Krishna Project PDF

PRAHLADRAIONS COLLEGE OF COMMERCE & ECONOMICS
Chapter 1. Introduction
A pension is a fund into which a sum of money is added during an employee's employment years,
and from which payments are drawn to support the person's retirement from work in the form of
periodic payments. A pension may be a "defined benefit plan" where a fixed sum is paid regularly
to a person, or a "defined contribution plan" under which a fixed sum is invested and then becomes
available at retirement age. Pensions should not be confused with severance pay; the former is
usually paid in regular installments for life after retirement, while the latter is typically paid as a
fixed amount after involuntary termination of employment prior to retirement.
The terms "retirement plan" and "superannuation" tend to refer to a pension granted upon
retirement of the individual. Retirement plans may be set up by employers, insurance companies,
the government or other institutions such as employer associations or trade unions. Called
retirement plans in the United States, they are commonly known as pension schemes in the United
Kingdom and Ireland and superannuation plans in Australia and New Zealand. Retirement
pensions are typically in the form of a guaranteed life annuity, thus ensuring against the risk of
longevity.
A pension created by an employer for the benefit of an employee is commonly referred to as an

occupational or employer pension. Labor unions, the government, or other organizations may also
fund pensions. Occupational pensions are a form of deferred compensation, usually advantageous
to employee and employer for tax reasons. Many pensions also contain an additional insurance
aspect, since they often will pay benefits to survivors or disabled beneficiaries. Other vehicles
(certain lottery payouts, for example, or an annuity) may provide a similar stream of payments.
The common use of the term pension is to describe the payments a person receives upon retirement,
usually under pre-determined legal or contractual terms. A recipient of a retirement pension is
known as a pensioner or retiree.
Pensions in India
PENSION POLICIES BY LIC Page1

There are three major components to the Indian pension system: the civil servant's pension, the
mandatory pension programs run by the Employees' Provident Fund Organization of India, and
the unorganized sector pension called the National Social Assistance Programme (NSAP).
The State of Uttar Pradesh has implemented E-pension system which allows filling up of pension
forms, checking, verification and payment using an online system.
The National Pension System (NPS) is a voluntary defined contribution pension system
administered and regulated by the Pension Fund Regulatory and Development Authority
(PFRDA), created by an Act of the Parliament of India. The NPS started with the decision of the
Government of India to stop defined benefit pensions for all its employees who joined after 1
January 2004. While the scheme was initially designed for government employees only, it was
opened up for all citizens of India in 2009. NPS is an attempt by the government to create a
pensioned society in India.
Government schemes
Government of India launched Pradhan Mantri Shram Yogi Maan-Dhan (PMSYM) in February
2019 to provide an assured pension of ₹3,000 (US$42) per month to unorganized workers.
The Employees' Provident Fund Organization (abbreviated to EPFO), is an organization tasked to

assist the Central Board of Trustees, a statutory body formed by the Employees' Provident Fund
and Miscellaneous Provisions Act, 1952 and is under the administrative control of the Ministry of
Labour and Employment, Government of India.
The National Social Assistance Programme (NSAP) is a Centrally Sponsored Scheme of the
Government of India that provides financial assistance to the elderly, widows and persons with
disabilities in the form of social pensions.
Lucknow: Uttar Pradesh Chief Minister Akhilesh Yadav Wednesday approved the implementation
of the ‘UP e-pension system’ for the benefit of lakhs of pensioners in the state.
A state government spokesman said under the system, filling up of pension forms, checking,
verification and payment will be done based on an online system.

The mechanism – ‘UP e-pension system’ – has been developed with the help of the National
Informatics Centre.
The spokesman said under the new system, no changes would be made in the rules of pension
approval and only filling up of forms and online disposal of ‘Pension Pradhikar Patra’ will be
done.
Formation of the Company
The Government of India has introduced the New Pension System (NPS), with effect from 1st
January 2004. Pension Fund Regulatory and Development Authority (PFRDA) through a process
of competitive bidding, has appointed Life Insurance Corporation (LIC), State Bank of India (SBI),
UTI Asset Management Company (UTI-AMC) and as Pension Fund sponsors under the NPS.
Consequent upon the selection as Sponsor, Life Insurance Corporation of India has formed LIC
Pension Fund Limited LIC Pension Fund has been incorporated as a Public Limited Company on
21.11.07 by the Registrar of Companies, Maharashtra, Mumbai under Part IXA of the Companies
Act, 1956 (No.1 of 1956) on 21st November, 2007. The Authorized Capital of the Company is Rs
25 Crores and Paid Up Capital of the Company is Rs 15 Crores. The Registrar of Companies
Maharashtra, Mumbai has issued Certificate of Commencement of Business to LIC Pension Fund
on 28th January, 2008. LIC Pension Fund is the first Pension Fund Company in India to be
incorporated and to receive commencement of business certificate.
Life Insurance Corporation of India (LIC) is an Indian state-owned insurance group and investment
company headquartered in Mumbai. It is the largest insurance company in India with an estimated
asset value of ₹2,529,390 crore (US$350 billion) (2016). As of 2013 it had total life fund of
₹1,433,103.14 crore and total number of policies sold coming in at ₹367.82 lakh that year (2012-
13).
The Life Insurance Corporation of India was founded in 1956 when the Parliament of India passed
the Life Insurance of India Act that nationalized the private insurance industry in India. Over 245
insurance companies and provident societies were merged to create the state owned Life Insurance
Corporation.

Chapter 2. Objective
Breaking Down Pension Plan

There are two main types of pension plans.
In a defined-benefit plan, the employer guarantees that the employee receives a definite amount of
benefit upon retirement, regardless of the performance of the underlying investment pool. The
employer is liable for a specific flow of pension payments to the retiree (the dollar amount is
determined by a formula, usually based on earnings and years of service), and if the assets in the
pension plan are not sufficient to pay the benefits, the company is liable for the remainder of the
payment. American employer-sponsored pension plans date from the 1870s (the American
Express Company established the first pension plan in 1875), and at their height, in the 1980s, they
covered nearly half of all private sector workers. About 90% of public employees, and roughly
10% of private employees, in the U.S are covered by a defined-benefit plan today, according to
the Bureau of Labor Statistics.
In a defined-contribution plan, the employer makes specific plan contributions for the worker,
usually matching to varying degrees the contributions made by the employees. The final benefit
received by the employee depends on the plan's investment performance: The company’s liability
to pay a specific benefit ends when the contributions are made. Because this is much less expensive
than the traditional pension, when the company is on the hook for whatever the fund can't generate,
a growing number of private companies are moving to this type of plan and ending defined-benefit
plans. The best-known defined-contribution plan is the 401(k), and its equivalent for non-profits'
workers, the 403(b).
In common parlance, "pension plan" often means the more traditional defined-benefit plan, with a
set payout, funded and controlled entirely by the employer.
Some companies offer both types of plans. They even allow employees to roll over 401(k) balances
into their defined-benefit plans.

There is another variation, the pay-as-you-go pension plan. Set up by the employer, these tend to
be wholly funded by the employee, who can opt for salary deductions or lump sum contributions
(which are generally not permitted on 401(k) plans). Otherwise, they similarly to 401(k) plans,
except that they usually offer no company match.
The Employee Retirement Income Security Act of 1974 (ERISA) is a Federal law designed to
protect the retirement assets of investors, and the law specifically provides guidelines that
retirement plan fiduciaries must follow to protect the assets of private sector employees.
Companies that provide retirement plans are referred to as plan sponsors (fiduciaries), and ERISA
requires each company to provide a specific level of plan information to employees who are
eligible. Plan sponsors provide details on investment options and the dollar amount of worker
contributions that are matched by the company, if applicable. Employees also need to
understand vesting, which refers to the dollar amount of the pension assets that are owned by the
worker; vesting is based on the number of years of service and other factors.
Most employer-sponsored pension plans are qualified, meaning they meet Internal Revenue
Code 401(a) and Employee Retirement Income Security Act of 1974 (ERISA) requirements. That
gives them their tax-advantaged status. Employers get a tax break on the contributions they make
to the plan for their employees. So do employees: Contributions they make to the plan come "off
the top" of their paychecks – that is, are taken out of their gross income. That effectively reduces
their taxable income, and, in turn, the amount they owe the IRS come April 15. Funds placed in a
retirement account then grow at a tax-deferred rate, meaning no tax is due on them as long as they
remain in the account. Both types of plans allow the worker to defer tax on the retirement plan’s
earnings until withdrawals begin, and this tax treatment allows the employee to reinvest dividend
income, interest income and capital gains, which generates a much higher rate of return before
retirement.
Upon retirement, when you start receiving funds from a qualified pension plan, you may have to
pay federal and state income taxes.

If you have no investment in the plan because you have not contributed anything or are considered
to not have contributed anything, your employer did not withhold contributions from your salary
or you have received all of your contributions (investments in the contract) tax free in previous
years, your pension is fully taxable.
If you contributed money after tax was paid, your pension or annuity is only partially taxable. You
don't owe tax on the part of the payment you made that represents the return of the after-tax amount
you put into the plan. Partially taxable qualified pensions are taxed under the Simplified Method.
Some companies are keeping their traditional defined-benefit plans, but are freezing their benefits,
meaning that after a certain point, workers will no longer accrue greater payments, no matter how
long they work for the company or how large their salary grows.
When a pension plan provider decides to implement or modify the plan, the covered employees
almost always receive a credit for any qualifying work performed prior to the change. The extent
to which past work is covered varies from plan to plan. When applied in this way, the plan provider
must cover this cost retroactively for each employee in a fair and equal way over the course of his
or her remaining service years.
When a defined-benefit plan is made up of pooled contributions from employers, unions or other
organizations, it is commonly referred to as a pension fund. Run by a financial intermediary and
managed by professional fund managers on behalf of a company and its employees, pension funds
control relatively large amounts of capital and represent the largest institutional investors in many
nations; their actions can dominate the stock markets in which they are invested. Pension funds
are typically exempt from capital gains tax. Earnings on their investment portfolios are tax
deferred or tax exempt.
A pension fund provides a fixed, preset benefit for employees upon retirement, helping workers
plan their future spending. The employer makes the most contributions and cannot retroactively
decrease pension fund benefits. Voluntary employee contributions may be allowed as well. Since
benefits do not depend on asset returns, benefits remain stable in a changing economic climate.
Businesses can contribute more money to a pension fund and deduct more from their taxes than
with a defined-contribution plan. A pension fund helps subsidize early retirement for promoting
specific business strategies. However, a pension plan is more complex and costly to establish and
maintain than other retirement plans. Employees have no control over investment decisions. In
addition, an excise tax applies if the minimum contribution requirement is not satisfied or if excess
contributions are made to the plan.
An employee’s payout depends on his salary and length of employment with the company. No
loans or early withdrawals are available from a pension fund. In-service distributions are not
allowed to a participant before age 62. Taking early retirement generally results in a smaller
monthly payout.
With a defined-benefit plan, you usually have two choices when it comes to distribution: periodic
(usually monthly) payments for the rest of your life or a lump sum distribution. Some plans allow
you to do both, i.e., take out some of the money in a lump sum, and use the rest to generate periodic
payments. In any case, there will likely be a deadline by which you have to decide, and your
decision will be final.
There are several things to consider when choosing between a monthly annuity and a lump sum.
● Annuity: Monthly annuity payments are typically offered as a single life annuity for you
only for the rest of your life – or as a joint and survivor annuity for you and your spouse.
The latter pays a lesser amount each month (typically 10% less), but the payouts continue
after your death, until the surviving spouse passes away.
Some people decide to take the single life annuity, opting to purchase a whole life or other type
of life insurance policy to provide income for the surviving spouse. When the employee dies, the
pension payout stops; however, the spouse then receives a large death benefit payout (tax-free)
which can be invested and uses to replace the taxable pension payout that has ceased. This strategy,
which goes by the fancy-sounding name pension maximization, may not be a bad idea if the cost
of the insurance is less than the difference between the single life and joint and survivor payouts.
In many cases, however, the cost far outweighs the benefit.

Can your pension fund ever run out of money? Theoretically, yes. But if your pension fund doesn’t
have enough money to pay you what it owes you, the Pension Benefit Guaranty Corporation
(PBGC) could pay a portion of your monthly annuity, up to a legally defined limit. For 2019, the
annual maximum PBGC benefit for a 65-year-old retiree is $67,295 . Of course, PBGC payments
may not be as much as you would have received from your original pension plan.
Annuities usually pay out at a fixed rate. They may or may not include inflation protection. If not,
the amount you get is set from retirement on. This can reduce the real value of your payments each
year, depending on how the cost of living is going. And since it rarely is going down, many retirees
prefer to take their money in a lump sum.
● Lump Sum: If you take a lump sum, you avoid the potential (if unlikely) problem of your
pension plan going broke, or losing some or all of your pension if the company files
for bankruptcy. Plus, you can invest the money, keeping it working for you – and possibly
earning a better interest rate, too. If there is money left when you die, you can pass it along
as part of your estate.
On the downside: No guaranteed lifetime income, as with an annuity. It’s up to you to make the
money last. And, unless you roll the lump sum into an IRA or other tax-sheltered account, the
whole amount will be immediately taxed and could push you into a higher tax bracket.
If your defined-benefit plan is with a public-sector employer, your lump sum distribution may only
be equal to your contributions. With a private sector employer, the lump sum is usually the present
value of the annuity (or, more precisely, the total of your expected lifetime annuity payments
discounted to today's dollars). Of course, you can always use a lump sum distribution to purchase
an immediate annuity on your own, which could provide a monthly income stream, including
inflation protection. As an individual purchaser, however, your income stream will probably not
be as large as it would with an annuity from your original defined-benefit pension fund.
With just a few assumptions, and a small amount of math, you can determine which choice yields
the largest cash payout.

You know the present value of a lump-sum payment, of course. But in order to figure out which
makes better financial sense, you need to estimate the present value of annuity payments. To figure
out the discount or future expected interest rate for the annuity payments, think about how you
might invest the lump sum payment and then use that interest rate to discount back the annuity
payments. A reasonable approach to selecting the ‘discount rate’ would be to assume that the lump
sum recipient invests the payout in a diversified investment portfolio of 60% equity investments
and 40% bond investments. Using historical averages of 9% for stocks and 5% for bonds, the
discount rate would be 7.40%.
Imagine that Sarah was offered $80,000 today or $10,000 per year for the next 10 years. On the
surface, the choice appears clear: $80,000 versus $100,000 ($10,000 x 10 years): Take the annuity.
But the choice is impacted by the expected return (or discount rate) Sarah expects to receive on
the $80,000 over the next 10 years. Using the discount rate of 7.40%, calculated above, the annuity
payments are worth $68,955.33 when discounted back to the present, whereas the lump-sum
payment today is $80,000. Since $80,000 is greater than $68,955.33, Sarah would take the lump-
sum payment.

Chapter 3. Research Methodology
The importance of a sturdy retirement plan is undeniable. If you want to have a happy and fulfilling
life post retirement, you must have a huge retirement corpus by the end of your professional life.
To achieve that, you have to start planning for retirement as early as possible.
It is best to start your retirement planning from the day you draw your first salary. Most employers
will get your EPF account opened by default as soon as you join their organization. As per the
rules of the Central Government of India, 12% of your basic salary will be contributed to your EPF
Account every month. The same amount will be contributed by your employer as well. This will
help you build a sizable retirement corpus for your post-employment life. But an Employees’
provident Fund (EPF) is not enough. In order to maintain the standard of living as well as to keep
the effects of inflation at bay, it is necessary for you to have a steady flow of income after
retirement. This is where the importance of a pension scheme is felt.
A successful retirement planning is impossible without a good pension scheme from a reputed
insurance provider. Most life insurance providers in India offer retirement plans these days. But
before investing in a pension scheme, you must be aware of the different types of pension plans
that are available in the market.
1. Deferred Annuity
A deferred annuity is a type of pension scheme that allows you to build a sizable retirement corpus
for your golden years. This is a type of investment plan where you enjoy absolute tax benefits. In
a deferred annuity plan, you pay your premiums for a limited period or throughout the entire policy
term. At the end of the accumulation phase, you start receiving regular annuities for the rest of
your life.
2. Immediate Annuity
Immediate Annuity plans are best for those who started their retirement planning rather late. In an
Immediate Annuity plan, you pay a lump sum amount and your annuities start immediately. In
case of your unfortunate demise, the nominee chosen by you will receive the money on your behalf.

3. Pension plans with and without life cover
Pension Plans with life cover are those that pays the lump sum assured to the nominee of the
policyholder in case of his or her untimely death during the accumulation phase. Deferred annuity
plans are mostly with cover pension plans. Without cover pension plans, on the other hand, do not
offer any guaranteed lump sum on the death of the policyholder. But all the premiums accumulated
are paid back to the nominee.
4. Traditional and Unit-Linked Pension Plans
A Pension scheme is a type of investment plan. Where will you invest your hard earned money
depends completely on your risk appetite. There are two types of pension plans- traditional and
unit-linked. A traditional pension plan invests the fund mostly in Government securities. A Unit-
Linked pension plan, on the other hand, invests the fund in combinations of bonds, stocks, and
equities etc.
5. Superannuation
A superannuation pension shall be granted to a Government servant who is retired on his attaining
the age of superannuation.
6. Retiring Pension:
A retiring pension shall be granted to a Government servant who retires, or is retired before
attaining the age of Superannuation or to a Government servant who, on being declared surplus
opts, for voluntary retirement.
7. Voluntary Retirement:
Any Government servant can apply for voluntary retirement, three months in advance, only after
the completion of twenty years of his qualifying service, provided there is no vigilance or
Departmental Enquiry pending /initiated against him/her.

8. Invalid Pension:
Invalid Pension may be granted if a Government servant applies for retirement from the service
on account of any bodily or mental infirmity which permanently incapacitates him/her for the
service. The request for invalid pension has to be supported by medical report from the competent
medical board.
9. Compensation Pension:
If a Government servant is selected for discharge owing to the abolition of a permanent post, he
shall, unless he is appointed to another post the conditions of which are deemed by the authority
competent to discharge him/her to be at least equal to those of his own, have the option.
(a) of taking compensation pension to which he may be entitled for the service he had rendered,
or
(b) of accepting another appointment on such pay as may be offered and continuing to count his
previous service for pension.
10. Compulsory Retirement Pension:
A Government servant compulsorily retired from service as a penalty may be granted, by the
authority competent to impose such penalty, pension or gratuity, or both at a rate not less than two-
thirds and not more than full compensation pension or gratuity, or both admissible to him on the
date of his compulsory retirement. The pension granted or allowed shall not be less than Rs. 9,000/-
p.m.
11. Compassionate Allowance:
(i) A Government servant who is dismissed or removed from service shall forfeit his pension and
gratuity:
Provided that the authority competent to dismiss or remove him from service may, if the case is
deserving of special consideration, sanction a compassionate allowance not exceeding two-thirds
of pension or gratuity or both which would have been admissible to him if he had retired on
compensation pension.
(ii) A compassionate allowance sanctioned under the proviso to sub-rule (i) shall not be less than
Rs. 9,000/- p.m.
12. Extraordinary Pension:
Extraordinary Pension in the form of Disability pension/extraordinary family pension may be paid
to the Government servant/his family if disablement/death (or the aggravation of
disablement/death)of the Government servant, during his service, are attributed to the Government
service. For the award of extraordinary pension, there should thus be a casual connection between
disablement and Government service; and death and Government service, for attributability or
aggravation to be conceded. The quantum of the pension, however, depends upon the category of
the disablement/death.
Government servants appointed on or after 1.1.2004 are not covered by the CCS(Extraordinary
Pension) Rules.
13. Family Pension:
Family pension is granted to the widow / widower and where there is no widow / widower to the
children of a Government servant who entered in service in a pensionable establishment on or after
01/01/1964 but on or before 31.12.2003 or having entered service prior to that date came to be
governed by the provisions of the Family Pension Scheme for Central Government Employees,
1964 if such a Government servant-
(i) dies while in service on or after 01/01/1964 or
(ii) retired/died before 31.12.1963 or
(iii) retires on or after 01/01/1964
and at the time of his death was in receipt of pension.
Family pension is payable to the children up to 25 years of their age, or marriage or till they start
earning a monthly income exceeding Rs.9,000/- + DA admissible from time to time p.m.
whichever is earlier.

Widow daughter / divorced daughter/ unmarried daughter of deceased Government servant is also
entitled for the family pension till her remarriage or up to life time or starts earning a monthly
income exceeding Rs.9,000/- + DA admissible from time to time p.m. whichever is earlier.
Family pension is payable to wholly dependent parents of the deceased Government servants w.e.f.
01/01/98, when he/she is not survived by a widow or eligible child. The family pension will be
payable to mother first , failing which to the father.
If the son or daughter, of a Government servant is suffering from any disorder or disability of mind
or is physically crippled or disabled so as to render him or her unable to earn a living even after
attaining the age of 25 years, the family pension can continue to be paid for life time subject
to conditions.

Chapter 4. Literature Review
India
1995: The NSAP is launched with the aim of providing social assistance to destitute "defined as
any person who has little or no regular means of subsistence from his/her own source of income
or through financial support from family members or other sources". The NSAP includes three
components: National Old Age Pension Scheme (NOAPS), National Family Benefit Scheme
(NFBS), and National Maternity Benefit Scheme (NMBS).
2000: Annapurna Yojana is introduced to provide eligible beneficiaries, who were not covered
under NOAPS, 10 kg of free rice.
2001: NMBS is transferred to the Department of Family Welfare.
2006: Monthly pension amount for NOAPS raised from ₹75 (US$1.00) to ₹200 (US$2.80)
2007: The NSAP is extended to cover all individuals living below the poverty line. The NOAPS
is renamed Indira Gandhi National Old Age Pension Scheme (IGNOAPS).
2009: The NSAP is expanded to include the Indira Gandhi National Widow Pension Scheme
(IGNWPS) – for widows aged 40–64 years – and the Indira Gandhi National Disability Pension
Scheme (IGNDPS) – for persons with multiple or severe disabilities aged 18–64 years living below
the poverty line.
2011: Age limit for IGNOAPS is lowered from 65 to 60 years under IGNOAPS and monthly
pension amount for those 80 years and above is raised from ₹200 (US$2.80) to ₹500 (US$7.00).
Age limits for IGNWPS and IGNDPS are changed to 40–59 and 18–59, respectively.
2012: Monthly pensions under IGNWPS and IGNDPS increased from ₹200 (US$2.80) to ₹300
(US$4.20). Age limit changed to 40–79 years and 18–79 years, respectively.
2013: Report of the Task Force on Comprehensive Social Assistance Programme submitted to the
Government of India. Recommends raising monthly pension and expanding coverage.
The National Assistance Program consists of five sub-schemes:

Indira Gandhi National Old Age Pension Scheme (IGNOAPS)
The Indira Gandhi National Old Age Pension Scheme (IGNOAPS) is a non-contributory old age
pension scheme that covers Indians who are 60 years and above and live below the poverty line.
All individuals above the age of 60 who live below the poverty line are eligible to apply for
IGNOAPS. All IGNOAPS beneficiaries aged 60–79 receive a monthly pension of Rs. 300 (Rs.
200 by central government and Rs. 100 by state government). Those 80 years and above receive a
monthly pension amount of Rs.500.States are strongly urged to provide an additional amount at
least an equivalent amount to the assistance provided by the Central Government so that the
beneficiaries can get a decent level of assistance .
Indira Gandhi National Widow Pension Scheme (IGNWPS)
Indira Gandhi National Widow Pension Scheme(IGNWPS), introduced in the year 2009, provides
BPL(Below Poverty Line) widows in the age group 40 to 64(later revised 40 to 59) with a monthly
pension of Rs. 200 per beneficiary. After they attain the age of 60, they qualify for pension under
Indira Gandhi National Old Age Pension Scheme(IGNOAPS).They should get upto 2000. This
programme was started in 2007 under the ministry for rural development.
Indira Gandhi National Disability Pension Scheme (IGNDPS)
Eligibility: Individuals aged 18 years and above with more than 80% disability and living below
the poverty line.
Amount: ₹300 (US$4.20) per month (₹500 (US$7.00) for those 80 years and above).
National Family Benefit Scheme (NFBS)
In the event of death of a bread-winner in a household, the bereaved family will receive lump sum
assistance of 40,000. The bread-winner should have been between 18–64 years of age. The
assistance would be provided in every case of death of primary bread-winner in a household.
Annapurna Scheme

This scheme aims to provide food security to meet the requirement of those senior citizens who,
though eligible, have remained uncovered under the IGNOAPS. Under the Annapurna Scheme,
10 kg of free rice is provided every month to each beneficiary.
Founding organizations
The Oriental Life Insurance Company, the first company in India offering life insurance coverage,
was established in Kolkata in 1818 by "Anita Bhavsar" and others. Its primary target market was
the Europeans based in India, and it charged Indians heftier premiums. Surendranath Tagore had
founded Hindusthan Insurance Society, which later became Life Insurance Corporation.
The Bombay Mutual Life Assurance Society, formed in 1870, was the first native insurance
provider. Other insurance companies established in the pre-independence era included
● Postal Life Insurance (PLI) was introduced on 1 February 1884

● Bharat Insurance Company (1896)
● United India (1906)
● National Indian (1906)
● National Insurance (1906)
● Co-operative Assurance (1906)
● Hindustan Co-operatives (1907)
● Indian Mercantile
● General Assurance
● Swadeshi Life (later Bombay Life)
● Sahyadri Insurance (Merged into LIC, 1986)
The first 150 years were marked mostly by turbulent economic conditions. It witnessed India's
First War of Independence, adverse effects of the World War I and World War II on the economy
of India, and in between them the period of worldwide economic crises triggered by the Great
depression. The first half of the 20th century saw a heightened struggle for India's independence.
The aggregate effect of these events led to a high rate of and liquidation of life insurance

companies in India. This had adversely affected the faith of the general in the utility of obtaining
life cover.
Nationalisation in 1956
In 1955, parliamentarian Amol Barate raised the matter of insurance fraud by owners of private
insurance agencies. In the ensuing investigations, one of India's wealthiest businessmen,
Ramkrishna Dalmia, owner of the Times of India newspaper, was sent to prison for two years.
The Parliament of India passed the Life Insurance of India Act on 19 June 1956 creating the Life
Insurance Corporation of India, which started operating in September of that year. It consolidated
the business of 245 private life insurers and other entities offering life insurance services; this
consisted of 154 life insurance companies, 16 foreign companies and 75 provident companies. The
nationalisation of the life insurance business in India was a result of the Industrial Policy
Resolution of 1956, which had created a policy framework for extending state control over at least
17 sectors of the economy, including life insurance.

Chapter 5. Needs of topic

The National Pension System (NPS) is a voluntary defined contribution pension system in India.
National Pension System, like PPF and EPF, is an EEE (Exempt-Exempt-Exempt) instrument in
India where entire corpus escapes tax at maturity and entire pension withdrawal amount is tax-
free.
NPS started with the decision of the Government of India to stop defined benefit pensions for all
its employees who joined after 1 January 2005. While the scheme was initially designed for
government employees only, it was opened up for all citizens of India between the age of 18 and
60 in 2009. In its overall structure, NPS is closer to 401(k) plans of the United States. Administered
and regulated by the Pension Fund Regulatory and Development Authority (PFRDA)(Based on
the recommendations of Chakka Muni Balaji Ganesh Committee), in accordance with (Juturu
Sahithi committee).
On 10 December 2018, Government of India made NPS an entirely tax-free instrument in India
where entire corpus escapes tax at maturity, the 40% annunity also became tax-free. The
contribution under Tier-II of NPS is covered under Section 80C for deduction up to Rs. 1.50 lakh
for income tax benefits, provided there is a lock-in period of three years. The changes in NPS will
be notified through changes in The Income-tax Act, 1961, which is expected to happen through
the Finance Bill in 2019 Union budget of India. NPS is limited EEE, to the extent of 60%. 40%
has to be compulsorily used to purchase an annuity, which is taxable at the applicable tax slab.
Contributions to NPS receive tax exemptions under Section 80C, Section 80CCC and Section
80CCD(1) of Income Tax Act. Starting from 2016, an additional tax benefit of Rs 50,000 under
Section 80CCD(1b) is provided under NPS, which is over the Rs 1.5 lakh exemption of Section
80C. Private Fund managers are important parts of NPS. NPS is considered one of the best tax
saving instruments, after 40% of the corpus was made tax-free at the time of maturity and it is
ranked just below Equity-linked savings scheme(ELSS).

National Pension System (NPS) :
Pension reform is a major initiative undertaken by the Government of India to provide income
security after retirement. The NPS for Govt. employees has been operationalized in 2007- 2008,
with the appointment of Pension Fund Manager (PFM), Central Recordkeeping Agency (CRA)
and other entities. New Pension System has been made available to all citizens of India from 1st
May,2009.
NPS is a low cost portable Pension System having unique Permanent Retirement Account
Number (PRAN) for each subscriber. There are multiple Fund Managers and multiple
investment options. There is also provision for mandatory annuitization at the time of exit.
Scheme for Govt employees :
Entry :
For Government Employees : National Pension System (NPS) has been introduced by the
Central Government on 01 January 2004 and is being regulated by Pension Fund Regulatory and
Development Authority (PFRDA). This scheme has already been made mandatory for Central
Government employees who joined their service on or after 01/01/2004 (except the armed forces).
Most of the state governments have also joined NPS for their employees, who joined their service
on or after 1st January 2004.
The NPS is a two tier Defined Contribution Pension System.
Tier I : Mandatory non-withdrawable Pension Account mandatory for Central Government

employees who have joined services on or after 1st January 2004. The employees will Contribute
10% of basic salary & DA and matching 10% will be contributed by the Government to Tier-I
Pension account of the employee.

Tier–II : Voluntary withdrawable Savings Account. No contribution will be made by the

Government under the Tier-II account for the employees who have joined NPS.
Contribution :
Central Government employees who have joined services on or after 1st January 2004 will
Contribute 10% of salary & DA and matching contribution by government. Individuals can
normally exit at or after age 60 years from the pension system. At exit, the individual would be
required to invest at least 40 percent of pension wealth to purchase an annuity. In case of
Government employees, the annuity should provide for pension for the lifetime of the employee
and his dependent parents and his spouse at the time of retirement. The individual would receive
a lump-sum of the remaining pension wealth, which subscriber would be free to utilize in any
manner. Individuals would have the flexibility to leave the pension system prior to age 60.
However, in this case, the mandatory annuitisation would be 80% of the pension wealth
Mandatory Annuitization :
Under the NPS, an employee will be entitled to exit only at the time of retirement at the age of 60,
however at least 40 per cent Pension wealth would be used for purchasing annuity from a life
insurance company approved by the IRDA.
All-citizens and scheme for corporate subscribers:
National Pension System has been made available to all citizens of India from 1st May, 2009.
Subscriber can be resident or non-resident Indian. The subscriber age should be between 18 and
65 years on the date of application. Minimum contribution per instalment is Rs 500 and minimum
contribution per year is Rs 1000, with at least 1 contribution per year.
Mandatory Annuitization :
For All Citizens : The normal retirement age has been fixed at 60 years. At 60, the subscriber will
be required to use at least 40 per cent of accumulated savings to buy a life annuity from an

insurance company. However, the subscriber has the option to defer the lump sum withdrawal till
the age of 70 years. Subscriber has also got the option to continue contributing upto the age of 70
years. This option is required to be exercised upto 15 days prior to completion of 60 years.
For those looking to exit before turning 60, there is an option to withdraw 20 per cent of the
accumulated savings but to buy an annuity with the remaining 80 per cent.
If the subscriber dies before he or she turns 60, the nominee can receive the entire pension corpus.
PRAN : Under the new pension system, Central Record Keeping Agency (CRA) will be required
to maintain subscriber accounts and issue a unique Permanent Retirement Account Number
(PRAN) to each subscriber.
Portability : Under NPS, employee’s pension account is portable. The same account and PRAN
continues even when subscriber switches jobs or schemes or fund managers. Investors have the
flexibility to choose between fund managers.
Multiple Funds : NPS envisages multiple pension fund schemes with different weightages of
Asset Classes.
Entities under NPS Architecture :
NPS is a well-structured Defined Contribution Pension system with defined role of various
entities.
Operationalization of National Pension System (NPS)
For Government Employees : NPS has been introduced by the Central Government on 01
January 2004 and is being regulated by Pension Fund Regulatory and Development Authority
(PFRDA). The NPS for Government employees has been operationalized in 2007-08 with the
appointment of three (3) Sponsors (LIC, SBI Mutual Fund and UTI Mutual Fund) to manage the
funds of NPS & Central Recordkeeping Agency (CRA) and the sponsor entities in turn has formed
separate companies for managing the funds of NPS. LIC Pension Fund was sponsored by LIC of
India, SBI Pension Fund was sponsored by SBI and UTI Retirement Solutions (P) Ltd has been
sponsored by UTI Mutual Fund.
For All Citizens : NPS has been made available to all citizens of India from 1st May, 2009. Eight
Pension Fund Managers including LIC Pension Fund have been appointed to manage the fund
under NPS for all citizens. Any citizen of India desiring to open an NPS account can contact any
of the Points of Presence (POPs) appointed by PFRDA or through eNPS.
Investment Options:
For Govt. Employees:
NPS funds are invested by the Pension Fund Managers in prescribed asset class as per
following investment pattern w.e.f 01.04.2019 :
Govt. Securities & related investments Upto a maximum of 55%
Debt Instruments & related investments Upto a maximum of 45%
Equity & related investments Upto a maximum of 15%
Asset Backed, Trust Structured and Misc. Investments Upto a maximum of 5%
Short-term Debt Instruments & related investment Upto a maximum of 10%
For All Citizens : Under the investment guidelines finalized for the NPS, pension fund managers
will manage four separate schemes, each investing in a different asset class. The four asset classes
are equity, government securities, credit risk-bearing fixed income instruments and alternate
investments. A subscriber opening an account with NPS with any one of the POPs or through
eNPS is provided a Permanent Retirement Account Number (PRAN), which is a unique number
and it remains with the subscriber throughout his lifetime. The scheme is structured into two tiers:
Tier-I account : This is the non-withdrawable permanent retirement account into which the
accumulations are deposited and invested as per the option of the subscriber

Tier-II account : This is a voluntary withdrawable account which is allowed only when there is
an active Tier I account in the name of the subscriber. The withdrawals are permitted from this
account as per the needs of the subscriber as and when claimed. However, the tax benefits are not
at par with Tier I account.
Fund Management and other charges :
NPS is the least cost pension system in India and probably in the world. Nowhere the fund
management charge is so low, which has been determined through competitive bidding in a very
transparent manner. The fund management fee is 0.01% p.a. under NPS all-Citizens scheme.
Tax Treatment:
Tax benefit to employee:
Individuals who are employed and contributing to NPS would enjoy tax benefits on their own
contributions as well as their employer’s contribution as under:-
(a) Employee’s own contribution - Eligible for tax deduction up to 10% of Salary (Basic + DA)
under Section 80 CCD(1) within the overall ceiling of Rs. 1.50 lakh under Sec 80CCE.
(b) Employer’s contribution – The employee is eligible for tax deduction up to 10% of Salary
(Basic + DA) contributed by employer under Sec 80CCD(2) over and above the limit of Rs. 1.50
lakh provided under Sec 80CCE.
Tax benefit for self-employed:
Eligible for tax deduction up to 10% of gross income under Sec 80CCD(1) within the overall
ceiling of Rs. 1.50 lakh under Sec 80CCE.
Subscriber is allowed deduction in addition to the deduction allowed under Sec. 80CCD(1)
for additional contribution in his NPS account subject to maximum investment of Rs. 50,000/-
under sec. 80CCD1(B)

Partial Withdrawal:
Partial Withdrawal is allowed to the subscriber subject to subscriber fulfilling the following
conditions and withdrawal can happen only against specified reasons:
Subscriber should be in NPS for 10 years
Amount should not exceed 25% of the contributions made by the subscriber
Purposes for which partial withdrawal allowed
- For the purpose of higher education of his/her children,
- For marriage of his/her children,
- For purchase or construction of residential house or flat
- For treatment of specified illnesses.
Frequency of partial withdrawal
- Maximum 3 (three) times during entire tenure,
- Minimum 5 (five) years gap between consecutive withdrawals
Types of Annuity:
The subscriber can purchase an annuity from any one of the PFRDA empaneled annuity service
providers as per his choice or selection of the annuity type. Currently, the Indian life insurers who
act as Annuity Service Providers(ASP) provide the following type of annuities in India :
Pension (Annuity) payable for life at a uniform rate to the annuitant only.
Pension (Annuity) payable for 5, 10, 15 or 20 years certain and thereafter as long as the subscriber
is alive.

Pension (Annuity) for life with return of purchase price on death of the annuitant (Policyholder).
Pension (Annuity) payable for life increasing at a simple rate of 3% p.a.
Pension (Annuity) for life with a provision of 50% of the annuity payable to spouse during
his/her lifetime on death of the annuitant.
Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during
his/her lifetime on death of the annuitant.
Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her
lifetime on death of the annuitant and with return of purchase price on death of the spouse. If the
spouse predeceases the annuitant, payment of annuity will cease after the death of the annuitant
and purchase price is paid to the nominee.
NPS is different from other pension schemes:
NPS is a technology driven low cost, highly transparent pension system.
Entire system of NPS is technology driven and all the entities of NPS interconnected.
Selection of Fund Managers, CRA, POPs were done under highly transparent manner through
competitive bidding.
Regulation of Asset Allocation aimed at reducing the risk content in the funds by keeping capped
equity exposure.
Mandatory Annuitization ensures that retirement savings provide regular flow of post retirement
income.

Pay-out is very flexible having in built provision of Mandatory annuity, Lump sum Withdrawal,
Phase Withdrawal (for All Citizens Scheme).

Chapter 6. Data Analysis
There are other basic factors that must almost always be taken into consideration in any pension
maximization analysis. These variables include:
● Your age: One who accepts a lump sum at age 50 is obviously taking more of a risk than
one who receives a similar offer at age 67. Younger clients face a higher level of
uncertainty than older ones, both financially and in other ways.
● Your current health and projected longevity: If your family history shows a pattern of
predecessors dying of natural causes in their late 60s or early 70s, then a lump-sum payment
may be the way to go. Conversely, someone who is projected to live to age 90 will quite
often come out ahead by taking the pension. Remember that most lump sum payouts are
calculated based on charted life expectancies, so those who live past their projected age
are, at least mathematically, likely to beat the lump sum payout. You might also consider
whether health insurance benefits are tied to the pension payouts in any way.
● Your current financial situation: If you are in dire straits financially, then the lump-sum
payout may be necessary. Your tax bracket can also be an important consideration; if you
are in one of the top marginal tax brackets, then the bill from Uncle Sam on a lump-sum
payout can be murderous. And if you are burdened with a large amount of high-interest
obligations, it may be wiser to simply take the lump sum to pay off all of your debts rather
than continue to pay interest on all of those mortgages, car loans, credit cards, loans and
other consumer liabilities for years to come. A lump-sum payout may also be a good idea
for those who intend to continue working at another company and can roll this amount into
their new plan, or for those who have delayed their Social Security until a later age and can
count on a higher level of guaranteed income from that.
● The projected return on the client’s portfolio from a lump-sum investment: If you feel
confident your portfolio will be able to generate investment returns that will approximate
the total amount that could have been received from the pension, then the lump sum may
be the way to go. Of course, you need to use a reasonable payout factor here, such as 3%,

and don’t forget to take drawdown risk into account in your computations. Current market
conditions and interest rates will also obviously play a role, and the portfolio that is used
must fall within the parameters of your risk tolerance, time horizon and specific investment
objectives.
● Safety: If you have a low risk tolerance, prefer the discipline of annuitized income, or
simply don't feel comfortable managing large sums of money, then the annuity payout is
probably the better option because it’s a safer bet. In case of a company plan going
bankrupt, along with the protection of the PBGC, state reinsurance funds often step in to
indemnify all customers of an insolvent carrier up to perhaps two or three hundred thousand
dollars.
● The cost of life insurance: If you're in relatively good health, then the purchase of a
competitive indexed universal life insurance policy can effectively offset the loss of future
pension income and still leave a large sum to use for other things. This type of policy can
also carry accelerated benefit riders that can help to cover the costs for critical, terminal or
chronic illness or nursing home care. However, if you are medically uninsurable, then the
pension may be the safer route.
● Inflation protection: A pension payout option that provides a cost-of-living increase each
year is worth far more than one that does not. The purchasing power from pensions without
this feature will steadily diminish over time, so those who opt for this path need to be
prepared to either lower their standard of living in the future or else supplement their
income from other sources.
● Estate planning considerations: If you want to leave a legacy for children or other heirs,
then an annuity is out. The payments from these plans always cease at the death of either
the retiree or the spouse, if a spousal benefit option was elected. If the pension payout is
clearly the better option, then a portion of that income should be diverted into a life
insurance policy, or provide the body of a trust.
With a defined-contribution plan, you have several options when it comes time to shut that office
door.

● Leave In: You could just leave the plan intact and your money where it is. You may in
fact find the firm encouraging you to do so. If so, your assets will continue to grow tax-
deferred until you take them out. Under the IRS' required minimum distribution rules, you
have to begin withdrawals once you reach age 70½. There may be exceptions, however, if
you are still employed by the company in some capacity.
● Installment: If your plan allows it, you can create an income stream, using installment
payments or an income annuity – sort of a paychecks-to-yourself arrangement throughout
the rest of your retirement lifetime. If you annuitize, bear in mind that the expenses
involved could be higher than with an IRA.
● Roll Over: You can roll over your 401(k) funds to a traditional IRA, where your assets
will continue to grow tax-deferred. One advantage of doing this is that you will probably
have many more investment choices. You can then convert some or all of the traditional
IRA to a Roth IRA. You can also roll over your 401(k) directly into a Roth IRA. In both
cases, although you will pay taxes on the amount you convert that year, all subsequent
withdrawals from the Roth IRA will be tax-free. In addition, you are not required to make
withdrawals from the Roth IRA at age 70½ or, in fact, at any other time during your life.
● Lump Sum: As with a defined-benefit plan, you can take your money in a lump sum. You
can invest it on your own or pay bills, after paying taxes on the distribution. Keep in mind,
a lump sum distribution could put you in a higher tax bracket, depending on the size of the
distribution.

LIC's Contribution to the five year plans over the years
Pla
Year Investment
n
2 1956-1961 ₹184 Cr
3 1961-1966 ₹285 Cr
4 1969-1974 ₹1,530 Cr
5 1974-1979 ₹2,942 Cr
6 1980-1985 ₹7,140 Cr
7 1985-1990 ₹12,969 Cr
8 1992-1997 ₹56,097 Cr
9 1997-2002 ₹1,79 Cr
10 2002-2007 ₹3,94,779 Cr
11 2007-2012 ₹7,04,151 Cr

₹14,23,055
12 2012-2017
Cr
13 2017-2022 ₹3,82,479 Cr

Chapter 7. Conclusion and Suggestions
LIC is the most trusted brand when it comes to life insurance. LIC has a huge range of products to
offer and it often becomes difficult to choose the right fit. So, we thought of easing this for you
and bring the best 5 policies offered by Life Insurance Corporation of India.
You can pick your cues from below.
1. LIC Jeevan Akshay VI
LIC Jeevan Akshay VI Plan is a Single Premium Immediate Annuity Plan which can be
purchased by paying a lump sum amount. It is a non unit-linked pension plan. This plan provides
for annuity payment of a fixed amount extending for a life time.
Salient Features
● Immediate Annuity Plan – Annuity starts as early as the next month

● Single Premium Plan – “Pay Once, Enjoy Forever”
● Minimum purchase price is Rs.1, 00,000 for offline and Rs.1, 50,000 for online purchase. There
is no maximum limit on purchase or annuity.
● More Annuity Options – 7 Options of Annuities to choose from
● Annuity payable for life at a uniform rate till the life assured is alive.
● Annuity payable for 5, 10, 15 or 20 years no matter if the insured person is alive or not, and
thereafter as long as the annuitant is alive.
● Annuity for life with return of purchase price on death of the annuitant.
● Increasing Annuity in which the pension is paid till the life assured is alive at an increasing rate
of 3% p.a.
● Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime
on death of the annuitant.
● Annuity for life with a provision of 100% of the annuity payable to spouse during his/her life
time on death of annuitant. The purchase price will be returned on the death of last survivor.
● Annuity for life with a provision for 100% of the annuity payable to the spouse of the annuitant
for life on death of the annuitant, with return of purchase price on the death of last survivor
● Covers broad range of age group – From 30 years to 85 years

● Maturity Benefit – No maturity benefits are available in this policy.

● No medical examination is required.
● Income Tax Benefit – Although, premiums paid under this policy are exempted from tax under
section 80C, but the pension received will be taxable.
● No surrender value shall be payable under this policy.
● No loan available under this plan.
● Incentive for online – Rebate of 1% by way of increase in the basic annuity rate will be available
LIC Policy Type Single Premium Immediate Annuity Plan
Minimum Age – 30 Years (Completed)

Entry Age
Maximum Age – 85 Years (Completed)
Minimum Purchase Minimum – Rs.1 lakh (All distribution Channels Except for Online)
Price Maximum – Rs. 1.5 Lakhs (Online)
Maximum Purchase
No Limit
Price
Modes of Annuity
Monthly, Quarterly, Half-Yearly, Yearly
Payment
Premium paid is tax exempt under Section 80C

Tax Benefit
Pensions received is taxable
Loan Facility Not Available

2. LIC e-Term Plan
LIC's e-Term policy is a pure life cover policy that provides financial protection to the insured's
family in case of any unfortunate event. In other words, you can say that it is a regular premium
non-participating (without bonus), “on-line term assurance policy”. This term insurance plan will
be available through on-line application process only and no agents are required.
Under the LIC’s e-Term policy, the insurer agrees to pay an agreed sum assured in the event of
his/her premature death during the policy term. Nevertheless, if the insured survives till the end of
the policy term, nothing is payable.
Salient Features
● Available on the official website of the LIC

● Differential premium rates for Smoker/Non-Smoker lives
● Application of own life ONLY will be considered
● Minimum Basic Sum Assured should be Rs. 25, 00,000 for Aggregate category and for Non-
smoker category it should be Rs. 50, 00,000. There is no upper limit for Maximum Basic Sum
Assured.
● Covers broad range of age group – Form 18 years to 60 years
● Loan is not available in this plan; Premiums have to be paid yearly.
● Minimum Policy Term for this plan is 10 years and Maximum Policy Term is 35 years.
Death and Maturity Benefits
Death Benefit: During the policy term if the unfortunate death of the life assured happens then the
sum assured will be payable.
Maturity Benefit: If the individual survives the policy term, nothing shall be payable.

LIC Policy Type Pure Term Plan
Minimum – Rs. 25,00,000

Sum Assured
Maximum – No Limit
Minimum Age – 18 Years

Entry Age
Maximum Age – 60 Years
Minimum – N/A
Age at Policy Maturity
Maximum – 75 years
Minimum – 10 years
Policy Term
Maximum – 35 years
Modes of Premium
Yearly
Payment
Tax Benefit Premium paid up to Rs. 1,00,000 is tax exempt under Section 80C
Allowed, within 2 years from the due date of first unpaid premium
Policy Revival
payment
Grace Period 30 Days from premium due date
Riders Not Available
Loan Facility Not Available

3. LIC New Children’s Money Back Plan

Launched on 4th March, 2015, New Children’s Money Back Plan is a non-linked, with-profit
regular premium payment policy particularly intended to meet educational, marriage and other
needs of a growing children. Moreover, this plan also provides risk cover to the insured child
during the policy term. That's why, it can be considered as a saving cum protection plan.
Salient Features
● Minimum Basic Sum Assured should be Rs. 100,000 and Maximum Basic Sum Assured has
No Limit. It should be noted that the Basic Sum Assured shall be in multiples of Rs. 10,000/-.
● Premiums can be paid regularly at monthly, quarterly, half-yearly or yearly mode (through
ECS only) or through SSS mode over the term of policy.
● Loan facility is available under this plan after the payment of premiums for at least three full
years.
● Age limit at entry for Life Assured: 0-12 years. The maturity age for the life assured is 25 years
i.e. policy term or premium paying term can be calculated by subtracting the age at entry by 25.
For example, if the child’s age is 7 at the time of entry then the policy term will be 25-7= 18 years.
● Surrender Value: If the premium has been paid for full three years then the policy can be
surrendered at any time during the policy term.
Death & Survival Benefits
Death Benefit:
o If death of insured occurs before the commencement of risk, an amount equivalent to the
premium payments will be paid.
o If death of the insured occurs after the commencement of risk, death benefit amount including
“Sum Assured on death + Final Additional Bonus + Accrued Bonuses” will be paid.
Survival Benefits (Money-Back payments):
o 20% of Sum Assured is paid after the child completes 18 years.


o After the child completes 25 years, the policy gets matured and the maturity amount which includes
40% of sum assured + Accrued Bonuses + Final Additional Bonus (FAB – if any) will be paid.
LIC Policy Type Participating Non-linked Money Back Plan
Minimum – 1,00,000
Sum Assured
Minimum Age – 0 Years (last birthday)

Entry Age
Maximum Age – 12 Years (last birthday)
Age at Policy Maturity 25 years
Policy Term 25 years
Modes of Premium Yearly, Half-yearly, Quarterly or Monthly (ECS only) or through SSS
Payment mode
under section 80C, under section 10(10D) (Death Benefit ), under section
Tax Benefit
10(10D) (Maturity Benefit)
Allowed within a period of 2 consecutive years from the date of first

unpaid premium but before the end of policy term on payment of all the
Policy Revival
arrears of premium together with interest (compounding half-yearly) at
such rate as fixed by the insurer.
30 days for all modes

Grace Period
15 days for monthly
Riders Premium Waiver Benefit Rider

Loan Facility Available
4. LIC Jeevan Anand Plan

LIC Jeevan Anand is a non-linked participating endowment plan that offers the dual benefit of
savings and protection. The advantage of investing in this plan is that, even after the policy
terminates, the life coverage continues till the death of the policy holder. A combination of whole
life and endowment plan, LIC Jeevan Anand offers Income tax benefits.
Salient Features
● Entry Age of the policy holder has to be minimum 18 years and maximum 50 years.
● Maximum maturity age is 75 years.
● Minimum and maximum policy terms are 15 years and 35 years respectively.
● You have to pay the premiums for the entire policy tenure
● If the policy holder survives till the completion of the policy term, the maturity benefit is paid out.
● It is whole life insurance plan.
● If the policy holder dies before the completion of the policy term, the sum assured is paid out to
the nominee as the death benefit.
● The minimum sum assured offered by the plan is Rs. 1,00,000/-
● Rebate is provided on opting for higher sum assured.
● Accidental death and disability benefits are the inbuilt rider of this plan.
● For additional protection you can buy Critical Illness rider.
● Premium paying term is equal to policy term.
● Premium paying frequencies include monthly, quarterly, half-yearly, and yearly.
● In case the policy holder commits suicide within 12 months from the commencement of the policy,
80% of the premiums will be paid back to the nominee.
● Accrued bonuses are paid out along with the sum assured.

● Death Benefit: In case of the policy holder’s death, the death benefit is paid out. The death
benefit is higher of :
1) 125% of the basic sum assured

2) 10 times the annualized premium
3) 105% of the total premium paid till the insured event.
● Maturity Benefit: If the policyholder survives the entire policy term, the sum assured is paid out
as the maturity benefit.
● Bonuses: Accrued bonuses are also paid out additionally with the sum assured. The bonuses
include simple reversionary bonus and terminal bonuses (if any).

LIC Policy Type Endowment cum Whole Life Policy
Minimum – 1,00,000
Sum Assured

Entry Age
Minimum– 5 Years
Policy Term
Maximum– 57 Years
Modes of Premium
Yearly, Half-yearly, Quarterly or Monthly, SSS mode
Payment
Premium exempt under section 80C, Maturity proceeds under section

Tax Benefit
10(10D)
Policy Revival Allowed within a period of 2 years

Grace Period
15 days for monthly
Riders Premium Waiver Benefit Rider
Loan Facility Available after 3 years

LIC New Jeevan Anand. Almost all features and benefits of the older version are still available in
the newer one, except for the maximum entry age and policy term. The maximum entry age has
been reduced to 50 years from 65 years and the policy term under this plan is now 15 years
(minimum) - 35 years (maximum).
5. LIC Jeevan Saral
Categorized under Special Plans, LIC Jeevan Saral is, in fact, an endowment policy with a lot of flexibilities that
is usually available only with unit linked insurance plans (ULIPs). With excellent features of the traditional plans
and the flexibility of ULIP plans, plan gives double death benefit of um assured plus return of premium.
Salient Features
● Flexible Monthly Premium payments and the Sum Assured is 250 times the Monthly Premium amount.
● Minimum Sum Assured in this plan is Rs. 62,500 and has no upper limits.
● Policy Term – Minimum: 10 Years and Maximum: 35 Years
● Entry Age of Policy Holder – 12 to 60 Years
● Payment Mode can be monthly, quarterly, half yearly and yearly.
● Optional higher cover through Term Rider, Accidental Death and Disability Benefit.
● Loyalty Additions are provided after the policy completes 10 years.
● Partial surrender of the policy can be done after the 3rd policy year.
● Loan on this plan is available.
● Income Tax Benefit – Available under Section 80 C for premiums paid and Section 10 (10D) for Maturity
returns.
Death Benefit – In case of death of the Life Insured, the nominee receives
o Sum Assured (i.e. 250 times the Monthly Premium)

o Return of premiums excluding extra/rider premium and first year premium
o Loyalty Addition, if any
Maturity Benefit – At the maturity of the policy, the insured will get
o Maturity Sum Assured (Depends on age of entry and policy term)

o Loyalty Additions, if any

LIC Policy Type Endowment Assurance plan
Sum Assured 250 times Monthly Premium

Entry Age

Policy Term
Modes of Premium
yearly, half-yearly, quarterly, or monthly through salary deductions
Payment
Tax Benefit Premium exempt under section 80C, Maturity proceeds under section 10(10D)
Policy Revival Allowed within the five consecutive years from the date of first unpaid premium

Grace Period
15 days for monthly
Riders Term Rider, Accidental Death & Disability Rider
Loan Facility Available

6. Pradhan Mantri Vaya Vandana Yojana

1. Introduction: Government of India in the Budget Speech of 2018-19 has announced the
enhancement of maximum limit under Pradhan Mantri Vaya Vandana Yojana to Rs. 15 lakhs per
senior citizen. The period of sale for this scheme has also been extended upto 31st March, 2020.
LIC of India has been given the sole privilege to operate this scheme. This scheme can be
purchased offline as well as online. To Purchase this scheme online please log on to our website
www.licindia.in.
2. Benefits: a. Pension Payment : On survival of the Pensioner during the policy term of 10 years,
pension in arrears (at the end of each period as per mode chosen) shall be payable.
b. Death Benefit: On death of the Pensioner during the policy term of 10 years, the Purchase Price
shall be refunded to the beneficiary.
c. Maturity Benefit: On survival of the pensioner to the end of the policy term of 10 years, Purchase
price along with final pension installment shall be payable.
3. Eligibility Conditions and Other Restrictions: a) Minimum Entry Age: 60 years (completed)
b) Maximum Entry Age: No limit
c) Policy Term : 10 years
d) Minimum Pension: Rs. 1,000/- per month Rs. 3,000/- per quarter Rs.6,000/- per half-year
Rs.12,000/- per year
e) Maximum Pension: Rs. 10,000/-per month Rs. 30,000/-per quarter Rs. 60,000/- per half-year
Rs. 1,20,000/- per year Ceiling of maximum pension is per senior citizen i.e. total amount of
pension under all the policies under this plan, including policies taken under Pradhan Mantri Vaya
Vandana Yojana with UIN: 512G311V01, allowed to a senior citizen shall not exceed the
maximum pension limit.
4. Payment of Purchase Price: The scheme can be purchased by payment of a lump sum Purchase
Price. The pensioner has an option to choose either the amount of pension or the Purchase Price.
The minimum and maximum Purchase Price under different modes of pension will be as under: 2
Mode of Pension Minimum Purchase Price Maximum Purchase Price Yearly Rs. 1,44,578/- Rs.

14,45,783/- Half-yearly Rs. 1,47,601/- Rs. 14,76,015/- Quarterly Rs. 1,49,068/- Rs. 14,90,683/-
Monthly Rs. 1,50,000/- Rs. 15,00,000/- The Purchase Price to be charged shall be rounded to
nearest rupee.
5. Mode of pension payment: The modes of pension payment are monthly, quarterly, half-yearly
& yearly. The pension payment shall be through NEFT or Aadhaar Enabled Payment System. The
first instalment of pension shall be paid after 1 year, 6 months, 3 months or 1 month from the date
of purchase of the same depending on the mode of pension payment i.e. yearly, half-yearly,
quarterly or monthly respectively.
6. Sample Pension rates per Rs.1000/- Purchase Price The pension rates for Rs.1000/-
Purchase Price for different modes of pension payments are as below: Yearly: Rs. 83.00 p.a.
Half-yearly: Rs. 81.30 p.a. Quarterly: Rs. 80.50 p.a. Monthly: Rs. 80.00 p.a. The pension
instalment shall be rounded off to the nearest rupee. These rates are age independent.
7. Surrender Value: The scheme allows premature exit during the policy term under exceptional
circumstances like the Pensioner requiring money for the treatment of any critical/terminal illness
of self or spouse. The Surrender Value payable in such cases shall be 98% of Purchase Price.
8. Loan: Loan facility is available after completion of 3 policy years. The maximum loan that can
be granted shall be 75% of the Purchase Price. The rate of interest to be charged for loan amount
shall be determined at periodic intervals. For the loan sanctioned till 30th April, 2018, the
applicable interest rate is 10% p.a. payable half-yearly for the entire term of the loan. Loan interest
will be recovered from pension amount payable under the policy. The Loan interest will accrue as
per the frequency of pension payment under the policy and it will be due on the due date of pension.
However, the loan outstanding shall be recovered from the claim proceeds at the time of exit.
9. Taxes: Statutory Taxes, if any, imposed on this Plan by the Government of India or any other
constitutional tax Authority of India shall be as per the Tax laws and the rate of tax as applicable
from time to time. The amount of tax paid shall not be considered for the calculation of benefits
payable under the plan. 3
10. Free Look period: If a policyholder is not satisfied with the “Terms and Conditions” of the
policy, he/she may return the policy to the Corporation within 15 days (30 days if this policy is
purchased online) from the date of receipt of the policy stating the reason of objections. The

amount to be refunded within free look period shall be the Purchase Price deposited by the
policyholder after deducting the charges for Stamp duty and pension paid, if any.
11. Exclusion: Suicide: There shall be no exclusion on count of suicide and full Purchase Price
shall be payable.

7. LIC’s New Jeevan Nidhi Plan

LIC’s New Jeevan Nidhi Plan is a conventional with profits pension plan with a combination of
protection and saving features. This plan provides for death cover during the deferment period and
offers annuity on survival to the date of vesting.
1. Benefits:
Benefit on Vesting: Provided the policy is in full force, on vesting an amount equal to the Basic
Sum Assured along with accrued Guaranteed Additions, vested Simple Reversionary bonuses and
Final Additional bonus, if any, shall be made available to the Life Assured.
The following options shall be available to the Life Assured for utilization of the benefit amount.
a) To purchase an immediate annuity The Life Assured shall have a choice to commute the
amount available on vesting to the extent allowed under Income Tax Act. The entire amount
available on vesting or the balance amount after commutation, as the case may be, shall be utilized
to purchase immediate annuity at the then prevailing annuity rates. Commutation shall only be
allowed provided the balance amount is sufficient to purchase a minimum amount of annuity as
per the provisions of section 4 of Insurance Act, 1938.
In case the total benefit amount is insufficient to purchase the minimum amount of annuity, then
the said amount shall be paid as a lump sum to the Life assured.
The annuity shall only be purchased from Life Insurance Corporation of India.
or
b) To purchase a new Single Premium deferred pension product from Life Insurance
Corporation of India Under this option the entire proceeds available on vesting shall be utilized
to purchase a single premium deferred pension product provided the policyholder satisfies the
eligibility criteria for purchasing single premium deferred pension product. The Life Assured will
have to intimate his / her intention to go for a particular option available on the date of vesting
atleast six months prior to the date of vesting.
» Death Benefit:
Death during first five policy years: Provided the policy is in full force, Basic Sum Assured
along with accrued Guaranteed Addition shall be paid as lump sum or in the form of an annuity or
partly in lump sum and balance in the form of an annuity to the nominee.
Death after first five policy years: Provided the policy is in full force, Basic Sum Assured along
with accrued Guaranteed Addition, Simple Reversionary and Final Additional Bonus, if any, shall
be paid as lump sum or in the form of an annuity or partly in lump sum and balance in the form of
an annuity to the nominee. In any case, provided all due premiums have been paid, the total death
benefit at any time shall not be less than 105% of the total premiums paid (excluding taxes, extra
premium and rider premium, if any). The amount of annuity will depend on the payable lump sum
and the then prevailing immediate annuity rates.
» Guaranteed Additions: The policy provides for Guaranteed Additions @ Rs.50/- per thousand
Basic Sum Assured for each completed year, for the first five years.
» Participation in profits: Provided the policy is in full force, depending upon the Corporation’s
experience the policies shall participate in profits from 6th year onwards for a Simple Reversionary
Bonus at such rate and on such terms as may be declared by the Corporation.Final (Additional)
Bonus may also be declared under the policy in the year when the policy results into a claim either
by way of death or on vesting, provided the policy has run for certain minimum term.
2. Optional Benefit:
LIC’s Accidental Death and Disability Benefit Rider: LIC’s Accidental Death and Disability
Benefit Rider is available as an optional rider by payment of additional premium under regular
premium policies. In case of accidental death, the Accident Benefit Sum Assured will be payable
as lumpsum along with the death benefit under the basic plan. In case of accidental disability
arising due to accident (within 180 days from the date of accident), an amount equal to the Accident

Benefit Sum Assured will be paid in equal monthly instalments spread over 10 years and future
premiums for Accident Benefit Sum Assured as well as premiums for the portion of Basic Sum
Assured which is equal to Accident Benefit Sum Assured under the policy, shall be waived. If the
policy becomes a claim either by way of death or the policy vests before the expiry of the said
period of 10 years, the disability benefit instalments which have not fallen due will be paid in lump
sum. The Accident Benefit Sum Assured may be opted for an amount upto the Basic Sum Assured
subject to minimum of Rs. 1,00,000 and maximum of Rs. 50 lakh (under individual as well as
group policies with LIC of India). This benefit will be available only till the vesting age.
8. LIC’S JEEVAN SHANTI - A Non-Linked, Non-Participating, Single

Premium Annuity Plan.
Conclusion
Retirement planning is the most important part of our financial planning. Retirement is inevitable
as your professional life will come to an end one day. So, a systematic retirement planning is what
everyone should start as early as possible in order to make your golden years more beautiful.
LIC is the most trusted brand when it comes to life insurance. LIC has a huge range of products to
offer and it often becomes difficult to choose the right fit. So, we thought of easing this for you
and bring the best 8 policies offered by Life Insurance Corporation of India.

Chapter 8. Bibliography and Webliography
www.wikipedia.com
www.investopedia.com
www.licpensionfund.in
www.policybazzar.com
www.licindia.in

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PRAHLADRAIONS COLLEGE OF COMMERCE & ECONOMICS

A pension created by an employer for the benefit of an employee is commonly referred to as an

PENSION POLICIES BY LIC Page1

The Employees' Provident Fund Organization (abbreviated to EPFO), is an organization tasked to

PENSION POLICIES BY LIC Page2

Formation of the Company

PENSION POLICIES BY LIC Page3

Breaking Down Pension Plan

PENSION POLICIES BY LIC Page4

PENSION POLICIES BY LIC Page5

PENSION POLICIES BY LIC Page7

PENSION POLICIES BY LIC Page8

PENSION POLICIES BY LIC Page9

Chapter 3. Research Methodology

PENSION POLICIES BY LIC Page10

3. Pension plans with and without life cover

4. Traditional and Unit-Linked Pension Plans

PENSION POLICIES BY LIC Page11

10. Compulsory Retirement Pension:

11. Compassionate Allowance:

12. Extraordinary Pension:

13. Family Pension:

(i) dies while in service on or after 01/01/1964 or

(ii) retired/died before 31.12.1963 or

(iii) retires on or after 01/01/1964

and at the time of his death was in receipt of pension.

PENSION POLICIES BY LIC Page13

PENSION POLICIES BY LIC Page14

Chapter 4. Literature Review

2001: NMBS is transferred to the Department of Family Welfare.

The National Assistance Program consists of five sub-schemes:

Indira Gandhi National Old Age Pension Scheme (IGNOAPS)

Indira Gandhi National Widow Pension Scheme (IGNWPS)

Indira Gandhi National Disability Pension Scheme (IGNDPS)

National Family Benefit Scheme (NFBS)

PENSION POLICIES BY LIC Page16

● Postal Life Insurance (PLI) was introduced on 1 February 1884

PENSION POLICIES BY LIC Page17

PENSION POLICIES BY LIC Page18

Chapter 5. Needs of topic

PENSION POLICIES BY LIC Page19

National Pension System (NPS) :

Scheme for Govt employees :

The NPS is a two tier Defined Contribution Pension System.

Tier I : Mandatory non-withdrawable Pension Account mandatory for Central Government

PENSION POLICIES BY LIC Page20

Tier–II : Voluntary withdrawable Savings Account. No contribution will be made by the

All-citizens and scheme for corporate subscribers:

PENSION POLICIES BY LIC Page21

Entities under NPS Architecture :

Operationalization of National Pension System (NPS)

For Govt. Employees:

Govt. Securities & related investments Upto a maximum of 55%

Debt Instruments & related investments Upto a maximum of 45%

Equity & related investments Upto a maximum of 15%

Asset Backed, Trust Structured and Misc. Investments Upto a maximum of 5%

Short-term Debt Instruments & related investment Upto a maximum of 10%

PENSION POLICIES BY LIC Page23

Fund Management and other charges :