Irda set to make annuity mandatory for all pension plans

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Irda set to make annuity mandatory for all
pension plans
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• Insurance Regulatory and Development Authority
  (IRDA) is all set to make annuity mandatory for
  all pension plans including traditional pension
  products.
• In a circular IRDA has clarified that guidelines
  on pension plan will include all individual and
  group unit-linked pension products, all
  individual and group non-unit-linked products and
  all individual and group variable insurance
  pension products which means all traditional
  pension plans will also come under guidelines on
  pension plans prior to this some insurers were
  assuming that guidelines will be applicable to
  only unit-linked pension plans.

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• As per the IRDA as annuity is the main feature of
  the pension plan hence it should be mandatory.
  There are some traditional pension products which
  do not provide annuity which defeats the purpose
  of the Retirement Pension Plan.
• As per IRDA if annuity is not mandated then
  policyholder is given lump sum at the end of the
  tenure of the policy which is like retirement
  fund where accumulation happens but policyholder
  is not bound to buy annuity which IRDA does not
  favor.
• IRDA wants that more life insurers should provide
  annuity products. As per IRDA there are many
  insurers active in accumulation stage but for
  annuity policyholder has to move to Life
  Insurance Corporation of India (LIC) which holds
  90-95 of the annuity market. Hence there is need
  to divide this concentration which makes it risky
  for LIC and there will be increased demand for
  annuity plans once the penetration of New Pension
  Scheme (NPS) increases.

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• Insurers will also have to provide assured
  benefit not only when the policy matures but also
  in the event of death of the policyholder or
  surrender of the policy and assured benefits
  should be declared at the time of the policy
  purchase.
• Keeping in mind likely implication of Direct
  Taxes Code (DTC) from next fiscal IRDA has eased
  its stand on the amount that need to be
  annuitised at the time of maturity or vesting
  now at the time of vesting or maturity
  policyholder will have the option to commute the
  percentage of the amount under the policy which
  will be in accordance with the extant rules of
  the income tax. Currently as per income tax rules
  commutation up to 33 of the maturity amount is
  non-taxable while above is taxable.

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