Calculators LIC plans New Money Back — 25 Years Review
LIC New Money Back Plan - 25 Years (Plan 721) is a participating money-back plan with a 25-year policy term and a 20-year premium paying term. It pays 15% of the BSA as a survival benefit at the end of years 5, 10, 15, and 20 — returning 60% of the BSA during the term — then pays the residual 40% of BSA plus full simple reversionary bonuses (accrued on the entire original BSA throughout the 25-year term) and a final additional bonus at maturity. For a 30-year-old buying ₹5 lakh BSA, the base-scenario XIRR across all cashflows is approximately 5.5–6.5%. The longer term means a meaningfully larger SRB accumulation: 25 years of bonuses vs 20 years in Plan 720.
A 28–38 year old with a 25-year savings horizon and specific liquidity needs at decade-ish intervals. The ideal buyer is someone who wants to retire at 55–60, buys at 30, and has earmarked the four SBs for specific goals (education, wedding, flat purchase, travel corpus) — then takes the maturity as a retirement nest egg. The 5 premium-free years at the end also suit people expecting income to peak at 45–50 and taper before maturity.
Anyone under 35 who can tolerate equity volatility — a 25-year SIP in a diversified equity fund will historically compound at 12–14% CAGR, versus 5–6% XIRR for Plan 721. The forced-savings premium is most justified when the alternative is spending rather than investing. Also unsuitable for anyone who may need full liquidity before year 10: surrendering a money-back plan in the early years returns well below total premiums paid.
A 25-year product is subject to 25 annual bonus declarations. If LIC's par fund underperforms (e.g., interest rate cycle down, valuation losses), SRB can be cut materially. The plan is also long enough that tax rules, GST rates, and §10(10D) thresholds may change before maturity — this is systemic risk for any ultra-long savings product. The four intermediate SBs, if not reinvested, reduce the effective compound return to the holder.
Our headline XIRR uses the middle premium-paying term (15 years against a 21-year policy term), excludes optional rider premiums from the cash-flow base, and assumes the latest declared simple reversionary bonus rate holds for the full term. Try other PPTs and bonus assumptions on the New Money Back — 25 Years calculator.
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