IRDA to do away with mandatory 4.5% return on pension schemes
The insurance regulator IRDA on Aug 1, 2011 proposed doing away with the assured 4.5 per cent return norm for pension schemes and introduced mandatory disclosure of assured benefits upfront to the customers. "A pension product shall have an assured benefit disclosed at the time of sale...in absolute terms which becomes payable on the vesting date," the Insurance regulatory and Development Authority (IRDA) said in a draft guideline for pension products. The IRDA proposed to modify the guidelines as the earlier norm of assured 4.5 per cent return did not find favour with life insurance companies. Since the implementation of the guidelines on pension products from September 1, 2010, only five out of 23 life insurance companies came out with pension or ULIP product. The regulator has said that the insurance companies would provide a "minimum return on the premiums paid during the period of contract, which shall be disclosed at the time of purchase of contract." The insurance company 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 4-6 per cent, to the policyholders.
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