1. Irda set to make annuity mandatory for all pension plans

2. ›Insurance Regulatory and Development Authority (IRDA) is all set to make annuity mandatory for all pension plans including traditional pension products. ›In a circular IRDA has clarified that guidelines on pension plan will include all individual and group unit-linked pension products, all individual and group non-unit-linked products and all individual and group variable insurance pension products which means all traditional pension plans will also come under guidelines on pension plans; prior to this some insurers were assuming that guidelines will be applicable to only unit-linked pension plans.

3. ›As per the IRDA as annuity is the main feature of the pension plan hence it should be mandatory. There are some traditional pension products which do not provide annuity which defeats the purpose of the Retirement Pension Plan.Retirement Pension Plan ›As per IRDA if annuity is not mandated then policyholder is given lump sum at the end of the tenure of the policy which is like retirement fund where accumulation happens but policyholder is not bound to buy annuity which IRDA does not favor. ›IRDA wants that more life insurers should provide annuity products. As per IRDA there are many insurers active in accumulation stage but for annuity policyholder has to move to Life Insurance Corporation of India (LIC) which holds 90-95% of the annuity market. Hence there is need to divide this concentration which makes it risky for LIC; and there will be increased demand for annuity plans once the penetration of New Pension Scheme (NPS) increases.

4. ›Insurers will also have to provide assured benefit not only when the policy matures but also in the event of death of the policyholder or surrender of the policy; and assured benefits should be declared at the time of the policy purchase. ›Keeping in mind likely implication of Direct Taxes Code (DTC) from next fiscal IRDA has eased its stand on the amount that need to be annuitised at the time of maturity or vesting; now at the time of vesting or maturity policyholder will have the option to commute the percentage of the amount under the policy; which will be in accordance with the extant rules of the income tax. Currently as per income tax rules commutation up to 33% of the maturity amount is non-taxable while above is taxable.

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