Should you Invest in LIC New Jeevan Nidhi Plan?

LIC New Jeevan Nidhi Plan is a conventional with profits pension plan which provides for death cover during the deferment period and offers annuity on survival to the date of vesting.

The term vesting has been used extensively in the article. For simplification vesting can be assumed equivalent to maturity of policy.

LIC New Jeevan Nidhi – Eligibility:

The table below shows the eligibility for  LIC New Jeevan Nidhi Pension Plan.

LIC New Jeevan Nidhi - Eligibility
LIC New Jeevan Nidhi – Eligibility

LIC New Jeevan Nidhi – Benefits on Vesting:

On Vesting you would get the basic sum assured along with accrued Guaranteed Additions, vested Simple Reversionary bonuses and Final Additional bonus, if any. This can be used for the following purpose only:

  1. To buy an immediate annuity plan from LIC or
  2. In case the total benefit amount is insufficient to purchase the minimum amount of annuity, then it would be paid as a lump sum or
  3. To purchase a Single Premium deferred pension product from LIC

The option needs to be selected at least 6 months prior to the date of vesting.

LIC New Jeevan Nidhi – Death Benefit:

Death during first five policy years: Basic Sum Assured along with accrued Guaranteed Addition shall be paid as lump sum or in the form of an annuity or partly in lump sum and balance in the form of an annuity to the nominee.

Death after first five policy years: Basic Sum Assured along with accrued Guaranteed Addition, Simple Reversionary and Final Additional Bonus, if any, shall be paid as lump sum or in the form of an annuity or partly in lump sum and balance in the form of an annuity to the nominee.

The amount of annuity will depend on the payable lump sum and the then prevailing immediate annuity rates.

LIC New Jeevan Nidhi – Riders:

Accident Benefit Rider: Accident Benefit Rider is available as an optional rider by payment of additional premium under regular premium policies. In case of accidental death, the Accident Benefit Rider Sum Assured will be payable as lumpsum along with the death benefit under the basic plan.

LIC New Jeevan Nidhi – Surrender Value:

The policy can be surrendered at any time after completion of at least 3 policy years but before the date on which annuity vests.

The Guaranteed Surrender Value will be as under:

  1. Single Premium Policies: The Guaranteed Surrender value is equal to 90% of the premium paid excluding extras, if any.
  2. Regular Premium Policies: The Guaranteed Surrender Value will be available provided atleast three full years’ premiums have been paid and is equal to 30% of the premiums paid excluding the premium paid for the first year and all premiums in respect of optional rider and extras, if any.

The surrender value shall be the guaranteed surrender value along with cash value of any accrued Guaranteed Additions and vested simple reversionary bonuses, if any.

How much Return can you expect?

You can expect following types of returns from the policy:

  1. Guaranteed Additions @ Rs.50/- per thousand Sum assured for each completed year, for the first five years.
  2. The policy is profit participating and hence would receive Simple Reversionary bonuses declared as per the experience of the LIC from the 6th year of policy.
  3. Final Additional Bonus may also be declared in addition.

You can check benefit illustration of LIC New Jeevan Nidhi at the LIC website here.

Here is some calculation on expected returns using the same assumption as on LIC Website:

  • Age: 35 Years
  • Policy Term: 25 Years
  • Premium: Rs. 4121
  • Premium Frequency: Yearly
  • Basic Sum Assured: Rs 1 Lakh
  • Vesting Age: 60

On maturity you would get following:

  1. Guaranteed Vesting Benefit (Rs 50 per 1000 sum assured for 25 years): Rs 1,25,000
  2. Simple Reversionary bonuses* (Rs 34 – 38 per 1000 sum assured for 20 years): Rs 68,000 to Rs 76,000
  3. Final Additional Bonus** (Rs 0 – 50 per 1000 sum assured for 1 year): Rs 0 to Rs 5,000

Total Amount at Maturity: Rs 1,93,000 to Rs 2,06,000

Annualized return: 4.54% to 4.98% per annum

Simple Reversionary bonuses has been assumed from the Simple Reversionary bonuses declared for LIC Jeevan Nidhi for some recent years by LIC.

** Final Additional Bonus is assumed for calculation purpose and it might vary

Now you will need to invest this maturity sum to buy an annuity plan from LIC. At this time LIC Jeevan Akshay VI is the only annuity plan from LIC. So assuming today returns, if you invest the above amount for Life time annuity, you would get Rs. 18,060 – Rs 19,261 per year. And the amount which you would get from the annuity would be added to your total income and taxed according to your tax slab.

Simplifying the above, you would invest Rs 4,121 per year for 25 years and after that LIC would pay you Rs. 18,060 – Rs 19,261 per year for your lifetime.

This might sound good to some of you but you can get better returns by just investing in PPF and then buying annuity from the maturity amount.

Should you invest in LIC New Jeevan Nidhi?

I would not advise to invest in LIC New Jeevan Nidhi Plan on account of following reasons:

  1. The guaranteed return is less than 1.5% per annum
  2. Even when we realistically add all bonuses, the return is less than 5% per annum
  3. You can easily get these kind of returns by investing in PPF, Fixed Deposits or Debt Mutual Funds.
  4. Other than the above reasons, the maturity amount needs to be invested in LIC Annuity Plan. This might not be the best retirement plan and you would want to keep the flexibility of investing your maturity amount in Post office MIP or something similar.
  5. Also in case you need to surrender the policy, you won’t be able to recover your initial amount.

You might want to also consider NPS (New Pension Scheme) which has given better returns historically and at maturity you need to invest only half of proceeds in annuity plan. And you are also open to choose annuity plan from the market rather than only from LIC.

LIC New Jeevan Nidhi
LIC New Jeevan Nidhi

10 thoughts on “Should you Invest in LIC New Jeevan Nidhi Plan?”

  1. Hi Sir,

    Please suggest any LIC plan which can offer a guaranteed Income after retirement(say 55 years) , considering present age years having annual income of 10-15 lacs.(software professional-salaried)
    I have just now purchased a term Insurance from LIC worth 50 Lacs.(Amulya Jeevan-2)

    1. Stay away from anything other than Term Plans from Insurance companies. For long term wealth Mutual funds is the way ahead!

  2. I am not agreed with above review given by the Expert that investing in Jeevan Nidhi is not good, because all the other option can give you better investment returns but not given the assurance that will get pension in old age. In the old age when you withdraw your funds from PPF account for investing in annuity(pension) your children will not support you to buy an annuity plan.
    I am an Insurance adviser, I get various calls from many well profile youngester who ask me always that how they can incash their parents Pension Plan.

    1. @Vikas Mathematically and financially it doe not make sense to invest in any Pension Plan offered by Insurance companies. As you stated children advise against investing in annuity. Now if children are eyeing parents money, no investment can help. parents have to be stronger and think about themselves first.

  3. I want to know whether LIC’s New Jeevan Nidhi Pension Plan is covered under NPS and what is the effective date for rebate in section 80CCD.

    1. LIC’s New Jeevan Nidhi Pension Plan and NPS are two different things and not related to each other. LIC’s New Jeevan Nidhi Pension Plan would give you tax exemption under section 80CCC

  4. You have not mentioned about the valuable insurance cover available till the vesting age. All other investment avenues mentioned/compared by you do not have any life insurance element.

    1. Thanks for commenting.
      You are right I have not considered the Life Insurance benefit, because the life insurance is too low to consider. To put things in perspective a 35 year male can get 10 Lakhs life insurance for 25 years for Rs 2,000 – 3,000 per annum depending on company and riders chosen.
      In the LIC New Jeevan Nidhi for 10 lakh sum assured your annual investment would be Rs. 40,000. Also as your investment increases your effective life insurance decreases. So this is like a decreasing insurance cover.
      If you consider any other suggested alternatives and take a term life insurance your returns would be much better of. You can read about one such comparison here.
      And its always advisable to keep investment and insurance separate.
      I would love to hear your opinion on the same.

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