No: IRDA/Act/GDL/PRD/135/06/2012 dated: June 13, 2012
All Life Insurance Companies
Sub: Guidelines for Pension Products — Clarification
1. Circular No. Ref: IRDA/Act/GDL/LIF/248/11/2011 dated 8.11.2011;
2. Circular No: IRDA/ACTL/ORD/PRD/013/01/2012 dated 5.1.2012;
The IRDA had issued guidelines for pension products vide references 1st and 2nd cited. Insurance companies have expressed certain concerns on the provisions in the cited Circulars and have also sought certain clarifications. In view of the above, the following clarifications are issued:
2. Clarifications on Reference 1st cited [Circular dated 8.11.2011]:
(a) Para 9 of the Circular cited is amplified to ensure that the same insurer is required to provide an immediate or deferred annuity even in the case of surrenders before vesting date. Hence, para 9 shall be substituted by the following:
“9(a) At the time of surrender and vesting, the policyholder shall have to buy a single premium deferred annuity or an immediate annuity product from the same insurer who contracted the original pension policy.
(b) In cases where the insurance company has undertaken management of a group superannuation fund which has been constituted by the employer in accordance with the extant laws, then the surrender of such a product will be governed by the provisions of Circular No. IRDA/Actl/ULIP/124(2)/10/2010, dated 27.10.2010. Further, the requirements of clause 9(a) will not apply to such surrenders.
3. After para 17 of reference 1st cited, it was required that all the then existing products which had not met the guidelines set out in reference 1 cited be withdrawn with effect from 1.1.2012. The Authority has observed that insurance companies have indeed withdrawn such products in accordance with the above stipulation but in certain cases group contracts continue to be managed by them owing to contractual commitments. It is hereby clarified that in such cases no new members shall be enrolled into such schemes.
4. Clarifications on Reference 2nd cited [Circular dated 5.1.2012):
(a) In para 1(b) of the circular after the words “…..sum equal to the premiums paid at” and before the words “the guaranteed rate of return ” the words “not less than” be inserted.
(b) Para 1(c) of the circular will be replaced by the following: “1(c) Surrender Value:
(i) Surrenders during the lock-in period of ULIP products shall be in accordance with the Guidelines on IRDA (Treatment of Discontinued Lined Insurance Policies) Regulations, 2010.
(ii) For non-linked products, the surrender value shall be in conformity with the provisions of the Insurance Act, 1938.
(iii) For surrenders after the lock-in period of ULIP based products, the surrender value shall not be less than the Fund Value.