Minimum payable fixed at Rs 12,000 a year; no upper limit. Payouts to be a factor of investment made
Insurance Regulatory and Development Authority of India (IRDAI) has asked all life insurers to offer a Standard Individual Immediate Annuity Product — 'Saral Pension' — from 1 April, this year. It is expected to ease the process of buying an annuity.
The plan promises to provide a minimum pension of Rs 12,000 yearly, payable monthly, quarterly, half-yearly or annually. There will be no upper limit on the payout, which would be a factor of the investment made. Anyone between 40 and 80 would be allowed to invest in this single premium plan.
"Launching a standard immediate annuity product will help drive awareness for this product segment in India. As the name goes, the 'Saral Pension' plan will be a simple, basic pension product and will offer just two annuity options," said Karthik Raman, CMO and Head – Products, Ageas Federal Life Insurance.
1) Life annuity with 100 per cent return of purchase price:
Under this option, the pension would be paid for the life of an annuitant. Also, 100 per cent purchase price would be returned to the nominee or legal heirs on the annuitant's death.
2) Joint life annuity with provision:
This plan would pay 100 per cent annuity to a secondary annuitant on the primary annuitant's death and return the purchase price if the last survivor expires. Here the pension would be first paid to the annuitant for life. After the annuitant's death, the spouse would receive the same amount for life. The purchase price would be payable to the nominee or their legal heirs on spouse's death. Suppose the annuitant is a widow or widower. In that case, the purchase price would be payable to the nominee or legal heirs of the annuitant
In case of a single life annuity, 100 per cent of the purchase price would be paid to spouse or nominee.
Death of annuitant in joint-life annuity:
a) The spouse would continue to receive the same pension for life. A 100 per cent purchase price would be payable to the nominee or legal heirs on the spouse's death.
b) However, if the annuitant is a widow or a widower, the purchase price would be payable to the nominee or legal heirs if the policyholder expires.
An annuity will be payable as long as the annuitant lives.
They would be allowed to surrender the policy after six months if they or the spouse or a child is diagnosed with critical illnesses specified in the policy. This, however, would be subject to documents submitted and its interpretation by a medical examiner. On approval of surrender, 95 per cent of the purchase price would be paid to the annuitant subject to deduction of outstanding loan amount and loan interest, if any. The list of critical illnesses could be revised from time to time. On payment of surrender value, the policy would stand terminated.
"The framework for the plan was fixed by the regulator and is standard across insurers. The aim is to eliminate any confusion in customers' minds, which arises from the different features attached to the product and the consequent variation in prices on account of these features," added Raman.