LIC Pension Plus

POSTED BY Mohit ON November 23, 2010 1:29 pm COMMENTS (8)

My mother is looking for a Pension Plan. Her age is 51 and she wants a plan which can yield her a fixed monthly income after 10 years. I found the LIC’s Pension Plus relevant but I am not sure if it is really beneficial. Could you suggest on this? If this is not a good plan then can you suggest any alternatives?

Thanks.

8 replies on this article “LIC Pension Plus”

  1. Ramesh Mangal says:

    For a period of 10 years, even for the most conservative of the investors, there should be a reasonable equity exposure if an investor wants to have any realistic expectation to cover the inflation risk.
    Put money in a debt-oriented hybrid fund and an equity-oriented hybrid fund in 50:50 or 60:40 ratio. Suggestions for the respective funds-
    Debt-oriented funds= HDFC MIP Long Term (G), UTI Mahila Scheme, Reliance MIP (G)
    Equity-oriented funds= HDFC Prudence / HDFC Balanced / Reliance RSF Balanced.
    Taking a conservative rate of return of 10%, the net value should be about 4.6 lakhs.

    At the rate of 3,500 per month (=42,000 per year), you then require 9% per annum. My suggestion even for then, keep your money in the same funds and just redeem the required money per month (can start SWP). Do not change to dividend plans.

    See postal MIS then (that also provides 9% pa with monthly payouts at current rates, but not then).

    1. I agree with Ramesh suggestions ..

      With age 51, she can have a bit of exposure on equity like 15-20% . After 10 yrs, she might want to move to 100% debt option . So a debt fund with some equtiy orientation should be best thing .

      I would suggest UTI Mahila Unit scheme . If equity allocation is very high at the moment, atleast 50% money can be put there.

      Once she is senior citizen , then she can opt for Senior Citizen saving scheme !

      Manish

    2. Ramesh Mangal says:

      There is a simple calculator which tells the amount of equity exposure one should have.
      Equity component = 100 – Age.
      Though it appears to be too simplistic, it is a very good guide. 🙂

  2. Chakri says:

    Mohit,

    Since she is almost reaching her retiring age, it is not suggested to go for ULIPs like LIC Pension plan, where is your principal amount is not at all guaranteed. If she is really interested in markets then ask her to go for MF’s directly and not to go for ULIPs. MF’s will charge max 2.5% charges annually and where as ULIPs will charge min 15% – 25% annually. Again if you go MFs through Agent then another 2.25% charge will be levied per unit cost. If you are looking for Life insurance too then the Term policy from LIC / Aegon + [MFs / PPF / Postal MIS/ KVP] flavors are recommended.

    I hope this info makes sense.

    Thanks,
    Chakri

    1. Mohit says:

      Hi Chakri,

      You are right that it’s a ULIP and that’s why I am looking for a better alternative. She doesn’t want to enter the markets. She is looking for something which can yield a guaranteed/fixed monthly income so that she stays independent upto a maximum extent. Can you suggest something which suits this requirement?

      Thanks!

      1. Chakri says:

        Mohit,

        Ask her to invest 4.5L on her name or 9L on joint names [where as if you take the individual share from the joint and single a/c’s it should not exceed 4.5L per head] in Postal Monthly Income Scheme [PO – MIS] which will yield 8% interest every month. Ask her to put that interest amount in a PO – Recurring Deposit for the same period [i.e., 6Yrs term] both will yield after 6Yrs like 11% interest.

        Remaining amount can be kept in Postal KVP [Term 8yrs 7months – locked for first 2years – the amount will be doubled at maturity – ROI will be 8.4%], Bank FD’s or FD’s from Financial Institutions like L&T / ICICI Housing Ltd etc. where the rate of interest will be upto 9.5%, again the ROI depending upon the period.

        If you go through Postal Agent, for postal products you will get upto 1% commission [mostly they will offer half % on the pricipal amount] from the agent. Which can be at least one months interest. [The agents will get 2% commission – 1% from State govt and 1% from Central govt]

        Her hard earned money will be safe in the above products and she can live peacefully.
        Again these products will not beat the inflations, that is for sure.

        All the best!.

        Thanks,
        Chakri

  3. Ramesh Mangal says:

    You need to provide some more details:
    1. What is the amount to be invested? Is there a lumpsum with yearly / quarterly / monthly investing intervals? What kind of combination?
    2. How much is your mother’s requirement per year after 10 years?

    1. Mohit says:

      Hi Ramesh,

      She is actually looking for something that can give a fixed/guaranteed monthly income. The amount to be invested is 25000 year and she’s expecting somewhere around 3500 per month after 10 years. I hope that answers your questions.

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