LIC (Life Insurance Corporation of India) is set to offer up to 6% annual return on Pension Plus, its ULIP - (unit-linked) pension product.
This comes at a time when the insurance regulator has been forced to withdraw the controversial 4.5 per cent guaranteed return clause on unit-linked pension plans following opposition from private life insurers, who argued such returns were not viable.
Pension Plus is thus the only regular premium unit-linked pension scheme based on guidelines mandating a minimum guaranteed return of 4.5%.
The Pension Plus was launched in 2010, September and collected a premium of nearly .400 crore.
The Insurance Regulatory and Development Authority (IRDA) has now offered to drop the guaranteed return clause in pension product norms, as private life insurers have refused to launch any products. The revised draft guidelines on pension plans, issued by the regulator last month, talked about a “non-zero” or capital guarantee instead of a fixed guarantee.
An IRDA official says the success of LIC proves the product is “workable” and “saleable”, unlike what's perceived by private life insurers.
Private insurance companies say a 6% return is good, considering the guaranteed clause, which inherently restricts investment freedom. Another says traditional pension plans are offering 7-9 per cent return, so a 6% return may seem to be a bit low. But, it is justified due to the guaranteed clause.
In September 2010, IRDA introduced pension product guidelines that mandated returns on such products to be linked to the reverse repo rate, and insurers were asked to offer an additional 50 basis points over the same. The minimum guaranteed return was fixed at 4.5% last year, based on the reverse repo rate. Reverse repo is the rate at which banks park their excess funds with the Reserve Bank of India (RBI)
This comes at a time when the insurance regulator has been forced to withdraw the controversial 4.5 per cent guaranteed return clause on unit-linked pension plans following opposition from private life insurers, who argued such returns were not viable.
Pension Plus is thus the only regular premium unit-linked pension scheme based on guidelines mandating a minimum guaranteed return of 4.5%.
The Pension Plus was launched in 2010, September and collected a premium of nearly .400 crore.
The Insurance Regulatory and Development Authority (IRDA) has now offered to drop the guaranteed return clause in pension product norms, as private life insurers have refused to launch any products. The revised draft guidelines on pension plans, issued by the regulator last month, talked about a “non-zero” or capital guarantee instead of a fixed guarantee.
An IRDA official says the success of LIC proves the product is “workable” and “saleable”, unlike what's perceived by private life insurers.
Private insurance companies say a 6% return is good, considering the guaranteed clause, which inherently restricts investment freedom. Another says traditional pension plans are offering 7-9 per cent return, so a 6% return may seem to be a bit low. But, it is justified due to the guaranteed clause.
In September 2010, IRDA introduced pension product guidelines that mandated returns on such products to be linked to the reverse repo rate, and insurers were asked to offer an additional 50 basis points over the same. The minimum guaranteed return was fixed at 4.5% last year, based on the reverse repo rate. Reverse repo is the rate at which banks park their excess funds with the Reserve Bank of India (RBI)
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