Pension Market Set to Revive in Next Two Quarters

It is expected that pension market which took a huge beating in last two years will revive in next one or two quarters.

At present only Life Insurance Corporation of India (LIC) is offering pension plan.

As per insurers, pension product should be targeted to a young population and it has to be incentivised. There is a need to have separate window of relief for pension, so that it can give incentive to those who invest in it.

In January 2012 Insurance Regulatory and Development Authority (IRDA) has said that pension products will have to guarantee an assured benefit in the form of a non-zero rate of return that would be disclosed upfront. Earlier this it was mandatory for insurers to offer 4.5% guaranteed return.

These new regulations lead to slower approval of pension product, as a result of which there is a dearth of pension products in the market.

However, now insurers believe that pension market is on the verge of revival.

Earlier pension use to account for 25% of the industry which now has come down to mere 1%. The Reason behind this decline is that guarantees which were expected were far too onerous over a long term horizon and with instruments which were not supporting it. Hence, no insurer filed any pension product.

But now, it has come down to capital guarantee and hence, insurers have started filing new products.