January to March is the tax-saving season which sees high number of customers flocking towards financial products to avail tax benefits. This is the time when insurance companies try to cash-in on these customers and maximize their revenues. But this quarter may be a little disappointing for customers looking to invest in pension plans as well as for the private life insurersThe reason for this is the withdrawal of existing pension or retirement plans from the markets because of the new guidelines released by the Insurance Regulatory and Development Authority (IRDA). The regulator had asked companies to file new pension plans which were compliant with the new norms.
According to IRDA Chairman J Hari Narayan, “Irda had issued guidelines for pension products on November 8, 2011, and insurance companies were required to withdraw all products not conforming to the guidelines with effect from January 1, 2012. In accordance with this circular, insurance companies had filed 22 revised products as on date, of which 21 were filed only in December 2011 and of which the largest number were filed in the last week of December.”
However, recent media reports suggest that the IRDA has asked companies to refile pension plans offered by them as it does not conform with the issued guidelines. Keeping in consideration, the fact that it takes more than 2 months to get an approval on new plans, it may be a while before customers and insurers see new pension plans floating in the markets.
Last November, the Insurance Regulatory and Development Authority (IRDA) had released new guidelines for pension plans scrapping the 4.5% guaranteed annual return clause. This move was welcome by the insurers as it meant more flexibility without having the burden of offering a guaranteed return. At the same time, the regulator said that the pension products should carry an ‘assured benefit’ which the insurers must disclose at the time of sale.
With effect from January 1, 2012, life insurance companies were asked to withdraw all pension products which did not meet the revised guidelines. In December 2011, the life insurers filed 21 revised pension products and also sought further clarification on the guidelines from IRDA. In response to the queries raised, the regulator said that the guidelines do not apply to Group Gratuity and Group Leave Encashment products. Further clarifications from IRDA on pension products: Assured Benefit: The life insurer will guarantee either a non-zero rate of return or an absolute amount on the premiums paid from the date of payment till vesting. This should be disclosed to the customer at the time of taking the policy.
Death Benefit: In the event of death of the policyholder during the policy term, the nominee will receive an amount equal to all the premiums paid at the guaranteed rate of return disclosed at the time of sale.
Surrender Value for linked pension products: If the insurance plan is on the platform of a unit-linked insurance plan or ULIP, then the surrender value will be higher of fund value and premium accumulation at the guaranteed rate on the date of surrender minus discontinuance charges.
According to IRDA Chairman J Hari Narayan, “Irda had issued guidelines for pension products on November 8, 2011, and insurance companies were required to withdraw all products not conforming to the guidelines with effect from January 1, 2012. In accordance with this circular, insurance companies had filed 22 revised products as on date, of which 21 were filed only in December 2011 and of which the largest number were filed in the last week of December.”
However, recent media reports suggest that the IRDA has asked companies to refile pension plans offered by them as it does not conform with the issued guidelines. Keeping in consideration, the fact that it takes more than 2 months to get an approval on new plans, it may be a while before customers and insurers see new pension plans floating in the markets.
Last November, the Insurance Regulatory and Development Authority (IRDA) had released new guidelines for pension plans scrapping the 4.5% guaranteed annual return clause. This move was welcome by the insurers as it meant more flexibility without having the burden of offering a guaranteed return. At the same time, the regulator said that the pension products should carry an ‘assured benefit’ which the insurers must disclose at the time of sale.
With effect from January 1, 2012, life insurance companies were asked to withdraw all pension products which did not meet the revised guidelines. In December 2011, the life insurers filed 21 revised pension products and also sought further clarification on the guidelines from IRDA. In response to the queries raised, the regulator said that the guidelines do not apply to Group Gratuity and Group Leave Encashment products. Further clarifications from IRDA on pension products: Assured Benefit: The life insurer will guarantee either a non-zero rate of return or an absolute amount on the premiums paid from the date of payment till vesting. This should be disclosed to the customer at the time of taking the policy.
Death Benefit: In the event of death of the policyholder during the policy term, the nominee will receive an amount equal to all the premiums paid at the guaranteed rate of return disclosed at the time of sale.
Surrender Value for linked pension products: If the insurance plan is on the platform of a unit-linked insurance plan or ULIP, then the surrender value will be higher of fund value and premium accumulation at the guaranteed rate on the date of surrender minus discontinuance charges.
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