IDBI Federal Retiresurance Guaranteed Pension Plan

Insurance | admin | August 3, 2011 at 6:03 am

IDBI Federal Life Insurance has joined the list of life insurers taking the single premium route for launching unit-linked pension plans, or pension Ulips, by launching the Retiresurance Milestone Pension Plan.

A category that was heavily promoted earlier, pension Ulips saw a dip in sales post the IRDA guidelines in September 2010. The guidelines made it mandatory for life insurers to offer a minimum return guarantee, linked to the RBI's key policy rate, the reverse repo rate. The insurance regulator has directed that pension Ulip returns should be at least 50 basis points higher than the prevalent reverse repo rate. The minimum returns on pension Ulips can move in the band of 3% to 6% per annum, depending on the applicable reverse repo rate.

PRODUCT FEATURES: It offers the policyholder a choice of two investment options — guaranteed return fund and guaranteed growth fund. While the first fund will invest in fixed income instruments to deliver a minimum guaranteed maturity value per unit, the second will try to enhance returns by investing a small portion (maximum 10%) in equities, besides delivering the minimum guarantee.

PREMIUMS: This is a single-premium plan, which means insurance-seekers will make a onetime payment towards premium. The minimum premium to be paid under the plan is .`1 lakh. There is no upper limit on the premium payable.

CHARGES: The major component of the charge structure is the fund management charge ( FMC), which amounts to 1.5% per annum and includes the investment guarantee charge. Premium allocation charge for single premiums under .Rs.25 lakh would be 0.5%.

The charges will be waived off for premium amounts above Rs.25 lakh. Policy administration charges will be in the range of 0.02% to 0.10%, depending on the amount of premium for the first five years. After this, the charges will be .`60 per month. Again those paying premiums higher than Rs.25 lakh will not have to pay any policy administration charge.

UPSIDE: Those with low-risk appetite may find this product's guaranteed-return feature attractive. There are other such plans from other insurers.

DOWNSIDE: The maximum possible equity exposure under the plan is 10%, which may not be adequate given that retirement planning necessitates a longterm strategy.

Source: Economic Times