If you are a salaried individual, you would be busy with the annual ritual of finalising tax-saving investments
during the first three months of the New Year. You can walk into your
bank, enquire about tax-saving investments, and step out with a life insurance
policy. You may even buy an insurance policy from your investment
advisor who always impresses you by counting the infinite benefits of
buying an insurance policy to save taxes.
In fact, insurance companies and their sales forces and banking officials work overtime to sell insurance plans during the tax-saving season. In fact, insurance companies clock most of their annual sales during this part of the year. Apart from the traditional endowment plans and regular unit-linked insurance policies (Ulips), you can expect these sales people to pitch unit-linked pension plans (ULPP) this year.
THE REINCARNATED PENSION ULIPS
At least three life insurers — HDFC Life, ICICIBSE -1.67 % Pru and Birla Sun Life Insurance — have launched unit-linked pension plans in the last few months. This is significant, as regular premium pension Ulips had almost disappeared from the market post the Irda guidelines of September 2010. Last year, the regulator relaxed some norms, most notably the return guarantee linked to RBI's reverse repo rate.
Insurers found it difficult to offer this return and policyholders, too, were at a disadvantage as a guarantee meant higher exposure to debt instruments, instead of higher-yielding equities. Elimination of rigid guarantee a plus In the current regime, pension plans have to offer a non-zero , positive return assurance or promise an absolute maturity amount upfront. This has meant more flexibility for insurers to design their products.
Hence, the partial revival in product launches. "Investors will get assured returns on vesting and death along with non-guaranteed bonuses in case of participating traditional plans. On the other hand, in case of pension Ulips, the equity component in the chosen fund option can offer higher returns. Investors should bear in mind the fact that it is a retirement solution .
They should invest into it with a long-term horizon of 10-15 years in mind," says Sanjay Tiwari, vice-president , strategy and product, HDFC Life. However, unlike pre-September 2010 pension Ulips, the equity exposure will be relatively curtailed as they have to offer some guarantee. "Freedom and guarantee cannot go hand in hand. Any form of guarantee by the insurer limits the freedom of the policy holder to switch between risky and secure assets.
Yet, pension Ulips score slightly over traditional endowment or pension plans in terms of transparency — investors will be aware of the portion of premium being allocated , charges and exposure to equities. Also , they can monitor the pension fund's performance regularly," says Sunil Sharma , chief actuary, Kotak Life.
In fact, insurance companies and their sales forces and banking officials work overtime to sell insurance plans during the tax-saving season. In fact, insurance companies clock most of their annual sales during this part of the year. Apart from the traditional endowment plans and regular unit-linked insurance policies (Ulips), you can expect these sales people to pitch unit-linked pension plans (ULPP) this year.
THE REINCARNATED PENSION ULIPS
At least three life insurers — HDFC Life, ICICIBSE -1.67 % Pru and Birla Sun Life Insurance — have launched unit-linked pension plans in the last few months. This is significant, as regular premium pension Ulips had almost disappeared from the market post the Irda guidelines of September 2010. Last year, the regulator relaxed some norms, most notably the return guarantee linked to RBI's reverse repo rate.
Insurers found it difficult to offer this return and policyholders, too, were at a disadvantage as a guarantee meant higher exposure to debt instruments, instead of higher-yielding equities. Elimination of rigid guarantee a plus In the current regime, pension plans have to offer a non-zero , positive return assurance or promise an absolute maturity amount upfront. This has meant more flexibility for insurers to design their products.
Hence, the partial revival in product launches. "Investors will get assured returns on vesting and death along with non-guaranteed bonuses in case of participating traditional plans. On the other hand, in case of pension Ulips, the equity component in the chosen fund option can offer higher returns. Investors should bear in mind the fact that it is a retirement solution .
They should invest into it with a long-term horizon of 10-15 years in mind," says Sanjay Tiwari, vice-president , strategy and product, HDFC Life. However, unlike pre-September 2010 pension Ulips, the equity exposure will be relatively curtailed as they have to offer some guarantee. "Freedom and guarantee cannot go hand in hand. Any form of guarantee by the insurer limits the freedom of the policy holder to switch between risky and secure assets.
Yet, pension Ulips score slightly over traditional endowment or pension plans in terms of transparency — investors will be aware of the portion of premium being allocated , charges and exposure to equities. Also , they can monitor the pension fund's performance regularly," says Sunil Sharma , chief actuary, Kotak Life.
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