Comments
If you are planning to buy a pension plan, you need to exercise more caution. The expected returns from unit-linked insurance plans (ULIPs) will now be subjected to market conditions. They could be go higher than 15 per cent or even drop to 1-2 per cent, thanks to new norms on pension plans mooted by the Insurance Regulatory and Development Authority (IRDA).
The existing minimum guaranteed annual rate of return at 4.5 per cent is proposed to be removed by the regulator with some kind of assured benefit on the premiums paid, which can be decided by an insurer.
This would call for a wise and informed decision from a policyholder to decide what kind of retirement protection he prefers.
“If one is averse to risk, one should go for traditional pension plan products. Otherwise, unit-linked pension plans can now give significant upsides of revenue depending on the markets conditions,” Mr Andrew Cartwrigth, Chief Actuary, Kotak Mahindra Old Mutual Life Insurance, told Business Line on Tuesday.
As per the new norms, the returns could be anywhere between 3 and 15 per cent, he hinted. This is possible because the investment options for insurers would now expand, according to Mr V. Srinivasan, Chief Financial Officer, Bharti AXA Life Insurance.
At present, the companies which offer unit-linked pension plans prefer to invest only in government securities because of the minimum guaranteed return norm of 4.5 per cent.
“But now, we can consider other investment options which can bring in higher yields,” he said.
“The idea to liberalise guarantees in pension plans is positive development for all stakeholders,” he added.
The proposed norms are seen largely as “industry-friendly”. Before the introduction of 4.5 per cent minimum guarantee norm in September 2010, the pension plans accounted for 20-30 per cent of the new business premium in the life insurance segment.
A stimulus for growth
“But now, if these proposed norms are introduced on a fast-track, the unit-linked pension plans will come up to rescue of the life insurance industry which needs a stimulus for growth,” a senior official of IndiaFirst Life Insurance said.
“More pension plans are likely to be launched. We, at Bharti AXA Life, are also working on filling the existing product void in the market,” Mr Srinivasan said.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.