IDBI Federal Retiresurance pension ULIP target unclear

IDBI Federal Retiresurance Milestone Pension Plan is a single-premium pension ULIP. Only Life Insurance Corporation of India has come out with a regular premium pension ULIP after the 1 September 2010, ULIP changes by Insurance Regulatory and Development Authority (IRDA). All other pension ULIP products offered today are single-premium which helps insurers to be on the safer side for guaranteeing 3% to 6% returns per annum. If this product had been launched last year, it may have got some response. In the current high interest rate scenario, it is unlikely to evoke interest. The minimum premium is a hefty Rs1 lakh. The premium allocation charges (0.50%pa) and policy administration charges (0.1% p.m. for five years and Rs60 p.m. thereafter) are on the lower side. These charges are zero for premium of Rs25 lakh and above. There will be fund management charge of 1.25%pa and investment guarantee charge of 0.25%pa.

One of the investment options of the product is 0%-10% exposure to equities and equity-linked instruments, but it also means that the company will take a conservative approach to be able to offer guaranteed returns. IDBI Federal recently launched a traditional pension plan called Retiresurance Guaranteed Pension Plan which may give better returns than the pension ULIP. If a customer chooses a 25-year term, the current rate for 25-year government securities (8.6%) will be guaranteed for the company’s traditional pension plan. IRDA will come up with changes to pension ULIP regulations soon. This is because pension ULIPs are not selling. The customer will be better off waiting for the future regulatory changes.