IRDAI mandates standard annuity plan

IRDAI has advised all life insurers to mandatorily offer from April 1 a standard, individual immediate annuity product it has developed.

The single premium, non-linked, non-participating plan, to be called Saral Pension with the insurer’s name prefixed, will have simple features and standard terms and conditions.

The product would make it easier for customers to make an informed choice, enhance trust between the insurers and the insured and reduce mis-selling as well as potential disputes, the regulator said while issuing guidelines for the product.

The minimum annuity is Rs. 1,000 per month and in multiples thereof for quarterly, half yearly and annual payouts. The minimum and maximum purchase price will depend on the annuity amount. The plan is targeted at those aged between 40 and 80 years.

There is no maturity benefit under the policy. Loan can be availed any time after six months from the commencement of the policy.

Noting that several individual immediate annuity products are marketed by life insurers, with each product having its own features, terms and conditions and annuity options, IRDAI said a standard product will broadly meet the needs of an average customer.

While leaving the pricing to the insurers, the regulator stipulated two annuity options that can be offered.

Under the Life Annuity with Return of 100% of Purchase Price, the first option, the annuity will be paid for life. In addition, 100% purchase price will be returned to the nominee / legal heirs on death of the annuitant.

In the case of Joint Life Last Survivor Annuity with Return of 100% of Purchase Price (ROP), the other option, annuity is first paid to the annuitant for life. After death of the annuitant, if the spouse is surviving, he/she will continue to receive same amount of annuity for life. On death of the spouse, the purchase price shall be payable to nominee/legal heirs.