Insurance Regulatory and Development Authority (IRDA) has issued a circular clarifying certain concerns raised by life insurers on the guidelines on pension products issued in January 2012 and November 2011.
IRDA clarified that Life insurers will have to provide an immediate or deferred annuity, even in cases where pension products are surrendered before the vesting date.
At the time of surrender or vesting, policyholder will have to buy a single-premium deferred annuity or immediate annuity product from the same insurer from he had bought the original pension plan.
In the case of surrender of Unit Linked Pension Products (ULPPs) after the lock-in period, surrender value should not be less than the fund value.
Surrender during the lock-in period of the unit-linked products should be in line with the existing regulations.
Annuity is an insurance product that pays out income, generally to be used as part of a retirement strategy through a pension plan.
A vesting period is the period of time an investor or other person holding a right to something must wait until they are allowed to fully exercise their rights.
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