Life Insurance Corporation of India (LIC) has introduced the Saral Pension Scheme with effect from July 1, 2021.
The Saral Pension Scheme is a standard immediate annuity plan as per the guidelines of the Insurance Regulatory and Development Authority of India (IRDAI), which offers the same terms and conditions across all life insurers. The policyholder has an option to choose the type of annuity from two available options on payment of a lump-sum amount.
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The annuity rates are guaranteed at the inception of the policy and annuities are payable throughout the lifetime of the annuitant(s). This plan can be purchased offline as well as online through LIC’s website www.licindia.in.
1) The annuity payments will be made in arrears for as long as the annuitant is alive, as per the chosen mode of the annuity payment. On the death of the annuitant, the annuity payment shall cease immediately and 100 per cent of the purchase price shall be payable to the nominee(s)/legal heirs.
2) The annuity amount shall be paid in arrears for as long as the annuitant and/or spouse are alive, as per the chosen mode of the annuity payment. On the death of the last survivor, the annuity payments will cease immediately and 100 per cent of the purchase price shall be payable to the nominee(s)/legal heirs.
The minimum age limit to enter the policy is 40 years, whereas the maximum age limit is 80 years. There is no ceiling on the maximum purchase price, with the annuity rates guaranteed at the start of the policy. The modes of annuity available are yearly, half-yearly, quarterly, and monthly. The annuity shall be payable in arrears i.e. the annuity payment shall be after 1 year, 6 months, 3 months, and 1 month from the date of commencement of policy depending on whether the mode of the annuity payment is yearly, half-yearly, quarterly, and monthly, respectively.
The minimum purchase amount is set at Rs 12,000 per annum, which implies a breakdown of Rs 1000 per month; Rs 3000 per quarter; Rs 6000 per half-year.
The Saral Pension Scheme loan shall be allowed at any time after six months from the date of commencement of the policy. Under the joint-life annuity option, the loan can be availed by the annuitant and on the death of the annuitant, the same can be availed by the spouse.
The maximum amount of loan that can be granted under the policy shall be such that the effective annual interest amount payable on the loan does not exceed 50 per cent of the annual annuity amount payable under the policy. Loan interest will be recovered from the annuity amount payable under the policy.
The loan interest will accrue as per the frequency of annuity payment under the policy and it will be due on the due date of the annuity. The loan outstanding shall be recovered from the claim proceeds under the policy. However, the annuitant has the flexibility to repay the loan principal at any time during the currency of the annuity payments.
The loan interest rate for all the loans commencing during the 12 months period from 1 May to 30 April, shall be an annual effective rate equal to 10-year G-Sec rate per annum plus 200 basis points. The 10-year G-Sec rate shall be as of 1 April of the relevant financial year. The calculated interest rate shall be applicable for the full term of the loan.
For the loan sanctioned during the 12 months’ period commencing from 1 May 2021 to 30 April 2022, the applicable interest rate is 8.44 per cent per annum effective for the entire term of the loan.