IRDA wants insurers to disclose pension benefits upfront

The new guidelines by the Insurance Regulatory and Development Authority (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 Existing pension products,which do not comply with the guidelines,will have to be withdrawn from January 1,2012,it said.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 per cent 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 per cent,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,” IRDA said.

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 per cent.

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.