How LIC Pension Scheme Works?

LIC (Life Insurance Corporation of India) is India’s No.1 Life Insurer. It has also launched several Pension schemes. But do you know that How LIC Pension Scheme works Exactly? Well, Today we will discuss about how Pension Schemes work?

Pension Schemes are defined contribution schemes means during the earning life span, the policy holder contributes some fixed amount every month, half yearly or every year. This accumulated Saving is used by Insurance Company to Invest in various Portfolios according to the risk appetite of the policy holder.

There are several Investment schemes available with any Insurance company. You have to chose any one of them. Insurance companies have their own Fund Managers. And these fund managers manage your money by investing it in different asset classes such as Stocks & Bonds.

At the Maturity means at your retirement, Your Invested amount as well as any accumulated profit will be transferred to totally safe fixed Income instruments by government and you receive a pension according to that corpus. This is how any Pension Schemes work.

What Finance Gurus Say about Pension Schemes -

Well, there is a lot of controversy about investing in pension plans in finance gurus itself. Some say that an average investor should invest in pension schemes while some says that, Pension schemes are nothing but the opaque mutual funds which charge higher administrative charges.

Many Finance gurus argue that, Why not directly invest in Mutual Funds which have very low administrative and fund management charges? There are several varieties of mutual funds available in the market than why to go for pension schemes which charge higher fees?

If you ask me than, I personally also prefer Mutual Funds and Direct Investments over Pension Schemes.

So I leave this decision on you. What do you think about it?