Listen to this article
A person who is about to retire often worries about how to manage the expenses without any regular income. During your working years, you can manage any emergency or any unplanned big-ticket expense easily.
But after retirement, a thousand question arises in mind like how to meet the living expense or any unforeseen expense. Can LIC Jeevan Akshay VII be a helping hand during your post-retirement period? Will LIC Jeevan Akshay VII provide financial security in post-retirement life?
In this article, we will figure out the advantages(pros) and disadvantages(cons) of LIC Jeevan Akshay VII and we will dissect whether ‘LIC Jeevan Akshay VII’ is a good or bad option for your golden years.
Let’s get started!
Table of Contents:
1.)An Overview of LIC Jeevan Akshay VII
2.)Features of LIC Jeevan Akshay VII – Analysis
3.)Eligibility Criteria of LIC Jeevan Akshay VII with Illustration
4.)Annuity Plan Options In LIC Jeevan Akshay VII
5.)LIC Jeevan Akshay VII – Review of Benefits in detail with Illustration
6.)Free-Look Period in LIC Jeevan Akshay VII
7.)Surrendering LIC Jeevan Akshay VII – Analysis
8.)Advantages of LIC Jeevan Akshay VII – Analysis
9.)Disadvantages of LIC Jeevan Akshay VII – Analysis
10.)Research Methodology Of LIC Jeevan Akshay VII – Analysis
11.)Benefit Illustration and IRR(Internal Rate Of Return i.e. Interest Rate) Analysis of LIC Jeevan Akshay VII
12.)LIC Jeevan Akshay VII vs. Other Investment Options
- LIC Jeevan Akshay VII vs. Bank Fixed Deposit
- LIC Jeevan Akshay VII vs. LIC Jeevan Lakshya
- LIC Jeevan Akshay VII vs. LIC Jeevan Azad
13.)LIC Jeevan Akshay VII vs. Other Investment Options – Review Conclusion
14.)Final verdict on LIC Jeevan Akshay VII – Good or Bad?
1. An Overview of LIC Jeevan Akshay VII
It is a Non-Linked, Non-Participating, Individual Immediate Annuity Plan. In this Immediate Annuity plan, you have the option to choose a type of annuity from 10 available options on payment of a lump sum amount. The annuity rates are guaranteed at the inception of the policy and annuities are payable throughout the lifetime of the Annuitant(s).
Click Here to download the official brochure of LIC Jeevan Akshay VII for more policy details.
2. Features of LIC Jeevan Akshay VII – Analysis
- One-time premium payment.
- Option to include spouse under Joint cover.
- There are 10 Annuity options to choose from.
- Annuity mode can be chosen as per your requirement – Monthly, Quarterly, Half-yearly, Annual.
- You get a guaranteed annuity at the chosen interval.
3. Eligibility Criteria of LIC Jeevan Akshay VII with Illustration
| Minimum Purchase Price | 25 years to 29 years – 10 Lakhs30 years & Above – 1 Lakh |
| Maximum Purchase Price | No Limit |
| Minimum Age at Entry | 25 years |
| Maximum Age at Entry | 85 years (100 Years for Option F) |
| Minimum Annuity | Monthly – ₹ 1000 Quarterly – ₹ 3000 Half-yearly – ₹ 6000 Annual – ₹ 12,000 |
| Annuity Mode | Yearly, half-yearly, quarterly, and monthly. |
4. Annuity Plan Options In LIC Jeevan Akshay VII
| Option A: | Immediate Annuity for life. |
| Option B: | Immediate Annuity with a guaranteed period of 5 years and life thereafter. |
| Option C: | Immediate Annuity with a guaranteed period of 10 years and life thereafter. |
| Option D: | Immediate Annuity with a guaranteed period of 15 years and life thereafter. |
| Option E: | Immediate Annuity with a guaranteed period of 20 years and life thereafter. |
| Option F: | Immediate Annuity for life with return of Purchase Price. |
| Option G: | Immediate Annuity for life increasing at a simple rate of 3% p.a. |
| Option H: | Joint Life Immediate Annuity for life with a provision for 50% of the annuity to the Secondary Annuitant on the death of the Primary Annuitant. |
| Option I: | Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitants survives. |
| Option J: | Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the annuitants survives and return of Purchase Price on death of last survivor. |
5. LIC Jeevan Akshay VII – Review of Benefits in detail with Illustration
| Option | Annuity Payment | On the death of the annuitant | Return of Purchase Price |
| Option A: | Made in arrears for as long as the Annuitant is alive | Annuity payment shall cease | No |
| Option B: | Made in arrears for as long as the Annuitant is alive |
|
No |
| Option C: | |||
| Option D: | |||
| Option E: | |||
| Option F: | Made in arrears for as long as the Annuitant is alive | Annuity payment shall cease | Yes |
| Option G: | Made in arrears for as long as the Annuitant is aliveAnnuity increases by a simple rate of3% p.a. | Annuity payment shall cease | No |
| Option H: | Made in arrears for as long as the primary Annuitant is alive |
|
No |
| Option I: | 100% of the annuity amount shall be paid in arrears for as long as the Primary Annuitant and/or Secondary Annuitant is alive, | On the death of the last survivor, the annuity payments will cease | No |
| Option J: | Yes |
Review of Death benefit In LIC Jeevan Akshay VII (options F & J)
The Annuitant(s) will have to choose one of the following options for the payment of the death benefit to the nominee(s) in LIC Jeevan Akshay VII.
Lumpsum Death Benefit: Under this option in LIC Jeevan Akshay VII, the entire Purchase Price shall be payable to the nominee(s) in lumpsum.
Annuitisation of Death Benefit: Under this option in LIC Jeevan Akshay VII the benefit amount payable on death i.e., Purchase Price shall be utilized for purchasing an Immediate Annuity from the Corporation for nominee(s). This LIC Jeevan Akshay VII option can be opted for full or part of the benefit amount payable on death.
In Instalment: Under this option in LIC Jeevan Akshay VII the benefit amount payable on death i.e., Purchase Price can be received in installments over the chosen period of 5 years instead of a lump sum amount. This option can be exercised for full or part of the Death Benefit payable under the policy.
6. Free-Look Period in LIC Jeevan Akshay VII
If you are not satisfied with the “Terms and Conditions” of the LIC Jeevan Akshay VII policy, the policy may be returned to the Corporation within 30 days from the date of receipt of the electronic or physical mode policy bond, whichever is earlier, stating the reasons for objections.
7. Surrendering LIC Jeevan Akshay VII – Analysis
Only under the following annuity options, the LIC Jeevan Akshay VII policy can be surrendered at any time after three months from the completion of the policy (i.e., 3 months from the date of issuance of the LIC Jeevan Akshay VII policy) or after the expiry of the free-look period, whichever is later.
LIC Jeevan Akshay VII Option F: Immediate Annuity for life with return of Purchase Price.
LIC Jeevan Akshay VII Option J: Joint Life Immediate Annuity for life with a provision for 100% of the annuity paid so long as one of the annuitants survives, with the Purchase Price being returned at the passing of the last survivor.
If the chosen annuity option is other than specified above, surrender of the policy shall not be allowed.
8. Advantages of LIC Jeevan Akshay VII – Analysis
- Hassle-free investment (lump sum investment).
- Annuity acts as a regular source of income.
- Death benefit (return of Purchase price) can be received as a Lump Sum or in installments.
- A joint life option is available.
- Loan can be availed.
9. Disadvantages of LIC Jeevan Akshay VII – Analysis
- The annuity option once chosen cannot be altered in LIC Jeevan Akshay VII.
- The Annuity amount is not adjusted for inflation. You receive a standard annuity every year (except Option G).
- Surrender of policy shall not be allowed for options other than Option F & Option J.
- The loan facility is available only under Option F & Option J.
- Once you purchase this plan, you can’t utilise the capital for any other purpose.
- An annuity is fully taxable.
10. Research Methodology Of LIC Jeevan Akshay VII – Analysis
Under LIC Jeevan Akshay VII, you receive a guaranteed annuity in the chosen annuity mode. Most of the options provide lifelong annuity. The return of purchase is available only under option F and option J. In order to find out the return & to understand how each option works, let us work out the benefit illustration given in the sales brochure.
11. Benefit Illustration and IRR(Internal Rate Of Return i.e. Interest Rate) Analysis of LIC Jeevan Akshay VII
Let us assume a 45-year-old male buys this plan for ₹ 10 lakhs (Purchase price). He chooses an annual annuity. Since most of the plan provides a lifelong annuity, we have assumed a life expectancy of 85 years. In the case of Joint life, we assume that the life expectancy of the last survivor is 85 years.
| Male | 45-year-old |
| Purchase Price | 10,00,000 |
| Annuity Mode | Annual |
Now, let us explore various annuity options. The following table will give a glimpse of the Annuity amount & the IRR(Internal Rate of Return i.e. Interest Rate) under each scenario.
| Annuity per annum | IRR | |
| Option A | 74,200 | 6.91% |
| Option B | 74,100 | 6.90% |
| Option C | 73,800 | 6.86% |
| Option D | 73,300 | 6.80% |
| Option E | 72,800 | 6.75% |
| Option F | 64,800 | 6.48% |
| Option G | 56,400 | 7.07% |
| Option H | 70,700 | 6.50% |
| Option I | 67,500 | 6.12% |
| Option J | 63,900 | 6.39% |
The IRR for various options is calculated in the above illustration.
Inference of the IRR analysis
Option A provides the highest annuity amount.
You get the maximum benefit under option G because you get an annual step-up income.
Least IRR for Option F & Option J as they return the purchase price at the end.
If you look at the IRR, it is almost hovering around 6.5%.
One might think that an annuity in the range of 6.5% is a good option. But, if you consider inflation, then the annuity wouldn’t be helpful in the long run. Moreover, you lose the opportunity to invest in other investment options as you don’t have the surrender option (Except in options F & option J). In the rising interest rate scenario, your funds get locked in LIC Jeevan Akshay VII.
12. LIC Jeevan Akshay VII vs. Other Investment Options
As we discussed, LIC Jeevan Akshay VII is like a mirage. It may look beneficial, but it is not value for money. Now, let us look at other investment options where you get regular income. The following instruments are also lumpsum investment options.
i) LIC Jeevan Akshay VII vs. Bank Fixed Deposit
In the following options, you have the advantage of spreading out the investment under various instruments (diversification). We can avoid the concentration of funds in one place.
| Bank FD | SCSS | RBI floating rate Bond | |
| Interest Rate (As of Aug 2023) | 6.5% – 7.5% | 8.2% | 8.05% |
| Tenure | 3 – 5 years | 5 years | 7 years |
| Frequency of Pay-out | Monthly, Quarterly, Half-yearly, Annual | Quarterly | Half-yearly |
| Maximum Investment Amount | No limit | Rs. 30 Lakhs | No Limit |
| Taxation | Exempt up to Rs. 50 K as Per Sec 80 TTB | Exempt up to Rs. 50 K as Per Sec 80 TTB | Fully Taxable |
| Premature Withdrawal | Allowed | Allowed | Allowed (For Senior citizens) |
| Return on the Purchase price (Investment Amount) | Returned at the end of Tenure | ||
A point to be noted here, the above options provide a standard regular cash flow without taking into account economic inflation. Only under the RBI Floating rate bond option, does your interest change as when there is a change in the market.
In order to get inflation-adjusted regular cash flow, it is always wise to invest in mutual funds. Here a portion of your fund is invested in equity, which grows & replenishes the debt part over the long term. Under this strategy, your corpus outlives you.
ii.) LIC Jeevan Akshay VII Vs. Inflation-adjusted income
Assume a 60:40 ratio for equity and debt, respectively. Out of ₹10 Lakhs, ₹6 Lakhs is invested in
equity for wealth accumulation, and ₹4 Lakhs is invested in debt for regular income needs. Equity
returns are assumed to be 12% p.a., and debt returns are assumed to be 6% p.a.
iii) LIC Jeevan Akshay VII vs. LIC Jeevan Lakshya
The Jeevan Lakshya Individual Life Assurance Plan from LIC is a non-linked, participating plan. It combines corpus savings with life insurance protection.
|
Age
|
Equity Portion |
Shift from Equity to Debt
|
Debt Portion | ||||
| Opening Balance | Yearly withdrawal | Closing Balance | Opening Balance | Yearly withdrawal | Closing Balance | ||
| 61 | 6,00,000 | 6,72,000 | 4,00,000 | 64,800 | 3,55,312 | ||
| 62 | 6,72,000 | 7,52,640 | 3,55,312 | 64,800 | 3,07,943 | ||
| 63 | 7,52,640 | 8,42,957 | 3,07,943 | 64,800 | 2,57,731 | ||
| 64 | 8,42,957 | 9,44,112 | 2,57,731 | 64,800 | 2,04,507 | ||
| 65 | 9,44,112 | 10,57,405 | 2,04,507 | 64,800 | 1,48,090 | ||
| 66 | 10,57,405 | 4,00,000 | 7,36,294 | 4,00,000 | 5,48,090 | 68,688 | 5,08,166 |
| 67 | 7,36,294 | 8,24,649 | 5,08,166 | 68,688 | 4,65,846 | ||
| 68 | 8,24,649 | 9,23,607 | 4,65,846 | 68,688 | 4,20,988 | ||
| 69 | 9,23,607 | 10,34,440 | 4,20,988 | 68,688 | 3,73,438 | ||
| 70 | 10,34,440 | 11,58,572 | 3,73.438 | 68,688 | 3,23,035 | ||
| 71 | 11,58,572 | 11,58,572 | 0 | 11,58,572 | 14,81,607 | 72,809 | 14,93,326 |
| 72 | 0 | 0 | 14,93,326 | 72,809 | 15,05,747 | ||
| 73 | 0 | 0 | 15,05,747 | 72,809 | 15,18,914 | ||
| 74 | 0 | 0 | 15,18,914 | 72,809 | 15,32,871 | ||
| 75 | 0 | 0 | 15,32,871 | 72,809 | 15,47,666 | ||
| 76 | 0 | 0 | 15,47,666 | 77,178 | 15,58,717 | ||
| 77 | 0 | 0 | 15,58,717 | 77,178 | 15,70,432 | ||
| 78 | 0 | 0 | 15,70,432 | 77,178 | 15,82,849 | ||
| 79 | 0 | 0 | 15,82,849 | 77,178 | 15,96,012 | ||
| 80 | 15,96,012 | 77,178 | 16,09,964 | ||||
| 81 | 16,09,964 | 81,809 | 16,19,845 | ||||
| 82 | 16,19,845 | 81,809 | 16,30,318 | ||||
| 83 | 16,30,318 | 81,809 | 16,41,420 | ||||
| 84 | 16,41,420 | 81,809 | 16,53,189 | ||||
| 85 | 16,53,189 | 81,809 | 16,65,663 | ||||
The first-year annuity amount is assumed to be similar to the Option F – Immediate Annuity for life with with return of Purchase Price, i.e., ₹ 64,800 Lakhs. Every five years, the debt portion is replenished from equity, and every five years, your annual withdrawal increases by 6% to combat inflation.
At the age of 71, the equity portion is fully shifted to debt. Even after this shift, the corpus outlives you, leaving you with approximately ₹16 Lakhs at the age of 85, which is higher than the return of the LIC Jeevan Akshay Plan’s purchase price.
The 60:40 ratio and the shift to debt at the age of 71 are illustrative and can be adjusted. Asset allocation and the shifting of funds between asset classes can be tailored to your risk appetite. This investment strategy demonstrates the efficient use of your hard-earned retirement corpus.
iv)LIC Jeevan Akshay VII vs. LIC Jeevan Azad
LIC Jeevan Azad is a non-linked, non-participating, individual savings plan for life insurance that combines savings and life insurance.
13. LIC Jeevan Akshay VII vs. Other Investment Options – Review Conclusion
After comparing and analyzing LIC Jeevan Akshay VII with other investment plans it is clear that Bank FDs give better returns than LIC Jeevan Akshay VII in the longer run.
14. Final verdict on LIC Jeevan Akshay VII – Good or Bad?
LIC Jeevan Akshay VII plans offer different pension options that you can choose based on your needs. Options may include a lifetime pension, joint-life pension, and pension with a return of purchase price.
You need to make a one-time lump-sum payment to purchase the plan. This payment is non-refundable (except under option F and option J), as the plan primarily focuses on providing a regular income stream.
The plan provides a fixed source of income during your retirement years. But you can’t rely solely on this income to meet your post-retirement expenses.
There are better investment options that yield you better returns than LIC Jeevan Akshay VII. Also, you have the flexibility in your investment which is missing in LIC Jeevan Akshay VII. Here your funds get locked & you can’t utilise the capital for any emergencies. From a return perspective, LIC Jeevan Akshay VII is not beneficial.
Those who want to lead a stress-free retirement life should prudently invest the retirement corpus. Any ready-made annuity plans will not provide you one-time solution for your retirement income.
Are you tired of searching for retirement income plans on social media sites like Quora, Facebook, Twitter, etc.? A professional financial planner can guide you through a comprehensive Retirement Plan.
Leave a Reply