LIC’s Pension Plan

Formed in 1956, the Life Insurance Corporation of India is the oldest life insurance company in the Indian insurance market. Being the oldest, the company also is the most trusted and the largest insurance company. It offers all types of life insurance policies for individuals whether it is for their children’s secured financial future, wealth creation, protection or investment needs. The company also offers pension plans which help individuals plan for a better retirement. Pension plans are different from other life insurance plans in terms of the benefits that they offer. Let’s, therefore, understand the concept of pension plans and have a look at the different pension plans which LIC offers –

What is a pension plan?

A pension plan is a life insurance plan which is designed for providing a steady source of income post retirement. The plan comes in two variants. One is the deferred annuity plan wherein the policyholder can choose the plan tenure. Thereafter, premiums are paid during the tenure which accumulates into a corpus. When the plan matures, the corpus is used to buy annuity pay-outs which are paid throughout the lifetime of the policyholder. The second one is an immediate annuity plan wherein the policyholder pays a lump sum and then starts getting annuity payment immediately.

Salient features of pension plans

Pension plans have the following salient features –

  • Deferred annuity plans can be traditional or unit linked in nature
  • The individual who receives annuity is called annuitant
  • Maturity of the deferred annuity plan is also called vesting. On vesting the policyholder can choose to withdraw 1/3rd of the accumulated corpus. This withdrawal is called commutation.
  • The remaining 2/3rd part of the corpus should be availed in annuity pay-outs
  • Premiums paid towards a pension plan qualify for tax deduction under Section 80CCC. The limit is INR 1.5 lakhs which includes the deduction under Section 80C
  • Commuted part of the corpus is tax-free in the hands of the policyholder under Section 10 (10A).
  • Annuity payouts are taxable at the slab rate of the annuitant
  • Under immediate annuity plans, annuity payouts can be taken jointly. In such cases, an annuity is paid until the annuitant is alive. On his/her death, the pay-outs continue until the spouse is alive.

Pension plans offer by LIC

LIC offers four types of pension plans which are as follows –

  • Pradhan Mantri Vaya Vandana Yojana
    This pension scheme has been incorporated as per the directives of the Indian Government. LIC has the sole privilege of offering this Government directed pension scheme to customers. The features of the scheme are as follows –

    • The plan has a term of 10 years during which pension is paid
    • In case of death, the purchase price is refunded
    • On maturity, the last pension payment and the purchase price are refunded back
    • Up to 75% of the purchase price can be availed as a loan after the completion of 3 policy years
  • LIC’s New Jeevan Nidhi
    New Jeevan Nidhi is a traditional deferred annuity plan which helps the policyholder to create a corpus through regular savings. The features of the plan are as follows –

    • The plan attracts bonuses and guaranteed additions are also added to the corpus
    • Bonuses are added after the first five years of the plan while in the first five years guaranteed additions are added
    • LIC’s Accidental Death and Disability Benefit Rider can be bought for additional coverage
    • Discounts are allowed for paying premiums yearly and half-yearly and also for choosing high sum assured levels
  • LIC’s Jeevan Akshay VI
    A very popular plan, Jeevan Akshay VI is an immediate annuity plan which pays annuity pay-outs throughout the annuitant’s lifetime. The features of the plan are as follows –

    • The annuitant has the option to avail annuity payments in seven different variants
    • The plan can be bought without any medical check-ups
    • Annuity rates are higher for higher levels of the purchase price
  • LIC’s Jeevan Shanti
    This plan can be taken either as an immediate annuity plan or as a deferred annuity plan as per the suitability of the policyholder. The plan’s features are as follows –

    • The immediate annuity variant has ten types of annuity payout options to choose from
    • The deferred annuity plan can be taken for a single life or jointly with the spouse too
    • Guaranteed additions are added to the policy for better annuity payments


Yes, the benefit received on death under LIC pension plans is completely tax-free in the hands of the beneficiary.

In case of death of the insured during the deferment period, the death benefit can be taken in a lump sum or in annuity payouts. The mode of receiving the death benefit under LIC pension plans would depend on the nominee.

Annuity payments can be made annually, half-yearly, quarterly or monthly as chosen by the policyholder.

No, the rider benefit is available only in LIC’s New Jeevan Nidhi Plan.

Under immediate annuity plans, annuity payments start immediately after the payment of the lump sum premium. As such, these LIC pension plans have no surrender value.

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