The insurance regulator made it mandatory for insurers to offer such plans with uniform features
HDFC Life has rolled out the standardised Saral Pension policy, a non-linked, non-participating immediate annuity plan.
Several life insurers, including Life Insurance Corporation of India (LIC), Max Life and Tata-AIA Life have already unveiled their Saral Pension plans. The Insurance Regulatory and Development Authority of India (IRDAI) made it mandatory for insurers to offer such plans with uniform features, like in case of standardised life and health insurance policies. Only the annuity rate, which will be determined by the life insurers, is the distinguishing factor.
Simple pension plan
Under immediate annuity plans, you hand over your accumulated retirement corpus to the life insurance company, which promises a life-long pension. Saral Pension offers the option of receiving this amount on a monthly, quarterly, bi-annually or annual basis. The rates – which determine the quantum of your annuity income – are decided at the time of buying the product. The minimum pension that you can receive is Rs 1,000 per month. The minimum age at entry is 40 years, while the maximum is 80 years.
Under Saral Pension plan, you can choose between two annuity options: ‘Life annuity with return of 100 percent of purchase price’ and ‘Joint life last survivor annuity with return of 100 percent of purchase price on death of the last survivor.’ In case of the first option, the annuitant will receive regular pension during her lifetime and after her death, the purchase price – lump-sum invested at the time of purchase – will be handed over to her nominees or legal heirs. In case of the second option, the surviving spouse will continue to receive the annuity even after the primary holder’s death. The purchase price will be paid out to her nominees or legal heirs after the surviving spouse’s death. The minimum purchase price under Saral Pension is Rs 2 lakh, and there is no cap on the maximum amount.
You can surrender the policy if you, your spouse or children, were to contract a critical illness such as cancer or renal failure. The product also allows annuitants to take a loan six months from the date of policy issuance. “Annuity plans are suitable for individuals who are closer to retirement age or have retired. These plans can act as a safeguard against market volatilities and falling interest rates,” said Srinivasan Parthasarathy, Chief Actuary, HDFC Life. Simple-to-understand features and two annuity options, with both offering return of purchase price constitute Saral Pension’s advantages.
On the flipside, annuity rates in India are low, with most insurers offering 5-6 percent returns for Saral Pension. Moreover, the entire annuity income is taxed at marginal rates, which is a dampener for retirees.
