrent for accumulating a good corpus.

IRR as per LIC New Jeevan Nidhi Illustration

LIC Jeevan Nidhi

Annuity – Final Destination

Since the new norm specifies that the annuity will have to be purchased from the same company, LIC has illustrated the annuity received by any policyholder on basis of today’s rate.

To Learn More about Annuity Concept Read: LIC Jeevan Akshay VI – Immediate Annuity Plan

Annuity payable for life based on above illustrated corpus at vesting age

Corpus Annual Annuity Payable
125000 11688
233500 22533

These are the current annuity rates of LIC immediate annuity product Jeevan Akshay VI

Age last
birthday		 Yearly annuity amount under option
( i ) ( ii ) (15 years certain) ( iii ) ( iv ) ( v ) ( vi ) (vii)
30 7190 7160 6890 5250 7080 6970 6860
40 7510 7440 6930 5610 7310 7120 6890
50 8140 7950 7000 6280 7760 7420 6930
60 9350 8790 7110 7530 8640 8030 7010
70 12080 9830 7260 10220 10560 9370 7130
80 17880 10440 7480 15890 14600 12340 7290

Should you Consider LIC New Jeevan Nidhi?

The product fails to attract due to below facts:

  1. The net return to the policyholder is not even matching inflation of 7% which has been the case with most traditional products. Isn’t it a much higher risk than investing in equities through SIPs where you are able to generate returns higher than inflation? Now a product like NPS have much higher flexibility and possibility of generating superior returns when compared with any traditional pension plan.
  2. The annuity rates will change and there may be companies which may offer higher. You would like to avail the maximum and so a boundation from the same company may end up with dissatisfaction in later years.
  3. The annuity rates shown in the tables consider that the pension is given to the policyholder only and no return to the nominee/spouse after his/her death. These will lower down if any such option is availed. Also, these rates are higher at higher age and so any selection of lower vesting age will lower the annuity amount substantially.
  4. Higher life coverage add to the mortality cost.  If one has a term insurance then this feature actually is an additional expense one is paying to lower the accumulation.
  5. To differentiate the product from other companies, LIC has introduced many options like buying another deferred pension plans even from the surrender value. All such options fail to attract when the accumulation is not enough to meet the retirement years growing expenses.

Retirement years are golden years of life where you aspire not to work and spend more time in social activities or with grand-children’s. For this achieving financial independence is very important and it very much hinges on how much you are able to accumulate for your post retirement needs. A long deferred period needs the exact identification of the requirement first. Then only you can evaluate an alternative to see whether it matches yours needs. LIC is surely the brand name but weigh your options efficiently before you get attracted to the fancy names of any product.

Review of LIC Jeevan Nidhi is done by Jitendra PS Solanki, CERTIFIED FINANCIAL PLANNERCM – the views expressed herein are the author’s personal views.

If you have any questions related to pension products or any other insurance policy – feel free to add in comment section.

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37 COMMENTS

  1. Thanks Jitendra for contributing this review.
    I expect there will be lot of queries on this post as there is lot of confusion around pension products – due to new IRDA guideline.

    • Thanks Hemant for sharing the review with Tfl readers.

      Yes, there has been lot of frequent changes in Insurance Industry which has actually increased the confusion among the investors.I will be happy to answer readers queries on this issue.

  2. As of now all private insurance companies are dumping their annuities with LIC once it becomes due. IRDA has mandated that the annuity would be provided only by the accumulator of funds. It would a policy feature of all future annuities.

    • Hi Priya,

      Yes you are right, as per new regulation the company which offers a pension plan will also have to provide the annuity to the policyholders. Previously after accumulation, the companies were giving an option to policyholders to buy annuity from any company.This translated to purchase of immediate annuity products which only LIC had.
      But now one can expect more annuity products even by the private companies. Already, Star Union Daichi and SBI Life has come out with their immediate annuity products.

  3. Hello Jitendra & Hemant,
    I’ve just invested in the LIC Jeevan anand policy (T/T-149). The term of the policy is 16 years and the maturity amount after 16 years would be around 20 lac (approx.) and life coverage for whole life. If I opt out from the life coverage thing, then an additional 9 lac will be paid by LIC. The policy amount is of 10 Lac. The yearly premium is around 72k for this.
    I would like to know if this is a good investment or there similar investments better than this. I’m more interested in having a lump-sum amount instead of pension.
    Thanks,
    Sandipan.

    • Hi Sandipan,

      In a traditional insurance plan the premium policyholder pays is invested majorly in debt securities after deducting various charges such as agents commissions. The returns generated from this segment forms the basis of bonus declared by the company.

      Now debt segment do not generate higher returns and factor in the charges deducted, the traditional insurance plans end up fetching 5-6 % returns to the investors. Jeevan Anand is also a traditional plans and you should not expect higher returns from this product.The problem here is inflation which is hovering around 7%. So if you do not get returns higher then this then you actually loose money and do not gain.

      Analyse your investments in the same manner. For investments which can negate impact of inflation in the long term and grow your money, equities is the most viable option. You should consider investing through Mutual Funds where you can create a well diversified portfolio.

  4. Hi Hemant/Jitendra,

    Lets say that Jeevan Nidhi has pile of stiffness, and surely after retirment we will be looking for handsome pension(which at least beat the inflation) and not the tension 😉 … Considering some one has already a Term plan and he is a regular investor in Mutual fund , which pension plan(s) you would recommend for your reader ..

    • Hi Satya,

      Unfortunately there is dearth of pension plans now.After IRDA regulations not many companies have come out with such products. But even the products now are not meeting the investors requirement.Hence, they do not come in recommendation list.
      The most viable alternative is what you have highlighted– a term plan for family protection and mutual funds for accumulation. For receiving an annuity the immediate annuity products are there but they too have lower rates and are not indexed to inflation. Include taxation and it is difficult to rely on them.

      With such scenarios one has to look for creating a retirement portfolio from different options which not only provide the desired income but also takes care of inflation and taxability.

  5. Hi … thanks Jitendra P.S.Solanki and Hemant Beniwal for your valuable information about new product in pension plan. I am regular reader of tflguide. Its very useful to me to learn new things every day. you are doing a very great job.

    1.Can you review and post some best pension plan available in the market?. Its very useful for less salary holders as well as new readers.

    2.Can i use pension plan as debit side of 25% rest 75% in equlaities(Mutual fund,SIP,EFT Gold etc?.

    3.Can you clarify me , all the product in pension plan will meet inflation rate?.

    • Hi Muhil,

      There are not many pension plans now after change in IRDA regulation. The best product which comes closely for lower salary individuals is NPS. But then it is also targeted at for accumulation for which it has mix of equity & debt.You can create the same discipline through mutual funds like you have mentioned 25:75.Still, automatic asset allocation in NPS works well for people who find it difficult to implement asset allocation strategies and rebalancing.

      So you have options to accumulate for your retirement but the real challenge is post retirement income.Fixed Annuities are not offering those inflation indexed rates and they are taxable to.So one has to look at mix of options where most part is variable. Hopefully for people who have still good enough time to retire, there might be options in future which will provide annuities taking care of the factors I have mentioned.

  6. Hi Hemanth,

    Nice Post.

    It would be helpful for everyone if you could list out the best pension plans available in the market.

    • Hi Kalyan,

      After IRDA changes, there are not many now to prepare a list. Moreover, pension products have not been able to meet the expectations.

  7. Hi Jitendra,

    Based on my understanding of your review and reader comments, I feel NPS would be good option to think for ones pension as it invests in equity and has the potential to beet the inflation…at least by 2 – 5 %.

    Regards,
    Pavan

    • Hi Pavan,

      Yes, in comparison NPS is much more cost efficient product.However, the commutation at vesting age is still not tax free in this although there is every possibility of government improving upon it.

  9. Thanks for the very informative article Mr. Solanki. I have a couple of queries:

    1) I am 40 and want to have a fixed pension of about rs 60000 per month after reaching 60. Would you advise J/Nidhi or J/Akshay or any other safe investment from the market?

    2) Are these policies market-linked? I do not want to reach a stage wherein after retirement I am left with NIL pension currently I have no pension arrangments).

    Thank you for your time.

    • Dear Mr. Sameer,

      You have still twenty years to go. Any pension you receive from these product will depend on the amount you are able to accumulate.Higher the amount, higher will be the pension. These are immediate annuity products and so there is no accumulation period. Also, these are not market linked but the rate of pension may vary when you actually buy the annuity from the company.
      It is difficult to assume a single product for meeting your retirement needs. you might have to go for combination. At this juncture you should focus on accumulating the surplus because that’s the key for receiving the pension you desire.So work on your existing investments by allocating the required savings in the right assets classes and once you reach your retirement you can then evaluate options for the income you need.

    • Hi Kaushal,

      There is no such best plan. Any product which meet your financial objectives will be the best plan for you. You need t work on your requirement and then analyse how a particular product fair in meeting it. If it doesn’t then good to avoid it.

  11. Thank you very much for your informative article…

    I am very much interested to know your view about LIC’s Jeevan saral policy. As per their brochure it is showing 10% IRR. It would be helpful for everyone if you could post a review about Jeevan Saral policy in this website.

    • Dear Sher_bin,

      Will look into the product. But prima facie a 10% IRR in a traditional product is difficult to achieve considering the nature of investments and expenses associated with it.

  12. Hi… Hemant & Jitendra…

    I like your this post. I regularly advice my client that do not purchase any profite return insurnace policy, instead of this type of policy you may go to buy any term policy and invest rest of funds in PPF, post or go for any bank FD. You must got more return. By all of your article you give good detail idea about this…

    Thanks

  13. Dear sir

    i’m 30 years old male earn Rs 40000 per month lives in Haldwani (Nainital) need to invest in pension plan for my later years. could you please suggest me which pension plan is best suited for me. i’m little bit confuse between SBI saral pension plan and LIC new jeeven nidhi.

    Thanks
    Varun Kumar

    • Varun,

      Unfortunately pension plans are not attractive enough after IRDA new norms. At present you should focus on accumulation for which mutual funds, PPF are good alternatives. Once you reach the desired retirement you can then choose options for generating monthly income for meeting your need.

  14. hi ,Mr. Jitendra,
    i am 39 king in working in private sector , looking for guarranted pension plans in market so that i can get decent pension of 30-40000 at age of 60. i have checked LIC jeevan nidhi ,ICICI,etc. can you tell whether LIC jeevan nidhi is guarranted pension plan i.e annunity @7% ,suppose i buy today ,that i will get at age of 60 or it will depend on the rate prevalent at age of 60.
    also what pension plan should i buy from plans in market.

    • Rakesh,

      Annuity which you will receive at age 60 will depend on the rate prevailing at the point of time. In my view you should focus on accumulation at this stage as the amount of pension you receive will very much depend on what corpus you are able to accumulate. For this you should look at mutual funds, PPF etc. for investing for your retirement corpus. Have a mix of equity and debt as per your risk tolerance so that you are able to generate returns on your investment which can beat inflation.
      Once you reach the desired retirement you can then evaluate options for generating monthly income.

  15. I have nirvana plus _Retirement policy in TATA AIG LIFE.
    On reading the earlier mails l am confused about continuing my pension plan.It’s rs.4,00,000/-policy where I pay rs.15,798 semi annual.I have paid for 9years.I am yet to pay for 11 more years ,when I will be 60years.
    I am a rheumatoid arthritis patient. Kindly guide me with your esteemed suggestions.

    • m.thilakavathy,

      You have already covered almost half of your policy term. At this juncture it will be difficult to discontinue with such policy. In my view you continue with your existing policy. But you should also evaluate your exact requirement. This will tell you if there will be any shortfall. If any cover it up by investing in mutual funds and other avenues. On reaching your retirement you can then choose options to generate monthly income.

      With regards to your illness it wont have impact on your existing life insurance policy.

  16. Sir,
    I am very much impressed by your reviews. Can you please suggest best endowment plan to my 6 year old daughter?

    • Anees,

      Endowment plans have issues with the net returns they offer to the policyholders. If you are looking for investments then choose mutual funds or any other avenue which can offer better returns, For insurance a term insurance can meet the objective of having a higher coverage at lowers cost.

  17. Hello Sir,
    In Feb 2011 I took this Jeevan Nidhi(old) policy and I am still continue that by paying 4950 rs Quarterly. After reading your article I understood that its better to invest my hard earned money with some other financial instruments. I took this policy at the age of 26 for 25 years. Please advise me on how to proceed further.

  18. Dear sir,
    I bought this Jeevan Nidhi plan 2 years back with annual premium of 15,000. I didn’t know much about this product and after reading your review I am feeling like I was misguided by the LIC agent. My 3rd premium is due on Aug-16. Could you please suggest if I can get out of the plan now or is there a minimum year I have to continue? Will I get back at least my principal amount? Thank you sir.

  19. Dear sir,
    I bought this Jeevan Nidhi plan 2 years back with annual premium of 22000. I didn’t know much about this product and after reading your review I am feeling like I was misguided by the LIC agent. My 3rd premium is due on NOV-2017. Could you please suggest if I can get out of the plan now or is there a minimum year I have to continue?
    Thank you sir.

  20. Sir. My reqrmts.are as below.
    1) I am salaried person in Pvt.job&my intake app.4 lacs. likly to increase in future
    2) I am looking for trm ins.with disability rider of monthly income (I am looking for (hdfc trm ins with dis.rdr.)
    3)My goal is for 80-90lacs in25-30yrs.
    4) I am invested 4000 in mf & 5000 in ppf.
    5) what should my invetment & what should my trm.ins.
    6) pls.guide for invst.as well as for trm ins. Thanks
    . Rajender Kumar
    . dob. 9-11-1985
    2) Iwant such type of trm.ins.
    with disability rider of monthly income.(I am looking for hdfc click2 protect with extra income)
    3)

  21. Please guide me about NPS and best fund plan for SIP . my target monthly investment is Rs 5000 per month for SIP and same for NPS..

    Regards
    Trilok Pundir

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