It is noticed by the regulator that the life insurers are obtaining Annuity Options from the policyholders prior to vesting date in the case deferred Annuity Plans and due to non-receipt of Annuity option from policyholders before the vesting date, its leading to delay in start of annuity on vesting date and causes loss to the policyholders.
In order to protect policyholder’s interest – Insurance Regulatory and Development Authority of India (IRDAI), mandates certain guidelines with respect to deferred Annuity in pension plans:-
Insurer to obtain the annuity option during the proposal stage itself and the same to be captured in the company records.
If the policyholder skips to opt for an annuity option during proposal stage, insurer should pro-actively obtain the same.
Insurer to send communication to the policyholder at least 6 months prior to the vesting date, briefing him/her the various options available and opportunity to select any other annuity option based on the latest information than what he/she selected earlier. The insurer should also mention that any change in annuity option should at least 90 days prior to the vesting age.
If there is no request for revised annuity option from policyholder within 90 days from the date of vesting, the insurer should process annuity payments as per the original option. If there is a request for revised annuity option from policyholder within 90 days from the date of vesting, then the annuity payments are to be processed according to the new annuity option.
The above guidelines/circular will be applied to all the annuities falling due from April 1st, 2016.
Annuity in a pension plan provides regular payments and can be used as a Retirement Strategy. The person who purchases the annuity is called the annuitant. The annuitant can choose to opt for the annuity immediately or at specific period/intervals as per his/her retirement needs. Pension plans, with these options are available in the insurance market namely – 1. Immediate Annuity 2. Deferred Annuity.
Immediate Annuity – In this option, the lump sum premium is paid once for the entire policy tenure. An immediate annuity allows income payments immediately, or very soon after purchase. Policyholder can use an immediate annuity whenever s/he want to start taking income as soon as possible.
Deferred Annuity – In this option, the premium is paid regular as per the premium paying tenure of the policy. In Deferred Annuity option, the income payments are paid at specific intervals, as per the policyholder’s discretion and the annuity option available in the plan.
