Insurance regulator 'Insurance Regulatory and Development Authority' (IRDA) asked all insurers selling pension products, to disclose in the policy document maturity benefits, a move that will make it easier for individuals to opt for the best policy as per their needs.
While issuing guidelines for pension products, IRDA said, "All pension products shall have explicitly defined assured benefit that is applicable on death, on surrender and on vesting, which is disclosed at the time of sale."
The new guidelines by the IRDA will come into force from December 1, 2011. Existing pension products, which do not comply with the guidelines, will have to be withdrawn from January 1, 2012, it said. The guidelines do away with the earlier requirement of providing a minimum guaranteed return of 4.5% on all pension products that did not find favour with life insurers.
The insurers at the time of sale of policies would have to make an illustration of the returns which it is expected to provide, in the range of 4-8%, to the policyholders. The need for greater security of the pensioner's fund and the stability and financial viability of the insurance companies need to be balanced for healthy growth of the sector.
In September 2010, IRDA introduced guidelines for pension products which mandated returns on such products to be linked to the reverse repo rate and the minimum guaranteed return was fixed at 4.5%.
The guidelines did not find favour with insurers, who argued that they would be forced to invest only in debt instruments. Following this, there was a decline in the sale of pension products as private insurers did not come out with any regular premium unit-linked pension products.