January to March are the months when people rush to make Tax Saving Investments. Insurance companies know this and they launch newer products to get a pie of this. Keeping with these traditions LIC has launched Flexi Plus – a Unit Linked Insurance Plan (ULIP).
The table below shows the eligibility for LIC Flexi Plus Plan.
LIC Flexi Plus has two options for investment.
The details are mentioned in the table below:
Logic for Expected Returns:
The Debt Fund option above is similar to Debt: Gilt and Long Term Mutual Fund. I looked at the 10 Years return of funds from this category. It varied from 3.34% to 7.91% annualized. So you should expect similar returns from the LIC Flexi Plus – Debt Fund.
Similarly LIC Flexi Plus – Mixed Fund is similar to Hybrid: Debt-oriented Conservative Mutual Fund. In this case the 10 year return of funds varied from 7.19% to 14.33%.
The ULIP has the following charges
The table below shows the details of all the charges:
The benefit illustration on LIC Website is pathetic as its hardly visible. I tried out from other sources are here are the numbers:
Fund Type: Debt Fund
Fund Type: Mixed Fund
The net yield has been calculated based on IRR function using excel.
The difference between gross and net yield is the expense. The significant point is Mixed fund with higher risk has slightly lower return in the benefit illustration. This is due to the higher fund management charge for mixed fund than debt fund.
LIC Flexi Plus is a ULIP which invests in debt related instruments. Most of debt mutual funds have expense ratio in the range of 2% to 2.25% and its similar in case of LIC Flexi Plan (taking all the expenses in account). So the long terms returns from LIC Flexi Plus – Debt Plan would be in lines of Gilt Mutual Fund which might vary from 3.5% to 7.5% per annum. While in case of Mixed Plan the return would be in line with Hybrid: Debt-oriented Conservative Mutual Fund which has given 7% – 14% annualized return over a long period of ten years.
So if you plan to invest in this LIC Flexi Plus, it’s good to go with Mixed Plan. Other than this you can also look to invest in PPF which is also a tax saving instrument under sec 80C and gives tax free return of 8.6%. But also keep in mind that PPF returns are no more fixed and would change every year.
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View Comments
Nice review of LIC Flexi Plan
Thanks! good to know you found it useful. Keep coming back for more.
charces are more than the return,think so
I think your estimate of 7.19% to 14.33% return for Mixed fund is highly exaggerated/inappropriate. As you yourself has put in the article that Equity exposure would be 25% at the most, i do not see the return more than 7.19% to 9.5% at the most, even in the long term..Plz correct me if i am wrong..
I agree with you that usually return should be below 10%, but I have picked these numbers from the following link: http://www.valueresearchonline.com/funds/h2_typecomp.asp?mode=performancelong&Type=1&objective=25