IRDA to frame new guidelines for pension products

Insurance regulator IRDA is considering revising a rule that mandates insurers to offer guaranteed maturity benefits on unit-linked pension plans to boost sales of these products. The new guidelines on pension products would be unveiled by the regulators in a fortnight which will then come into effect from 1 April this year, according to an IRDA official.

According to industry sources, the 4.5 per cent guaranteed return that goes with the pension plan is a deterrent to insurers launching pension products. They say very few companies have launched pension products after the new norms came into effect from last year.

IRDA member-actuary R Kannan said the regulator planned to frame guidelines for pension products keeping the differences in risk appetite for investors in view.

Currently insurers are mandated to offer a 4.5 per cent guaranteed return on unit-linked platform pension products.

According to the regulator a guaranteed return would protect policy holders even in the event of the markets crashing. The objective is to encourage long-term savings and help policyholders build up enough funds to cater to their needs in their old age.

However, a review has been warranted following insurers' complaints that they would not be in a position to guarantee returns on unit-linked pension plans as it would hit their profitability. The insurance regulator had in fact, hinted earlier that a 4.5 per cent return was not sacrosanct and could come up for review, depending on the economic environment.