LIC Jeevan Akshay VI: All you need to know (Review)

LIC Jeevan Akshay VI is one of the most popular plans from LIC. In fact, it is one of the very few plans from LIC that I do not dislike.

LIC Jeevan Akshay VI is an immediate annuity plan.

You pay a lump sum amount once and the insurance company pays you a pension for life. It does not matter how long you live. The insurance company will pay you the pension for life.

Not just that, it pays you the contracted rate of interest for life (irrespective of how the interest rates move in the future). Therefore, the insurance company does not only assume the longevity risk but also the interest rate risk.

LIC Jeevan Akshay VI comes in 7 multiple variants. You can even choose an option where the pension continues to your spouse after your demise. I will discuss various features of LIC Jeevan Akshay later in the post.

LIC Jeevan Akshay VI: Review and Salient Features

1. Minimum Entry Age: 30 years
2. Maximum Entry Age: 100 years for Option 3, 85 years for other options. We will discuss the various options (variants) in detail later.
3. Minimum Purchase Price: Rs 1.5 lacs (on buying online), Rs. 1 lac for buying through other channels
4. Maximum Purchase Price: No Limit
5. Pension Payment Frequency: Monthly, Quarterly, Half-yearly or Annual
6. You CAN NOT avail loan under LIC Jeevan Akshay.
7. You get 1% rebate on buying the policy online.
8. GST at 1.8% is applicable on the purchase amount. If you want to invest Rs 10 lakh, you will have to pay Rs. 10.18 lac (prevailing GST rate for annuities is 1.8%)
9. No medical examination is needed at the time of purchase.

You can also visit LIC’s website for more information.

LIC Jeevan Akshay VI: Interest Rate (Annuity Rate)

Interest rate (annuity rate) depends on your age and the annuity variant.

The insurance company pays a higher rate when its liability is lower.

This is why Annuity rates increase with age. A 40-year-old person is likely to receive the pension for many more years (as compared to a 70-year-old). Therefore, the annuity rate will be lower for a 40-year-old and higher for a 70-year-old.

Here is a snapshot to show what various variants of LIC Jeevan Akshay offer.

We will discuss various variants in detail later in the post.

Let’s first look at the interest rates for the various variants.

1. The amount is for a purchase of Rs 1 lac.
2. The amount mentioned above is for an annual pension. If you opt for monthly, quarterly or half-yearly pension, the amount will be different.
3. For example, a person aged 60 will receive an annual pension of Rs 8,700 rupees for life on investing Rs 1 lac in Option 1.
4. Interest rate increases with your age.
5. You will get the pension for life. You may go on to live till the age of 100 years or even 150 years. LIC will continue to pay interest as per above rates.
6. This interest rate (annuity rate) may change from time to time. Before you take the plan, check at the LIC branch or on the LIC branch or on the LIC website.
7. If you buy LIC Jeevan Akshay plan online, you will get 1% more pension. If a 60-year-old person invests Rs 1 lakh in option 1, he will get an annual pension of Rs 8,700 every year. If pays online, he will get 1% more i.e. he will get an annual pension of 8,700 * 101% = 8,787
8. There is a minor incentive if you invest a big amount.
9. Continuing with the above example, if you invest 5 lakh rupees, then you will get a pension of Rs. 8,704 per lac instead of 8,700 rupees per lac.

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Option 1: Annuity for Life

Pension Benefit: You will get pension throughout life. The pension will stop after your death.

Death Benefit: Nominee will not get anything after the demise of the annuitant. Payment of pension will also stop.

Maturity Benefit: Not applicable

Surrender Benefit: Not allowed. This means that you or your nominee will never get the invested amount back.

The annuity rates are the highest under this option because the insurer has to pay only till the end of purchaser’s life. No payments (lump sum or annuity) to be made after the investor’s demise.

Illustration

A 60-year-old person invests Rs 10 lakh in Option 1. The total outgo will be Rs 10.18 lacs (inclusive of GST).

If you look at the corresponding age and option in the table, you will find 8,700.

This means that you will get an annual pension of Rs 8,700 for investing Rs 1 lakh in Option 1.

For an investment of Rs 10 lakhs, you will get an annual pension of Rs 87,000.

You will get this pension for life. The pension will stop after your death. No annuity or lump sum will be given to your spouse or nominee.

In case of an early death, your money goes to the sink. For instance, if the investor dies after two years, he would have got a pension of only Rs 1.74 lacs (87,000 X 2). Nothing will be given to spouse or nominee after the demise of the investor.

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Option 2: Annuity payable for 5, 10, 15 or 20 years certain and thereafter as long as the annuitant is alive.

Under this variant, you can choose from 4 options for the Guaranteed period: 5 years, 10 years, 15 years or 20 years

Pension Benefit:

You will get the pension for life.

If you pass away before the end of the guaranteed period, the nominee will get the pension till the end of the guaranteed period. The pension to the nominee will stop at the end of the guaranteed period.

If you pass away after the expiry of the guaranteed period, the pension will stop after your demise. Nothing will be paid to your nominee.

As expected, the lower the guaranteed period, the higher the interest rate.

Death Benefit: No lumpsum payout shall be made to the nominee after the demise of the investor.  As mentioned above, if the purchaser were to die before the end of the guaranteed period, the nominee will get the pension till the end of such period.

If the investor passes away after the end of the guaranteed period, the nominee gets nothing.

Maturity Benefit: Not applicable

Surrender Benefit: Not permitted

Illustration

A 60 year old person invests Rs 10 lakh in Option 2. The total outgo will be Rs 10.18 lacs (inclusive of GST).

Let’s assume the guaranteed period is 15 years.

From the table, you can check that the corresponding value is Rs 8,170. For an investment of Rs 10 lacs, you will get an annual pension of 81,700 rupees.

You will get this pension for your entire life.

But if you die after 6 years, then your nominee will get the pension for the remaining 9 years (15 years – 6 years). Pension to the nominee will stop at the end of the guaranteed period.

If you pass away after 15 years (end of the guaranteed period), then the pension will stop after your demise. Your nominee will not get anything.

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Option 3: Annuity for life with return of purchase price on the annuitant

The only difference between Option 1 and Option 3 is that, under Option 3, the purchase price is returned to the nominee. Since the liability of the insurer is higher under Option 3, the annuity rate is also lower (as compared to Option 1)

Pension Benefit: You will get pension for life. The pension will stop after your death.

Death Benefit: On the death of the investor, the payment of pension will stop and the investment amount will be returned to the nominee. If you had invested Rs 10 lakh, then 10 lakh rupees will be returned to the nominee. GST charged at the time of purchase will not be returned.

Maturity Benefit:  Not applicable

Surrender Benefit: You can surrender the policy one year after taking the policy. Surrender is permitted in only two situations

1. Diagnosis of a critical illness such as cancer, kidney failure, organ failure. You can find the entire list of the illnesses in the policy wordings.
2. If you are shifting to another country

Surrender Value will depend on your age at the time of surrender. I am not sure how to calculate this amount.

Illustration

A 60-year-old person invests Rs 10 lakh in Option 3. The total outgo will be Rs 10.18 lacs (inclusive of GST).

From the table, you can check that the corresponding value is Rs 6,320. For an investment of Rs 10 lacs, you will get an annual pension of 63,200 rupees.

You will get the pension for life. The pension will stop after your death. 10 lakhs will be returned to your nominee on the amount of death.

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Option 4: Annuity payable for life increasing at a simple rate of 3% pa

Pension Benefit: You will get the pension for life. Your pension will increase by 3% every year.

Death Benefit: On the death of the investor, the pension (annuity payments) will stop. The nominee will not get anything.

Maturity Benefit: Not applicable

Surrender Benefit: Not permitted

Illustration

A 60 year old person invests Rs 10 lakh in Option 4. The total outgo will be Rs 10.18 lacs (inclusive of GST).

For an investment of Rs 10 lacs, you will get a pension of Rs 69,300 in the first year.

In the second year, the pension amount will increase by 3% i.e. Rs. 71,739

In the third year, the pension will increase to Rs. 73,520.

Similarly, the pension amount will continue to rise throughout your life.

The pension will stop after your demise. Your nominee will not get anything back.

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Option 5: Annuity for life with a provision of 50% of annuity payable to spouse during his / her life on the annuitant

Pension Benefit: The investor will get pension for life. After the death of the investor, the spouse will get pension for his/her life. However, the spouse will get only 50% of the pension amount (that was being paid to the investor).

Death Benefit: 50% of the pension will be paid to the spouse on the death of the investor.

After the demise of the spouse, the pension will stop and the nominee will not get anything.

If the spouse passes away before (predeceases) the investor, the pension will stop after demise of the investor. Nominee will not get anything.

Maturity Benefit: Not applicable

Surrender Benefit: Not permitted

Illustration

A 60 year old person invests Rs 10 lakh in Option 5. The total outgo will be Rs 10.18 lacs (inclusive of GST).

The corresponding value in the table for the age of 60 and Option 5 is 7,990.

For an investment of Rs 10 lacs, you will get a pension of Rs 79,900 per annum.

You will get this pension for life. After you, your spouse will get half this amount for life i.e. your wife (or husband) will get an annual pension of 79,900 * 50% = 39,950.

After the death of your spouse, the pension will stop. The nominee will not get anything.

If your spouse predeceases (passes away before) you, the pension will stop on your demise. Your family or nominee will not get anything.

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Option 6: Annuity for life with a provision of 100% of annuity payable to spouse during his / her life on the annuitant

Only a minor difference as compared to option 5.

Under Option 5, after investor’s demise, the spouse got 50% pension for life.

Under Option 6, after investor’s demise, the spouse will get 100% pension for life.

Since the liability of the insurance company is higher under Option 6, the annuity rate for Option 6 is lower as compared to Option 5.

Illustration

A 60 year old person invests Rs 10 lakh in Option 6. The total outgo will be Rs 10.18 lacs (inclusive of GST).

The corresponding value in the table for the age of 60 and Option 6 is 7,390.

For an investment of Rs 10 lacs, you will get a pension of Rs 73,900 per annum.

You will get this pension for life. After you, the exact same pension will continue to your spouse. Your wife (or husband) will get an annual pension of Rs. 73,900.

After the death of your spouse, the pension will stop. The nominee will not get anything.

If your spouse predeceases (passes away before) you, the pension will stop on your demise. Your family or nominee will not get anything.

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Option 7: Annuity for life with a provision of 100% of annuity payable to spouse during his / her life time on death of annuitant. The purchase price will be the last survivor

Under Option 6, the family gets nothing after the demise of husband and wife.

The difference in option 7 is that after the death of husband and wife, the investment amount is returned to the nominee.

Pension Benefit: The investor will get pension for life. After the death of the investor, the spouse will get the 100% pension for his/her life.

Death Benefit: 100% of the pension will be paid to the spouse on the death of the investor.

After demise of the spouse, the pension will stop and the nominee will be given back the investment amount.

If the spouse passes away before (predeceases) the investor, the pension will stop after demise of the investor. The investment amount will be returned to the nominee.

Maturity Benefit: Not applicable

Surrender Benefit: Not permitted

Illustration

A 60 year old person invests Rs 10 lakh in Option 7. The total outgo will be Rs 10.18 lacs (inclusive of GST).

The corresponding value in the table for the age of 60 and Option 6 is 6,240.

For an investment of Rs 10 lacs, you will get a pension of Rs 62,400 per annum.

You will get this pension for life.

After you, the exact same pension will continue to your spouse. Your wife (or husband) will get an annual pension of Rs. 62,400.

After the death of your spouse, the pension will stop. Your nominee will get Rs 10 lacs.

If your spouse predeceases (passes away before) you, the pension will stop on your demise. Your nominee will get Rs 10 lacs.

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LIC Jeevan Akshay VI: Tax Benefits

Investment under LIC Jeevan Akshay plan is eligible for tax benefit under Section 80CCC. The benefit under Section 80CCC comes under the overall limit of Rs 1.5 lacs under Section 80C.

The annuity income (pension income) is taxable at your income tax slab rate.

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Should you invest in Annuity plans?

Not an easy question to answer. Let’s look at the pros first.

1. By purchasing an annuity plan, you sell the longevity risk to the insurance company. The insurance has to make payments even if you live past the age of 150. An annuity purchase ensures that you never run out of money. Whether this amount will be enough is a different question.
2. You pass on the interest rate risk to the insurance company. It is very much possible that the interest may go much lower in the future. You don’t have to worry. The insurance company bears the risk. You will get payments at the contracted rate.
3. Easy to understand. Can be quite useful at an old age when your physical and mental abilities start deserting you.

However, not everything is hunky dory. There are quite a few cons too.

1. The annuity rates tend to be quite low. The rates may be higher for options where there is no return of purchase price. However, in such cases, you must understand that the insurance company is making payments from your principal (since it does not have to return the principal).
2. The pension income is taxable at your marginal tax rate.
3. The annuity income may not be inflation adjusted.
4. You can’t exit (except for a few cases). Therefore, liquidity is an issue.
5. You have to pay GST on the purchase price.

I have discussed these aspects in greater detail in this post.

You also have to look at alternatives for generating income during retirement. You can invest in fixed deposits or debt mutual funds. If you are a senior citizen, you have additional options in Pradhan Mantri Vaya Vandana Yojana (PMVVY) and Senior Citizens Savings Scheme (SCSS).

You need to look at returns (interest rate), taxability and liquidity while making a choice.

Here is a brief comparison between annuity, bank FDs, SCSS and PMVVY.

Do note it is not an either-or strategy. A smart retirement strategy may utilize a mix of these products.

Which variant of LIC Jeevan Akshay should you opt for?

Assuming you have decided to go with an annuity plan, you still need to select the annuity variant.

The choice will depend on your requirement.

If you want to leave a legacy for your family, you should consider Option 3 and 7.

If you want to ensure pension for your spouse too, consider Options 5, 6 or 7.

If you want your annuity pay-outs to grow gradually, you may opt for Option 4.

If you merely want to maximize income (and are not concerned about leaving a legacy), you may like Option 1 the most.

On the other hand, if you want to higher income but want to ensure cashflows to the family for a minimum period, Option 2 may be the right choice for you.

Which variant will you choose?

By the way, do consider annuity plans from private insurers too. You may get better rates for the same variant.

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How to buy LIC Jeevan Akshay VI?

You can buy this plan by going to LIC branch or with the help of an LIC agent.

You can also buy LIC Jeevan Akshay VI plan Online. You have to go to the LIC website. As mentioned above, you will get a better annuity rate if you purchase the product online.

Additional Links/Source

1. LIC New Money Back Plan-25 years
2. LIC Children’s Money Back Plan
3. LIC Jeevan Tarun
4. LIC New Endowment Plan
5. LIC Jeevan Labh
6. LIC Bima Bachat
7. LIC Jeevan Umang
8. LIC Jeevan Utkarsh
9. LIC Jeevan Shiromani
10. LIC Bima Shree
11. LIC Single Premium Endowment Plan (Table no 817)
12. Problems with Endowment Plans
13. With Traditional plans, age affects your returns
14. LIC Jeevan Akshay: Review in Hindi