Last year, while preparing a retirement planning illustration based on laddered annuities, we listed the annuity rates of LIC Jeevan Akshay – an immediate annuity plan. These are the revised and higher annuity rates applicable from Feb 28th 2023.
Additional resources
- Use this annuity ladder calculator to plan for retirement with multiple pension streams
- How LIC annuity rates have changed over the last 20 years
- I need a pension: Should I buy an annuity or a govt bond?
- How Annuity Plans Work
- When should senior citizens purchase an annuity?
Annuity Options
A. Annuity payable for life at a uniform rate.
B. Annuity payable for 5 years certain and thereafter as long as the annuitant is alive.
C. Annuity payable for 10 years certain and thereafter as long as the annuitant is alive.
D. Annuity payable for 15 years certain and thereafter as long as the annuitant is alive.
E. Annuity payable for 20 years certain and thereafter as long as the annuitant is alive.
F. Annuity for life with return of purchase price on death of the annuitant.
G. Annuity payable for life increasing at a simple rate of 3% p.a.
H. Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
I. Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
J. Annuity for life with a provision of 100% of the annuity payable to spouse during his/ her lifetime on death of annuitant. The purchase price will be returned on the death of the last survivor.
The option that looks most beneficial to us is least beneficial to the insurer, and therefore, the annuity rate will be lower. For example, in option A, the insurer gets to pocket the purchase price on the annuitant’s death. In option F, the insurer must return the purchase price to the nominee.
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So they would offer a terrible interest rate (annuity rate) on option F and the best rate for option A! For all options other than A, the rate will drop quickly and fast!
In option G, the income increases each year by 3%. If the annuitant is old (55 or above), this has a higher rate than option F. Older people are likely to die sooner, and the insurer with option F must0 repay sooner!
Annuity rates dramatically increase with age because older people need not be paid for long! This is the underlying principle behind laddering annuities (more on this in the coming days). We shall also study the time value of money for these options. To learn more
Annuity rate comparison
Let us look at how the rates have increased for option A: Annuity payable for life at a uniform rate.
| Age | Feb 28th 2023 to Feb 2th 2023 | From Feb 28th 2023 |
| 30 | 6.205% | 6.899% |
| 40 | 6.535% | 7.276% |
| 50 | 7.155% | 7.949% |
| 60 | 8.325% | 9.265% |
| 70 | 10.690% | 12.050% |
| 80 | 17.230% | 18.486% |
Annuity Rates of LIC Jeevan Akshay VII from Feb 28th 2023
Plan no: UIN – 512N337V04
There are incentives for buying online and for a higher purchase price which would increase the annuity rate. These are not considered in this illustration.
You can also download the Excel version of this data. To find the rate applicable to your specific age, you can use LIC’s online premium calculator.
younger retirees might get a better deal if they buy govt bonds (although this is not guaranteed income for life and could be recalled by the govt). See an example: How I used RBI Retail Direct to buy government bonds and create an income source. Also see:
- RBI Retail Direct: A look inside: how to register and what you can buy/sell
- RBI Retail Direct for govt bonds: Who should use it and who should not
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