Individuals with no annuity (pension) benefit in retired life can look at purchasing immediate annuity product. LIC’s Jeevan Akshay-VI is a formidable solution here.
What is the scheme?
LIC will pay the annuitant a uniform payment at regular intervals starting immediately after the annuitant pays a lumpsum premium towards the price of the policy. One can choose to receive the payments monthly, quarterly, half-yearly or yearly.
Investors can choose from any of the options listed here:
A) Annuity payable for life: The annuitant is paid a fixed annuity at regular intervals throughout his life. Pension ceases as the annuitant dies. This is suitable for those who do not have any obligations post-death. This option offers the highest amount of pension for an individual compared to other options available.
B) Annuity payable for life with guaranteed period of 5, 10, 15 or 20 years. Annuity is paid for certain years and thereafter, as long as the annuitant is alive. The shorter the guarantee period, the higher the pension. Annuity stops on either the death of the annuitant or completion of guaranteed period, whichever is later. This is a simpler tool to ensure income.
C) Life annuity with a return of purchase price: Here, the annuitant enjoys the pension till he dies. After death of the annuitant, the purchase price of the annuity — premium paid by the purchaser — is paid to the nominee. This is a popular option as both the annuitant and the nominee get the benefit and the money does not go ‘in vain’ if the annuitant dies early.
D) Life annuity increasing at a fixed rate: Under this option, there is an increase in the annuity amount payable per year by a simple rate of 3%. Though this is not a full-proof method to tackle inflation, it still works better than fixed annuity.
E) Joint life and last survivor annuity: As the name denotes, the annuitant is entitled to receive lifetime pension. If the spouse survives the annuitant, the spouse is also entitled to the pension. The buyer can further choose the quantum of pension payable to the spouse. Depending on the option chosen and the age of the annuitant, the amount of pension is ascertained.
How does it work?
The annuitant has to submit a standard age proof at the time of entry. The annuitant has to choose the option at the inception of annuity. There is no medical test involved in the purchase process. Subject to conditions, the annuitant can choose the frequency of payment of pensions.
Minimum age at entry is 40 years and maximum age at entry is 79 years. Minimum purchase price is higher than ` 50,000 and an amount that earns a certain minimum pension for each option. There is no surrender or paid-up value available under this plan. There is no loan available against this plan. Pension received is taxable under existing income tax laws. Though there are options such as Senior Citizen Saving Scheme where one may realise higher returns, the returns on such schemes are not guaranteed for the lifetime of the investor.