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The IRDA has dropped the minimum guaranteed return of 4.5 per cent on Unit-Linked Pension Plans. In its draft guidelines on pension products, the regulator said a pension product should have an assured benefit at the time of sale.
At present, it is mandatory for insurers to provide a guaranteed annual rate of return at 4.5 per cent.
Effectively, this move de-links minimum guarantee from the reverse repo rate. In its earlier norms announced in September 2010, the IRDA asked the insurers to ensure a return of 50 basis points over reverse repo rate.
Instead of this, there would a capital guarantee which can vary depending on the type of product.
The pension plans offered by insurers may have an optional insurance cover throughout the deferment period or approved riders.
At the time of vesting or surrender, the policyholder should be given an option to commute up to one-third of the amount realised.
The balance amount after commutation should be utilised to purchase pension, guaranteed for life at the then prevailing annuity rate, IRDA said.
If the policyholder dies during the deferment period, the nominee would be entitled to withdraw the entire proceeds of the policy or purchase annuity.
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