The plan was unveiled at the Life Insurance Council meeting in Hyderabad on May 5, by Insurance Regulatory and Development Authority (Irda) chairman N Rangachary. He has sought feedback on the proposed plan within a month.
Standardised pension plans may have a limited role to play in entry-level positions. However, they are normally not used for the mainstream market where the benefits of product providers competing against each other in terms of pricing and product features are more in the consumers interest. We must remember that the whole point of liberalisation was competition and choice, not homogeneous offerings, CEO of Aviva Life Insurance Stuart Purdy pointed out.
The Irda Standard Pension Plan proposes a minimum annual contribution of Rs 3,000 under a deposit administration plan drawn up on the lines of a unitised, with profits plan of the UK or the universal life plan of the US and Canada. The contribution, payable in one or more instalments, can be made to the insurer preferred by the policy-holder through select banks. Individual companies may choose to cap the maximum annual contribution, Irda said. It will also be a portable scheme, so that individuals can switch mid-stream to another insurer.
The proposed plan envisages two funds to be set up by the insurer - the policy-holder fund and the general fund. Based on the investment performance of the policy-holders fund, the insurer will declare income credit in the form of bonus/dividend from time to time. This would be in two parts - guaranteed and non-guaranteed.
CEO and managing director of Max New York Life Anuroop Tony Singh felt that a standard pension plan was not an ideal solution in a market differentiated by innovation in products, pricing and marketing strategies.
However, he added that given the large numbers of public who had no recourse to pensions, the Irda proposal was a good thought-starter, especially since it allowed flexibility to insurers beyond the basic framework.
AMP Sanmar vice-president SV Mony said: The Irda proposal on standard pensions is workable and we have said so to them. We would be keen to take it up.
As for Birla Sun Life, its associate director, marketing and communication Anjana Grewal said the company would crystallise its view on the plan within the month and send it to Irda.