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I am 50 years old and work in a public sector company where I don’t have pension benefits. My monthly expenses are Rs 30,000. I have made adequate provisions for my daughter’s education and marriage. Two years back, I took a LIC Jeevan Anand policy for my pension. I have no other insurance policy. The policy premium paying period is 17 years with yearly premium of Rs 1.34 lakh. The sum assured is Rs 21.96 lakh with accident coverage of Rs 26.96 lakh. The agent told me that my risk cover will increase to Rs 37.7 lakh and accident cover to Rs 42.7 lakh.
The pension amount starts from the age of 65 at Rs 3.07 lakh a year with inflation rate of five per cent. But I will retire at 60. At 75, my pension will be Rs 4.88 lakh.
My queries are:
Is the policy worth continuing in view of investment of Rs 1.34 lakh being made for 17 years. If I discontinue the policy, what will be the loss as I already paid two premiums?
Currently my EPF balance is Rs 40 lakh. I am contributing Rs 16,000 a month and my employer contributes Rs 8,000. With current interest rate, will this be sufficient for me to live till 80. How will I be affected if I cancel the pension plan? I will also eligible for Rs 20 lakh as retirement benefits.
Should I increase my contribution to EPF?
— Rajakumar
Your investments in EPF along with the current accumulation will amount to Rs 1.43 crore, if the rate of return continues to be 8.5 per cent. Together with your other retirement benefits, the corpus will take care of your needs till you turn 85. Your retirement corpus should earn a return of one per cent over and above inflation (assumed to be 7 per cent).
Jeevan Anand is not a pension plan, it is an endowment product. It may be prudent to hike the EPF contribution and take term insurance to meet your risk cover. If you surrender Jeevan Anand after three years you will be entitled to 30 per cent of the basic premium paid excluding the first year premium and accident benefit premium.
Take a health cover for Rs 5 lakh, four years before retirement. Also, take a term cover for Rs 1 crore.
(The author is CEO, >myassetsconsolidation.com )
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