The life insurance industry collectively has Rs 15,166.47 crore of unclaimed money that belongs to
Last year, the Insurance Regulatory and Development Authority of India (Irdai) asked insurance
companies to make provisions to reach out to the policyholders and pay them their dues, now the regulator itself is taking steps to make it easier for policyholders to claim their money.
Through a circular dated 3 August, the insurance regulator has relaxed the rules on pension products and allowed policyholders to completely withdraw smaller amounts accumulated through pension products. This is one of the reasons why insurance companies have unclaimed money, said the circular.
A pension policy sold by the life insurance industry is known as a deferred pension plan. This is because in the initial phase or through the policy term, you invest periodically to accumulate a corpus. On maturity or at the end of the policy term, you can only keep up to one-third or about 33% of the maturity corpus tax-free in your hands.
With the remaining money, you need to buy an annuity or a single premium deferred pension plan. An annuity product provides you pension for life.
As per Irdai rules, an insurance company needs to pay an annuity amount of at least Rs 1,000 per month to the policyholder. In other words, your corpus has to be enough for the insurer to give you Rs 1,000 per month, after annuitizing.
For this, the corpus for a 60-year-old would have to be about Rs 2 lakh, in the current scenario; most insurers specify a minimum purchase price for their annuity products. If the accumulated amount is lower, insurers can’t annuitise, and since the rules allow you to withdraw only one-third of the maturity corpus, insurers are left with the remaining money.
We spoke to insurers to understand what happens to this money: while some insurers hold on to the amount and move it to the unclaimed fund, some others refund it to the policyholders. So there is ambiguity on what to do with this money.
But now Irdai has specified that any accumulated unclaimed amount that’s not sufficient to buy the minimum annuity amount can be paid back to the policyholder as lump sum.
According to income tax rules, any amount that’s commuted (taken as lump sum) from a pension product is tax free. So the amount refunded to you will be tax free too.
DO YOU HAVE MONEY IN YOUR PENSION ACCOUNT with INSURANCE COMAPNY ?
Irdai relaxes rules to help you claim pension money
– Mint – 9th August 2018 ( Presented as it is )