Pension products to guarantee a non-zero return :: Business Line

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The insurance regulator IRDA has clarified that pension products will guarantee an assured benefit in the form of a non-zero rate of return, which will be disclosed upfront.

This clarification comes after IRDA's guidelines issued in November which mandated that all pension products offered by life insurers would define an assured benefit that is applicable on death, on surrender and on vesting, which had to be disclosed at the time of sale. Prior to this, insurers were required to give a 4.5 per cent guarantee on pension products.

According to the guidelines, insurance companies were required to withdraw all insurance products that did not conform to the guidelines by January 1, 2012.

In compliance with the circular, insurers re-filed 22 revised products.

As per the IRDA circular, in the event of death of a policyholder during the term of the contract, the successors to the policyholder will be entitled to receive a sum equal to the premiums paid at the guaranteed rate of return.

The regulator has also said that the pension guidelines issued in November 2011 do not apply to group gratuity and group leave encashment products.