Listen to this article
The current workforce especially in the private sector does not have any social security benefits. Employees in the Organised sector have access to the Employee Provident Fund (EPF) but Gig workers and freelancers have no other option other than the National Pension Scheme (NPS). So, you need to plan for retirement well in advance.
Accumulating adequate retirement corpus is one of the primary goals of any individual. LIC New Jeevan Shanti guarantees you with lifelong pension. Is LIC New Jeevan Shanti a Good or Bad option for your post-retirement needs?
In this article, let us find the Advantages(pros) and Disadvantages(cons) of LIC New Jeevan Shanti and review the plan to find out whether this plan suits your retirement basket.
Let’s get started!
Table of Contents
1.)An overview of LIC New Jeevan Shanti
2.)Features of LIC New Jeevan Shanti – Analysis
3.)Eligibility Criteria of LIC New Jeevan Shanti
4.)Plan options in LIC New Jeevan Shanti – Review
5.)Review of Benefits in detail – LIC New Jeevan Shanti
6.)Free Look Period of LIC New Jeevan Shanti
7.)Surrendering LIC New Jeevan Shanti
8.)Advantages of LIC New Jeevan Shanti – Analysis
9.)Disadvantages of LIC New Jeevan Shanti – Analysis
10.)Research Methodology Of LIC New Jeevan Shanti
- Benefit illustration – IRR (Internal Rate of Return) analysis of LIC New Jeevan Shanti
11.)LIC New Jeevan Shanti vs. Other Investment Options
- LIC New Jeevan Shanti Vs. ELSS
- LIC New Jeevan Shanti vs. LIC New Pension Plus
- LIC New Jeevan Shanti vs. LIC Jeevan Akshay – VII
12.)LIC New Jeevan Shanti vs. Other Investment Options – Review Conclusion
13.)Final Verdict on LIC New Jeevan Shanti – Good or Bad?
1. An overview of LIC New Jeevan Shanti
It is a Non-Linked, Non-Participating, Individual, Single Premium, Deferred Annuity Plan. The policy’s inception guarantees the annuity rates, and payments begin after the deferment period and continue for the duration of the annuitant(s)’s life.
2. Features of LIC New Jeevan Shanti – Analysis
- Single premium payment and annuity start after the end of the deferment period.
- Fixed annuity rates from the inception of the policy.
- Multiple annuity options are available.
- Increasing Death Benefit during the deferment period.
- Option to choose between Single life and Joint life Deferred annuity.
3. Eligibility Criteria Of LIC New Jeevan Shanti
| Minimum | Maximum | |
| Age at entry | 30 years | 79 years |
| Age at Maturity | 31 years | 80 years |
| Deferment period | 1 year | 12 years |
| Purchase Price | 1,50,000 | No Limit |
| Annuity Mode | Monthly, Quarterly, Half-yearly and Annual | |
4. Plan options in LIC New Jeevan Shanti – Review
Option 1: Deferred annuity for Single life
During the deferment period:
On survival of annuitant – Nothing is payable
On death of annuitant – Death Benefit is payable.
After the deferment period:
On survival of annuitant – Annuity is payable in arrears as per chosen mode
On the death of the annuitant – Annuity, payment shall cease and Death Benefit is payable.
Option 2: Deferred annuity for Joint life
During the deferment period:
On survival of primary and/or secondary annuitant – Nothing is payable
On the death of the last survivor – Death Benefit is payable.
After the deferment period:
On survival of annuitant – Annuity is payable in arrears as per chosen mode as long as the Primary
The annuitant and/or Secondary Annuitant is alive.
On the death of the last survivor – Annuity payment shall cease and Death Benefit is payable.
5. Review of Benefits in detail – LIC New Jeevan Shanti
Death Benefit
Death Benefits under both of the Options shall be: Higher of
- Purchase Price plus Accrued Additional Benefit on Death minus Total annuity amount payable till date of death, if any OR
- 105% of Purchase Price
Accrued Additional Benefit on Death: Additional Benefit on Death shall accrue at the end of each policy month, till the end of the Deferment Period.
6. Free Look Period of LIC New Jeevan Shanti
If the LIC New Jeevan Shanti Policyholder is not satisfied with the “Terms and Conditions” of the policy, the policy may be returned to the Corporation within 30 days from the date of receipt of the electronic or physical mode of the LIC New Jeevan Shanti policy bond, whichever is earlier.
7. Surrendering LIC New Jeevan Shanti
The LIC New Jeevan Shanti policy can be surrendered at any time during the policy term. The surrender value payable shall be higher than the Guaranteed Surrender Value or Special Surrender Value.
8. Advantages of LIC New Jeevan Shanti – Analysis
- Hassle-free investment.
- An annuity could act as a second source of income throughout your lifetime.
- Guaranteed annuity and Guaranteed Death Benefit.
- The policy loan option is available at any time after three months of issuance of the policy.
- Death Benefit can be utilized to purchase an immediate annuity plan from the corporation.
9. Disadvantages of LIC New Jeevan Shanti – Analysis
- The annuity amount is not adjusted to inflation. Throughout your lifetime you receive the same amount.
- This annuity amount can’t be solely relied upon for all your post-retirement needs.
- An annuity is fully taxable.
10. Research Methodology Of LIC New Jeevan Shanti
One-time premium payments and lifelong annuity an attractive features of LIC New Jeevan Shanti. But we need to analyze the product in terms of return. Guaranteed annuity may look lucrative but we need to figure out the returns. For this, let us analyze the illustration given in the sales brochure
Benefit illustration – IRR (Internal Rate of Return) analysis of LIC New Jeevan Shanti
A 45-year-old male buys LIC New Jeevan Shanti for ₹10 Lakhs. The deferment period is 12 years. The annual annuity amount is ₹1,39,900.
| Age | 45 years |
| Purchase price | 10 Lakhs |
| Deferment period | 12 years |
| Annuity Mode | Annual |
| Annuity Amount | 1,39,900 |
The annuitant is eligible for a lifelong annuity under LIC New Jeevan Shanti. Here, we assumed a life expectancy of 85 years. On the death of the annuitant, a Death Benefit is payable.
| Age | Year | LIC New Jeevan Shanti | |
| Annualised premium / Benefit | Death Benefit | ||
| 45 | 1 | -10,00,000 | 10,00,000 |
| 46 | 2 | 0 | 10,00,000 |
| 47 | 3 | 0 | 10,00,000 |
| 48 | 4 | 0 | 10,00,000 |
| 49 | 5 | 0 | 10,00,000 |
| 50 | 6 | 0 | 10,00,000 |
| 51 | 7 | 0 | 10,00,000 |
| 52 | 8 | 0 | 10,00,000 |
| 53 | 9 | 0 | 10,00,000 |
| 54 | 10 | 0 | 10,00,000 |
| 55 | 11 | 0 | 10,00,000 |
| 56 | 12 | 0 | 10,00,000 |
| 57 | 13 | 0 | 10,00,000 |
| 58 | 14 | 1,39,900 | 10,00,000 |
| 59 | 15 | 1,39,900 | 10,00,000 |
| 60 | 16 | 1,39,900 | 10,00,000 |
| 61 | 17 | 1,39,900 | 10,00,000 |
| 62 | 18 | 1,39,900 | 10,00,000 |
| 63 | 19 | 1,39,900 | 10,00,000 |
| 64 | 20 | 1,39,900 | 10,00,000 |
| 65 | 21 | 1,39,900 | 10,00,000 |
| 66 | 22 | 1,39,900 | 10,00,000 |
| 67 | 23 | 1,39,900 | 10,00,000 |
| 68 | 24 | 1,39,900 | 10,00,000 |
| 69 | 25 | 1,39,900 | 10,00,000 |
| 70 | 26 | 1,39,900 | 10,00,000 |
| 71 | 27 | 1,39,900 | 10,00,000 |
| 72 | 28 | 1,39,900 | 10,00,000 |
| 73 | 29 | 1,39,900 | 10,00,000 |
| 74 | 30 | 1,39,900 | 10,00,000 |
| 75 | 31 | 1,39,900 | 10,00,000 |
| 76 | 32 | 1,39,900 | 10,00,000 |
| 77 | 33 | 1,39,900 | 10,00,000 |
| 78 | 34 | 1,39,900 | 10,00,000 |
| 79 | 35 | 1,39,900 | 10,00,000 |
| 80 | 36 | 1,39,900 | 10,00,000 |
| 81 | 37 | 1,39,900 | 10,00,000 |
| 82 | 38 | 1,39,900 | 10,00,000 |
| 83 | 39 | 1,39,900 | 10,00,000 |
| 84 | 40 | 1,39,900 | 10,00,000 |
| 85 | 41 | 1,39,900 | 10,00,000 |
| 10,50,000 | |||
| IRR | 6.12% | ||
In the above illustration, the IRR is calculated at 6.12% for LIC New Jeevan Shanti.
The IRR for the cash flow is 6.12%. In the initial years, the annuity may provide you steady stream of income. The purchasing power of money will be reduced year after year. This option is not viable down the lane. This will leave you in trouble in the later period. The returns are not convincing for a long-term investment.
11. LIC New Jeevan Shanti vs. Other Investment Options
This part of the analysis discusses the other investment opportunities where you can park your lumpsum amount. Over the years, this investment grows and becomes a part of your retirement kitty. This retirement corpus could be invested in a safe place to withdraw regularly similar to an annuity.
LIC New Jeevan Shanti offers life cover. But a similar life cover is not assumed here. Because anyway at the end of the term or on death your investment amount is returned to you or the nominee as the case may be.
i) LIC New Jeevan Shanti Vs. ELSS
10 Lakhs could be invested in an ELSS fund. During the deferment period, the money is parked and allowed to grow. At the time of exiting the fund, capital gains tax is payable. Tax calculation is given below.
The Pre-Tax Value under ELSS is ₹43.63 Lakhs. The post-tax value is ₹ 40.37 Lakhs. The Post-Tax Value is invested in a 7% return instrument. Similar to the annuity amount under LIC Jeevan, ₹1.39 Lakhs is withdrawn annually. At the end of 85 years, the balance is assumed to be withdrawn fully (Similar to the Death Benefit).
| Age | Year | ELSS | |
| ELSS | Death Benefit | ||
| 45 | 1 | -10,00,000 | 10,00,000 |
| 46 | 2 | 0 | 10,00,000 |
| 47 | 3 | 0 | 10,00,000 |
| 48 | 4 | 0 | 10,00,000 |
| 49 | 5 | 0 | 10,00,000 |
| 50 | 6 | 0 | 10,00,000 |
| 51 | 7 | 0 | 10,00,000 |
| 52 | 8 | 0 | 10,00,000 |
| 53 | 9 | 0 | 10,00,000 |
| 54 | 10 | 0 | 10,00,000 |
| 55 | 11 | 0 | 10,00,000 |
| 56 | 12 | 0 | 10,00,000 |
| 57 | 13 | 0 | 10,00,000 |
| 58 | 14 | 1,39,900 | 10,00,000 |
| 59 | 15 | 1,39,900 | 10,00,000 |
| 60 | 16 | 1,39,900 | 10,00,000 |
| 61 | 17 | 1,39,900 | 10,00,000 |
| 62 | 18 | 1,39,900 | 10,00,000 |
| 63 | 19 | 1,39,900 | 10,00,000 |
| 64 | 20 | 1,39,900 | 10,00,000 |
| 65 | 21 | 1,39,900 | 10,00,000 |
| 66 | 22 | 1,39,900 | 10,00,000 |
| 67 | 23 | 1,39,900 | 10,00,000 |
| 68 | 24 | 1,39,900 | 10,00,000 |
| 69 | 25 | 1,39,900 | 10,00,000 |
| 70 | 26 | 1,39,900 | 10,00,000 |
| 71 | 27 | 1,39,900 | 10,00,000 |
| 72 | 28 | 1,39,900 | 10,00,000 |
| 73 | 29 | 1,39,900 | 10,00,000 |
| 74 | 30 | 1,39,900 | 10,00,000 |
| 75 | 31 | 1,39,900 | 10,00,000 |
| 76 | 32 | 1,39,900 | 10,00,000 |
| 77 | 33 | 1,39,900 | 10,00,000 |
| 78 | 34 | 1,39,900 | 10,00,000 |
| 79 | 35 | 1,39,900 | 10,00,000 |
| 80 | 36 | 1,39,900 | 10,00,000 |
| 81 | 37 | 1,39,900 | 10,00,000 |
| 82 | 38 | 1,39,900 | 10,00,000 |
| 83 | 39 | 1,39,900 | 10,00,000 |
| 84 | 40 | 1,39,900 | 10,00,000 |
| 85 | 41 | 1,39,900 | 10,00,000 |
| 1,47,62,437 | |||
| IRR | 8.76% | ||
| ELSS Tax Calculation | |
| Pre-tax Maturity value | 43,63,493 |
| Less | |
| Purchase price | 10,00,000 |
| Long-term capital gains | 33,63,493 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 32,63,493 |
| Tax paid on LTCG | 3,26,349 |
| Maturity value after tax | 40,37,144 |
In the above illustration, the IRR for ELSS investment is calculated at 8.76%. You have full control over your funds here. If you need a step-up income, you have room for that as well. This will help to keep up with inflation. And you have liquidity throughout the term.
Inflation-adjusted annuity and Liquidity are the missing features under LIC New Jeevan Shanti. Alternatively, you can accumulate your retirement corpus through a diversified investment portfolio.
ii) LIC New Jeevan Shanti vs. LIC New Pension Plus
Some of the features of LIC New Pension Plus are,
- The option to select the premium payment amount and policy duration is subject to minimum and maximum premium, policy term, and vesting age constraints.
- The method of premium payment for regular premiums can be monthly, quarterly, half-yearly, or annually. It must be determined at the start of the policy term.
- An option that offers the same terms and circumstances as the initial insurance to extend the accumulation or deferment time inside the same policy.
Read the complete review of LIC New Pension Plus here.
iii) LIC New Jeevan Shanti vs. LIC Jeevan Akshay – VII
Some of the features of LIC Jeevan Akshay – VII are
- premium payments made once.
- spouse may be covered under joint insurance.
- There are ten different Annuity choices available.
Read the complete review of LIC Jeevan Akshay – VII here.
12. LIC New Jeevan Shanti vs. Other Investment Options – Review Conclusion
After comparing and analyzing LIC New Jeevan Shanthi with all other alternate investment options, it is clear that taking a Term Insurance for your life cover needs and then investing some amount in ELSS is a far better option for your retirement needs.
13. Final Verdict on LIC New Jeevan Shanti – Good or Bad?
LIC New Jeevan Shanti is a pension plan, which means it is designed to provide a regular income or pension to the policyholder after a specified period (deferment period). The deferment period ranges between 1 year and 12 years. Policyholders can choose to start receiving pension payments depending on their financial needs.
Guaranteed annuity throughout the lifetime and one-time premium payment will be the sales pitch by agents to sell this plan to you for their agent commission. But one must look at other factors like return and liquidity. While analyzing LIC New Jeevan Shanti, it is clear that in terms of return and liquidity, it is not beneficial to other investors.
Don’t fall prey to the word “Guaranteed Annuity”. In order to accumulate your retirement corpus, instead of searching social media sites like Quora, Facebook, Twitter, etc.. Consult a Certified financial planner. He will aid you in building your retirement corpus and planning your post-retirement period.
Leave a Reply