Insurance companies are shying away from designing new group pension products for company employees after the Insurance Regulatory and Development Authority (IRDA) circulated a new draft guideline barring fresh recruits to be put under the existing schemes.
"We may not be able to come up with new pension products as that would mean a guaranteed return to the member and that is not feasible for us, the moment we have to provide certain guarantee to the investor, it puts us in an uncomfortable situation," a senior official at a life insurance company, who did not wish to be identified, told Hindustan Times.
This would mean fresh employees joining the workforce would not get additional retirement benefits.The IRDA in its draft guideline circulated to insurance companies said, "any pension contract which has been renewed/issued w.e.f 01.04.2012 shall comply with the pension guidelines/circular. As such the existing schemes are closed to new members unless the contracts are revised as per new pension guidelines/circular".
"New schemes have to be more pro-consumer," IRDA chairman J Hari Narayan told HT. "We want to safeguard the interests of the consumers."
However, those employees who are already under a group pension scheme would continue to enjoy the benefits even if she decides to switch her job, said the official.
Until now, several companies have been offering additional benefits to their employees by parking 15% of their basic salary in group pension products, which is tax friendly.