UTI in talks with Irda to offer pension schemes

New Delhi, June 11: Unit Trust of India is exploring possibilities of enlarging its unit linked insurance plan (Ulip) scheme for offering pension facilities while planning to introduce more such schemes once government comes up with the final guidelines for the sector.

“We are in talks with the Insurance Regulatory and Development Authority (Irda) for pension schemes. We are planning to enlarge the Ulip scheme to offer pension benefits,” a top UTI official said here.

The move comes after the insurance regulator favoured entry of mutual funds along with life insurance companies for boosting the pension sector. Irda is expected to submit the final draft on pension reforms to the ministry of finance by July end or latest by October 2001.

UTI chairman PS Subramanyam met Irda chairman N Rangachary recently to seek clarification about extending the ulip scheme to offer more facilities to pensioners.

Ulip, which had mopped up about Rs 4,500 crore till April 2001 is a multi-benefit scheme which combines the basic benefit of life insurance with good returns, tax benefits and accident insurance cover. Apart from modifying the Ulip scheme, the UTI official said the fund is planning more schemes specifically for pension sector once Irda comes out the guidelines.

Irda sources said UTI would have to abide by the new investment norms and change its portfolio holding in Ulip according to the prudential investment norms, which allow a maximum 25 per cent investment in equities.
Irda sources said UTI would have to abide by the new investment norms and change its portfolio holding of Ulip in accordance to the prudential investment norms, which allow a maximum 25 per cent investment in equities.

Pension funds are required to invest 40 per cent in government and other approved debt instrument (with a minimum 20 per cent in government securities) and the remaining 60 per cent in approved investments including ‘AAA’ rated debentures and equities.

Currently UTI pays a small amount from Ulip to Life Insurance Corporation (LIC) towards premium and invest the balance in debt (60 per cent) and equities (40 per cent).

The new investment norms for ‘Unit Linked Life Insurance’ schemes put out by Irda states: “The unit linked policies may only be offered where the units are linked to categories of assets which are both marketable and easily realisable.”

However, the total investment in other than approved categories of investment shall at no time exceed 25 per cent of the fund, the guideline said. The Irda is currently working on the basis of the SA Dave committee report on Old Age Security and Income Scheme (OASIS) report.

Irda sources said the regulator may differ slightly from what the committee suggested and allow mutual funds to enter the pension business.

The regulator intends to intensify competition and ensure higher coverage of pensions especially in the unorganised and private sectors. LIC, ICICI Prudential, HDFC Standard Life and Birla Sunlife have already expressed intentions to come up with pension schemes when the Irda comes out with the final guidelines.

-- PTI