I invest Rs 60,000 per annum in LIC Pension Plan since 2011. However, looking at the market trends and high expense/charges, I am wondering if I should exit it?
-Sameer Singh
LIC Pension plan offers you an insurance cover and it allows you to invest a part of your premium regularly to build a retirement fund. But the problem is that such hybrid products are inefficient by design - neither do they offer you adequate insurance, nor do they help you accumulate sizeable wealth. Therefore, you should consider exiting the policy. You may contact your insurer and find out your options of surrendering this plan.
As a general principle, do not mix insurance and investment in future. You must always buy a pure term insurance plan for securing a life cover. Also, it is always better to invest in pure investment products such as mutual funds to achieve your long-term financial goals. If you are looking for tax benefits, you may consider investing in Equity Linked Savings Schemes (ELSS).
If you want a government-sponsored retirement product with extra tax benefits, you can consider National Pension Scheme (NPS). But remember, you can only withdraw up to 40% of the corpus tax-free at the time of retirement. Further, you must use at least 40% of the corpus to buy an annuity. You can withdraw the remaining 20%, but it will be added to your income and taxed as per the income tax slab applicable to you.
In this context, you might also want to read this article.
This article was originally published on February 06, 2017.
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