Irdai introduces 'Saral Pension', a standard individual annuity product

The product will offer life annuity with 100 per cent return of purchase price.
The insurance regulatory and development authority of India (Irdai) has introduced a standard individual immediate annuity product “Saral Pension”, which all life insurers have to start offering to consumers by April 1. The product has to be filed by the insurers with the regulator by the end of February.

This has been done to ensure uniformity across insurers, and to make available a product by all life insurers that will broadly meet the needs of an average customer, the regulator said.

The product will offer life annuity with 100 per cent return of purchase price. It comes with joint life annuity and a provision of 100 per cent annuity to the secondary annuitant upon death of the primary annuitant and return of the full purchase price on death of last survivor. This means the annuity will be paid to the annuitant for life and after his/her death, the spouse continues to get the annuity for life until his/her death. Furthermore, on the death of the spouse, the legal heir will get the purchase price back.

The minimum annuity payable under the policy is Rs 1,000 per month, Rs 3,000 per quarter, Rs 6,000 half yearly, and Rs 12,000 per anum. However, there is no limit on the maximum annuity.
The regulator has said, the policy can be surrendered after six months of the commencement of the policy, if the annuitant or his/her spouse is diagnosed with some critical illness.

“On approval of surrender, 95 per cent of the purchase price shall be paid to the annuitant, subject to deduction of outstanding loan amount and loan interest, if any.  On payment of surrender value, the policy will be terminated, the regulator said.

While the pricing of the product is left to the insurers, the regulator has said the annuity rates should be fair and reasonable. It has also prescribed a band-wise annuity rate, wherein band 1 has been categorised as purchase price of less than Rs 2 lakh, band 2 as purchase price between Rs 2 lakh and Rs 5 lakh, band 3 with a purchase price of Rs 5 lakh and Rs 10 lakh, band 4 having a purchase price between Rs 10 lakh and Rs 25 lakh, and band 5 with a purchase price of over Rs 25 lakh.

Furthermore, the regulator has said, a loan can be availed under the policy post six months of commencement of policy. The maximum loan amount should be such that the effective annual interest amount payable on loan does not exceed 50 per cent of the annual annuity amount payable under the policy. The interest on loan shall be at 10-year G-Sec rate per annum as on April 1, of the relevant financial year and the loan interest will be recovered from the annuity amount payable under the policy.


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