Why LIC may revise Interest rates in Jeevan Shanti plan - Annuity policy

LIC Jeevan Shanti is a blessing for the people who are looking or better place than Banks to keep their funds' and get monthly interest. This policy is the only Investment which gives interest every month as well as Insurance cover also from day one.  This plan has very unique features like immediate and deferred annuity options. 

Get Lifetime guaranteed pension in the fast-changing Interest Regime.

A unique product for all over 30 years of age. In addition to guaranteeing Lifetime Pension Rates, Jeevan Shanti has a unique benefit called Guaranteed Additions. Under the Deferred Pension option, the policyholder’s account will be credited with Guaranteed Additions every month during the Deferment Period. 

The Guaranteed Additions will be arrived at the applicable future Pension rate for the given age and Deferment Period, at the basic monthly rate. In case of unfortunate death of the policyholder, before the start of the pension, the Purchase price plus accumulated Guaranteed Additions till the date of death will be returned to the nominee.

Example:

Age at entry 50; at entry 50; 

Deferment Term: 10 Years; 

Investment Rs.10 Investment Rs.10 lacs. 

The policyholder will get life long guaranteed pension of Rs. 8,742 Every month, after the end of 10 years. During the deferment period, an amount of Rs. 8,584 will be added to the policy account, every month as Guaranteed Additions. The total Guaranteed Additions added to the account would be Rs.10,30,080 at the end of 10 Years. In case the policyholder, unfortunately, dies during the deferment period, the invested amount along with the guaranteed additions accumulated up to the date of death will be given to the nominee.

Suppose, the policyholder dies at the end of 5 years and 4 months in the present example, the total accumulations, till such period would be Rs. 5,49,376/- (64 X 8584 )and a total of Rs. 15,49,376 /- would be settled to the nominee.

After the Deferment period

These Guaranteed Additions help the policyholder’s family in the case of unfortunate death, after the start of Pension. Upon the death of the policyholder after the deferment period, the nominee will get the Purchase Price plus balance of Accumulated Guaranteed Additions (i e, Total Guaranteed Additions Accumulated less Pension paid till death) or 110% of the Investment amount, whichever is higher. In the given example, the total accumulation of Guaranteed Additions during the 10 Year Deferment Period is Rs. 10,30,080.

If the policyholder, unfortunately, dies after receipt of a pension for just 2 years and 3 months, the total monthly pension he would have got would be Rs. 2,36,034 (8742 X 27). Then the balance Guaranteed Additions in the account would be Rs. 7,94,766 (10,30,800 less 2,36,034).

The nominee would get Rs. 17,94,766. (Purchase Price 10 lacs plus Balance of Guaranteed Additions Rs.7,94,766) It may be noted that there is a minimum guarantee of return of 110% of the Purchase price to the nominee, whenever the policyholder dies, even after getting pension for a long period and all the accumulated guaranteed additions are exhausted. 

There are many advantages and disadvantages to these plans. But the investor considers the current scenario of illness and fear in the World, this plan would be the best to park funds and get monthly interest.

World economical conditions and Interest rates are coming down drastically due to Coronavirus COVID-19 Pandemic disease. Worldwide trade and deals are happening with some of the other kind of fear in mind. In all media, there is the news of the war between the big countries. Considering these outcomes, many Banks had reduced interest rates.  To meet the market expectation for a long time, LIC of India may also reduce the interest rates very soon.