Insurers told to offer uniform Saral Pension plan from April
In a bid to help customers make an informed choice, the insurance regulator has mandated all life insurers to offer a standard individual immediate annuity product from April 1 this year. The product called, “Saral Pension”, prefixed by the insurer’s name, will be a traditional, single premium, non-participating immediate annuity plan with two annuity options. The minimum entry age to buy this plan will be 40 years and the maximum will be 80 years.
It may be noted that annuities are plans bought by an individual from insurance companies for retirement or other purposes while a pension is provided by an employer to the employee solely for the purpose of retirement.
In the first of the two annuity options, ‘Life Annuity with Return of 100 per cent of Purchase price’, the annuity is paid for the entire life of the annuitant, or subscriber. In addition, 100 per cent of the Purchase Price will be returned to the nominee / legal heirs on death of the annuitant.
The second variant called ‘Joint Life Last Survivor Annuity with Return of 100 per cent of Purchase Price on death of the last survivor’ the annuity is first paid to the annuitant for life. After death of the annuitant, if the spouse is surviving, the spouse continues to receive the same amount of annuity for life till his/ her death. Subsequently, on death of the spouse, the Purchase Price shall be payable to nominee/legal heirs. However, if the spouse has pre-deceased the annuitant, then on the death of the annuitant, the Purchase Price shall be payable to the nominee /legal heirs.
However, there will be no maturity benefit under the product.
As per the guidelines, the minimum annuity will be Rs 1,000 per month, Rs 3,000 per quarter, Rs 6,000 per half year and Rs 12,000 per annum.
There will be a limit for maximum annuity. The minimum and maximum purchase price depends on the annuity amount, , the guidelines said.
The guidelines further said pricing is left to the insurers. However, annuity rates should be derived based on actuarial principles and ensure that annuity rates are fair and reasonable to customers.
“Indian life insurance market currently has several individual immediate annuity products marketed by life insurers, with each product having its own features, terms and conditions and annuity options. With a view to having uniformity across insurers, and to make available a product by all life insurers that will broadly meet the needs of an average customer, it is felt necessary to introduce a standard, individual immediate annuity product, with simple features and standard terms and conditions,” said the Insurance Regulatory and Development Authority of India (Irdai) on Monday in a statement.
The policy can be surrendered any time after six months from the date of commencement, if the annuitant or the spouse is diagnosed with any specified critical illnesses.