LIC Saral Pension Plan (No. 862) | Review of Immediate Annuity Plan + Benefits (2023)

LIC Saral Pension Plan (Table No. 862 – 512N342V04) is a standard immediate annuity plan by LIC, where you need to pay the one-time lumpsum premium and you start getting your annuity income immediately. LIC already has an immediate annuity plan but this one, i.e., LIC’s Saral Pension plan is a comparatively simpler with limited options and was introduced in 2021 at the behest of IRDA.

If you want to know more about the LIC Saral Pension Review (2023) article, then in this article you will get to know all the LIC Saral Pension Plan Details and LIC Saral Pension Policy Benefits and features. We will also see how to arrive at LIC Saral Pension annuity rates using LIC Saral Pension Plan Calculator.

In 2021, IRDA asked all insurers (via circular) to launch a standard immediate annuity plan (or Saral Pension) where the features will remain uniform across all insurers. The Saral Pension plan simplifies the annuity selection for the individuals and reduce mis-selling. So, to meet this need, LIC launched LIC Saral Pension Plan No. 862 in 2021, even though it already had LIC Jeevan Akshay VII Pension plan.

It has revised the plan a few times across following versions – Plan UIN 512N342V01 was available from May-2021 to Mar-2022. The UIN 512N342V02 was available from Mar-2022 to Aug-2022. The third UIN 512N342V03 was available from Aug-2022 to Feb-2023. And finally, the latest LIC’s Saral Pension Plan product UIN 512N342V04 has been available for investment since 28-February-2023 after some revision in LIC Saral Pension Interest Rate in 2023.

LIC Website link to Policy page – Link

Many investors buy annuity products to generate an income stream during retirement years or whenever they get some lumpsum money and wish to replace their salary income (generally after retirement). LIC Saral Pension is one such simple and standard annuity product which allows you to buy a policy with one time payment today itself, and start getting regular guaranteed pension income for the rest of your life.

Let’s see the features now.

Features of LIC Saral Pension Plan (862)

Let’s see what are the LIC Saral Pension plan Benefits. Here are the plan details and prominent features:

• This is an Immediate Annuity product that comes under LIC Table No. 862
• What this means simply is that you need to pay a lumpsum amount one-time now, and the payment of pension will start immediately. Once it starts, the insurer will pay this pension to you for rest of your life. So even if you become a tortoise and live for a hundred or more years, even then you will keep getting the same pension.
• If you are not sure about the difference between Immediate Annuity and Deferred Annuity Plan, then here is a short explainer. In immediate annuity, the annuity payment starts immediately after payment of the lumpsum investment. On the other hand, in a deferred annuity product (like LIC New Jeevan Shanti), you defer the annuity payments for a few years and the payments start at the end of the deferment period. And LIC Saral Pension is an immediate pension plan.
• There is no upper limit for the maximum investment amount for this plan.
• One can purchase this plan at Minimum Entry Age of 40 years and up to a Maximum Entry Age of 80 years.
• This is an immediate annuity plan; and the Premium Payment Frequency therefore is One-Time Single Premium Payment as you pay the premium just once. So, it is Pay-Once-Enjoy-Forever kind of an annuity plan.
• To keep thing simple (and hence the name Saral), the LIC Saral Pension plan is available in just 2 options: Immediate Annuity for Single Life and Immediate Annuity for Joint Life. Both options come with Return of 100% of Purchase Price.
• How often will you get the annuity (pension) income? The annuity payment frequency can be chosen from options – Monthly, Quarterly, Half-yearly, Annual.
• All the annuity income is fully taxable and taxed as per policyholder’s income tax slab rates.
• At the time of purchase initially, you are eligible for tax benefit on the investment amount, but only up to Rs 1.5 lakh the under the Section 80CCC (and within the overall limit of Rs 1.5 lakh of Section 80C).
• The plan can be purchased offline via LIC office/agent as well as online on LIC website. Unsurprisingly and to push digital mode, there is a 2% rebate for online purchases of the policy. This means that for the same investment amount you will get a slightly higher annuity income.
• You don’t need to undergo any medical tests to purchase this plan.
• You can also buy more than one LIC Saral Pension policies in your name if you want.

Do remember that the option chosen (Single life vs Joint life) at the start of the LIC Table No. 862 policy is final and binding and cannot be changed later on. In the same way, the Annuity rates are decided and fixed and guaranteed at the beginning of the policy and remain the same. The annuity plan will then provide regular annuity payments of the calculated amount throughout the life time of the annuitant.

The annuity can be paid either at monthly, quarterly, half yearly or yearly intervals.

Now let’s discuss the 2 options available in this plan.

LIC Saral Pension Option 1 vs 2 (Immediate Annuity for Single Life vs. Joint Life Survivor)

In LIC Saral Pension’s 1st Variant (Single Life with Return of purchase price), you buy the plan and start getting pension immediately. After you, the investment amount is returned to the nominee.

In LIC Saral Pension’s 2nd Variant (Joint Life Survivor with Return of purchase price), you buy the plan and start getting pension immediately. After you, your spouse or 2nd annuitant also keeps getting the same pension for rest of their life. After them, the investment amount is returned to the nominee.

So, the only actual difference between Option 1 and Option 2 of LIC Saral Pension plan, is that unlike in 1st option, the annuity pension is paid to the second annuitant (of joint life) as well. This second annuitant may not necessarily be a spouse. It can also be a sibling or any other lineal ascendant or descendant like grandparents, parents, children, grandchildren, etc.

And there is obviously a difference in premium or purchase price of both the options. The plan 862 brochure provides the following illustration:

In the illustration provided by LIC, if a 60-year old person chooses the SINGLE LIFE option and invests Rs 10 lakh, then he will get an annual pension of Rs 64,350 per year, for as long as he is alive.

On the other hand, if a 60-year old person chooses the JOINT LIFE option with a 55-year old person, invests Rs 10 lakh, then he will get an annual pension of Rs 63,650 per year for as long as he lives on. And after him, the second annuitant will keep getting the same pension for rest of his/her life.

So, the annuity rates also take into account the age of the second annuitant and not just the primary first annuitant when deciding the premium for LIC Saral Pension plans.

LIC Saral Pension Interest Rates or Annuity Rates (2023)

The interest rate (annuity rate) depends on your age and the annuity variant. In case of joint life plans (where the spouse or any other family member), the annuity rate will also depend on the age of the second annuitant.

To find out the LIC Saral Jeevan Interest Rate 2023 or the latest annuity rates of LIC’s LIC Saral Pension (Plan No. 862, UIN : 512N342V04), I decided to use the LIC Online Premium Calculator on the website’s sales page (link) as the latest annuity rates are not available elsewhere on the LIC website.

Generally, annuity rate increases with the entry age of the investor in annuity plans but since the purchase price (investment amount) is returned to the nominee in LIC Saral Pension, the annuity rate does not increase much with increase in the entry age.

Here is what the calculator shows as sample, i.e., annual amount of annuity payable at yearly intervals which can be purchased for Rs 10 lakh under different variant and age combination.

Here is how to read the table above:

• If you are a 40-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-1 of Single Life, then you will immediately start getting an annual pension or annuity of Rs 63,690 per year for the rest of your life. This translates to an annuity rate of about 6.39% per annum.
• If you are a 40-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-2 of Joint Survivor Life, then you will immediately start getting an annual pension or annuity of Rs 63,450 per year for the rest of your life. This translates to an annuity rate of about 6.34% per annum.
• If you are a 50-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-1 of Single Life, then you will immediately start getting an annual pension or annuity of Rs 64,674 per year for the rest of your life. This translates to an annuity rate of about 6.46% per annum.
• If you are a 50-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-2 of Joint Survivor Life, then you will immediately start getting an annual pension or annuity of Rs 64,266 per year for the rest of your life. This translates to an annuity rate of about 6.42% per annum.
• If you are a 60-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-1 of Single Life, then you will immediately start getting an annual pension or annuity of Rs 65,592 per year for the rest of your life. This translates to an annuity rate of about 6.55% per annum.
• If you are a 60-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-2 of Joint Survivor Life, then you will immediately start getting an annual pension or annuity of Rs 65,082 per year for the rest of your life. This translates to an annuity rate of about 6.51% per annum.
• If you are a 70-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-1 of Single Life, then you will immediately start getting an annual pension or annuity of Rs 66,612 per year for the rest of your life. This translates to an annuity rate of about 6.66% per annum.
• If you are a 70-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-2 of Joint Survivor Life, then you will immediately start getting an annual pension or annuity of Rs 66,102 per year for the rest of your life. This translates to an annuity rate of about 6.61% per annum.
• If you are an 80-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-1 of Single Life, then you will immediately start getting an annual pension or annuity of Rs 68,142 per year for the rest of your life. This translates to an annuity rate of about 6.81% per annum.
• If you are an 80-year old who invest Rs 10 lakh in LIC Saral Pension, and chooses Option/Variant-2 of Joint Survivor Life, then you will immediately start getting an annual pension or annuity of Rs 67,326 per year for the rest of your life. This translates to an annuity rate of about 6.73% per annum.

So that are the immediate annuity rates for LIC’s Saral Pension Plan Table 862 for different ages and different variants.

Also, if we consider the taxation of annuity income, then obviously the effective annuity rates or returns will be much lower. These and annuity plans are best for those who are looking for constant stream of risk-free stable income and belong to comparatively lower tax slabs.

But in general, as of 2023, the annuity rates for LIC Saral Pension are in the range of 6.3-6.8% per annum.

How to purchase LIC Saral Pension online?

Step-by-step process to buy LIC Saral Pension Plan Online:

• Log-on to LIC website (www.licindia.in) for buying this online product. Click on ‘Buy Policies Online’. Select plan LIC Saral Pension Plan.
• Click on ‘Buy Online’. Choose your desired Purchase Price, Policy option, Annuity Payout Mode (Monthly/Quarterly/Half-yearly/Yearly), Date of Birth, Gender, Smoking status, etc.
• Enter other details such as Name, Address, Occupation, Qualification etc. displayed on the screen and complete the proposal form online.
• Pay premium online and fulfil the underwriting requirements, if any.

That’s how you can buy LIC Plan 862 online with rebates of about 2% on purchase amount.

Should You Buy LIC Saral Pension Plan (No. 862) in 2023?

That is the key question obviously after all the discussion, review of LIC Saral Pension Plan Review, and analysis of plan and policy benefits.

While there is no doubt about LIC being synonymous with trust in India, should you invest in LIC Saral Pension policy (No. 862)?

Annuity plans have a very specific use case and that is to provide regular, reliable and stable income to the annuity buyer.

So, for those who are looking for regular income immediately and don’t want to get into too much confusion, LIC’s offer of Saral Pension plan (as mandated by IRDA to launch a common simple annuity product) can be a useful option. But if you are in accumulation phase of life and don’t need pension or regular income as you are still actively working and getting salary/business income, then this is not for you.

Everybody doesn’t need to purchase an annuity plan. So first, you need to establish whether LIC Saral Pension plan does fit in your product suitability factor or not. And if it does, at what age should you purchase it (as annuity rates differ slightly with entry age) and which variant (from single vs joint life) ones to choose from.

But let’s not forget one thing. All annuities help you fix up a regular flow of income for the rest of your life. But the payout is decided and fixed for life and then the annuity payout remains the same. But there is still inflation monster that you need to account for. Annuity pension will not increase but your expenses will due to inflation. So, you need to make sure you have a plan in place to meet the rising expenses in the future as well. So don’t just depend on fixed annuities.

Annuity products are a safe way to put in place an income stream for your expenses after retirement. LIC’s Saral Pension plan is a simple-to-understand product that ensures policyholders receive a pension for life, especially if they won’t have any other pension after retirement and primarily those who have limited understanding of annuity products. While it doesn’t offer multiple annuity options like other immediate annuity products, it still serves its basic purpose well by providing a reliable lifelong pension via simple policy.

Hopefully, you would have found this LIC Saral Pension plan Review of LIC’s popular immediate Annuity plan (UIN – 512N342V04) useful and the policy details and LIC Saral Pension Policy Benefits would be clear by now. You can use LIC’s Saral Pension to generate annuity income throughout the life of annuitant in India (2023). But make sure you understand and assess the suitability first.