The recent trend of simple, standardised products being introduced for various forms of life and health insurance business has continued with the introduction of a standard immediate annuity product. On 25 January 2021, the IRDAI issued the “Guidelines on Standard Individual Immediate Annuity Product, “Saral Pension”” (Guidelines).

The Guidelines recognise that there is presently a multitude of annuity products available in the market and aim at the creation of a uniform product across Insurers that will meet the needs of the average customer.

Saral Pension – Product Overview

On or before 1 April 2021, all Life Insurers are mandatorily required to offer the prescribed standard immediate annuity product, ‘Saral Pension' (Standard Product). The Standard Product is a non-linked, non-participating, individual, immediate annuity insurance plan, under which the annuitant (individual/joint life)/nominee/legal heirs, in addition to the annuity payouts in regular intervals, also receives benefits in the event of death and surrender of the policy.

The Guidelines stipulate, inter alia,  the following features and parameters of the Standard Product:

  • Age at entry: 40 years.
  • Prospective Policyholders: All individuals without any restrictions on gender, travel and future occupation.
  • Policy Term: Whole life product, ie, the Insured's entire lifetime or the specified maturity date.
  • Premium Payment: Only single premium allowed.
  • Purchase Price & Annuity Rates: Return of 100% of the purchase price on the death of the annuitant (and spouse) at the annuity rates derived based on the bands prescribed in the Guidelines along with the Insurer's actuarial principles.
  • Death Benefit: In case of single life annuity, 100% of the purchase price shall be payable on the death of the annuitant. For joint life annuity, after the death of the annuitant, the policy will continue on the life of the surviving annuitant spouse. Subsequently, on the death of the spouse, 100% of the purchase price shall be payable to the nominee/legal heirs. 
  • Survival and Surrender Benefit: Benefits will be available on the survival of the annuitant, and on the surrender of the policy due to the diagnosis of any of the critical illnesses as specified under the Guidelines.
  • Maturity Benefit: NIL
  • Annuity Payout: Payments will be in arrears only per the payout options chosen by the annuitant (monthly, quarterly, half-yearly and yearly) wherein the first payout will begin after the modal duration.
  • Policy Loan: Loan can be availed at any time after six months from the date of commencement of the policy.  The maximum amount of loan that may be granted under the policy will be such that the applicable annual loan interest amount payable does not exceed 50% of the annual annuity amount payable under the policy. 
  • Policy Document: The format for the policy document and terms and conditions of the Standard Product is prescribed under the Guidelines.

Concluding Remarks

The Guidelines seek to provide customers with access to a standard product to be offered on a uniform basis by all Life Insurers. The Standard Product has been introduced to broadly meet the needs of an average customer. To this end, the IRDAI has mandated all Life Insurers to offer the Standard Product on or before 1 April 2021, and in furtherance of which, Life Insurers are required to make the filings with the IRDAI under the File & Use Procedure by 28 February 2021.

It appears that customers' feedback towards standard products in the recent past has been broadly positive thus far, accordingly, it will be interesting to see how such a standard annuity insurance product, ‘Saral Pension', will be received in the market going forward.

Originally Published by Tuli & Co, February 2021

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.