Dear Shri Joshi Ji,
I am happy to be in contact with you. I am aware of your significant contribution in co-authoring the booklet "LIC Pensioners Hand Book". Your understanding and interpretation of the rules are wonderful.
Now, coming to the points stated in your message, my views are as under:
1. As we know, LIC pays Pensionary Benefits to the employees from the 'pension fund' created and governed by the rules set in Chapter III of the Pension Rules and the terms of the Trust Deed of the 'Irrevocable Trust', appointed by the Corporation. The Trust is authorized to keep the money under Trust Fund invested, in accordance with rule 85 and clause (ii) of rule 89 of the Income-tax Rules 1962. As the Group Pension Scheme of LIC of India is also one of Income Tax approved schemes, the Trust through its Secretary takes out the Master Policy for payment of Pensionary Benefits from LIC of India, as the insurer.
2. There is a confusion in the minds of some pensioners that the Pension Fund pertains to the retired employees only. This is not correct. Once the employee retires, regular contribution for him stops. Thus, the Pension Fund on a given date is mainly to meet with the future liability.
3. The Trust is entrusted with the job of making following payments:
a. Regular Pension,
b. Family Pension,
c. Commuted Value of Pension
d. Arrears, in respect of above (a), (b) and ( c), if any payable as per rules.
4. On the retirement of an employee, Commuted Value or arrears for Commuted Value, if any, are paid from the Pension Fund direct. For payment of the Pension including Family Pension or increased Pension, immediate annuities are purchased as per the requirement keeping in view the Pension Rules and the terms and the conditions of the Group Master Policy, which is a sort of Tailor Made Policy and hence does not have full resemblance with the Individual Annuity Policies or other Group Personal Pension Policies. The Pension Fund is actuarially evaluated every year to ensure that sufficient funds are there to meet with the liabilities of the pension pay outs, and usually every year LIC has to make additional contribution as necessitated by the actuarial valuation. The following table shows how LIC has to make additional contribution to ensure sufficiency of fund to meet with total pension liabilities as on a given date:
31/03/2017 31/03/2018 31/03/2019
Fund at Beginning of Year 38,927 45,110 53,904
Investment Income 3,295 3,561 4,573
Regular Contributions (10%) 526 718 507
Additional Contributions 4,669 5,921 4,320
Benefits paid 2,308 1,405 2,192
Fund as at end of year 45,110 53,904 61,111
Thus, we may observe that
1. The Immediate Annuity purchased is not with Return of Purchase price on the death of the Regular Pensioner, but with the provision of payment of pension to the family member –which covers spouse and other family members under certain circumstances.
2. In my opinion, immediate annuities are purchased with the provision of continuity of the lower pension to the family member in the beginning it-self. But, for this we have to see the terms and conditions of the Master Policy.
Payment of pension to LIC employees is a statutory liability as the Pension Scheme is governed by the Rules made by the Central Government. The employees have no say in deciding method of payment of pension i.e. on the basis of 'Pay as you go' or on the basis of 'the Pension Fund'. Whatever the methodology is adopted by LIC, it has to be equitable without creating discrimination.
I have shared my observations, which you may kindly examine and in case you find anything incorrect, I request you to kindly correct me.
With kind regards,
M P Agnihotri
Hyderabad 9618315890/9425206198
1 comment:
Dear Shri Agnihothri Sir,
The Immediate Annuity purchased is not with Return of Purchase price on the death of the Regular Pensioner, but with the provision of payment of pension to the family member –which covers spouse and other family members under certain circumstances.
Please correct your above information.Annuity Purchased for the Pensioner do not cover family Pension.Fresh Annuity has to be Purchased for family Pension.
Rule 13(a) of LIC Pension Rules 1995 states , “ The Trust shall purchase immediate annuities from the Corporation in respect of each employee or his family,as the case may be, at the time he or his family becomes eligible for the benefits under these rules:”
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