If you are buying a pension-linked insurance plan, you will soon know the guaranteed maturity benefit at the time of buying.
All the insurance-linked pension products will provide a guaranteed maturity benefit in absolute amounts from December 1.
In the guidelines for pension products issued on Wednesday, the Insurance Regulatory and Development Authority said the assured benefit could be utilised on the vesting date or on the date of surrender or on date of death.
The life insurers can offer pension products both in the unit and non-unit-linked segments and in the form of variable insurance pension products, besides individual and group categories.
On the date of vesting, the policyholder will have various options, including commutation. In this case, after fulfilling the income-tax requirements, one may use the balance amount to purchase immediate annuity.
This would be guaranteed for life at the then prevailing annuity/pension rate.
It is also possible to utilise the entire proceeds to purchase a single premium deferred pension product.
An insurance cover throughout the deferment period may form part of a pension product. They can also offer some riders with maximum cap of 15 per cent of the total premium paid for the pension policy.
“The need for greater security of the pensioner's fund and the stability and financial viability of the insurance companies need to be balanced for healthy growth of the sector,” Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority said in the circular.
In effect, the circular brings all traditional plans under the ambit of annuity. At present, there are some traditional pension plans which do not have an annuity provision.
The guidelines were finalised on the basis of a draft guidelines released by the regulator earlier.