Is this a good option to invest in, for retirement?

Jeevan Akshay VII - Option G provides Immediate Lifetime Annuity increasing by 3% every year with no Return of Premium.

A friend to whom this policy was sold was asking - Is that for real? Will the annuity payment be 3% for the 1st year, 6% for next year, 9% for the 3rd year, etc.? How will the insurance company be able to pay like that??

It is the last few days for tax-saving investments for the current year. Those procrastinators who wait for the last minute to make tax-saving investments are in a hurry and won’t ask too many questions now. So, anything goes, is it?!

Let’s clarify :

Firstly - a 3% increase in annuity does not mean 3% becomes 6% and then 9%.

It means, every year the annuity payment will be 3% more than the annuity paid the previous year.

As per the example provided in the brochure :

If a policy is taken at age 45 and if the investment amount is Rs. 10 lacs, then an annuity of Rs.50,650/- is payable in the first year.?

2nd year annuity will be Rs.50,650/+ 3% of 50,650 = Rs.52,170/-

3rd year annuity will be Rs. 53,735/-

4th year - Rs.55347/-?

At age 70 - Rs. 1,06,050/- pa

At age 80 - Rs.1,42,522/- pa

At age 90 - Rs.1,91,538/- pa

At age 99 - Rs.2,49,913/- pa

Secondly, What would that buy for you?

You may think Rs.50,650/- is not too bad today. That is almost Rs.4,220/- per month. Might just help in the purchase of some medicines etc.?

At 70 you will receive Rs.1,06,050 per annum. Assuming your living expenses are growing at 7% per annum inflation, that will be equivalent to Rs. 19,539/- today. This means you will receive an equivalent of Rs. 1,628/- as monthly pension.

What would that buy for you?

Thirdly, Taxable Income

This is a LIC plan, so you may think that all money coming from this policy will be tax-free. NO. This is an Annuity plan. Even if it comes from LIC, money received from an annuity plan is taxable. So you will have to pay tax on the amount received, as per your normal tax slab.

Fourthly, Not Joint life, No Return of Premium Paid

If you survive till you are 100, then the policy will give you a return of about 7.63%.?

However, if you do not survive 100, your family/dependents gets no money. No more pensions. No death benefit. Not even the premium paid.?

There was a recent article on how a man who took a life annuity plan in 2019 and passed away in 2020, and the wife got nothing out of the investment and the court dismissed the case.

https://timesofindia.indiatimes.com/city/bengaluru/woman-denied-late-spouses-life-annuity-policy-money/articleshow/90039103.cms

The same policy also has Joint Life and Return of Premium options as well. But those options do not have an increasing annuity feature.

Readers of this article - anything does not go!?

• Avoidable loss/wasting money is a crime against your / your family’s future.
• Do your tax planning at the beginning of the financial year to avoid these last-minute excitements.
• The policy MAY be suitable for you - if you want guaranteed returns, absolute certainty on cash flow in your lifetime, how much returns does not matter to you and you have no dependents who should get some money if you die. ?

If you have to make investments for your retirement / save tax / get life insurance - speak to a qualified and registered financial adviser who gets paid by you and not by any company so that you get advice that is best suited for you.