Prior to the new ULIP regulations, about 30% of business came from pension products. While most insurers have avoided pension ULIPs, IDBI Federal plans to revive the dwindling pension market with a new traditional pension product

IDBI Federal Retiresurance is a guaranteed traditional pension plan designed to help customers secure their lifestyle post-retirement. Retiresurance is a good product for people looking at returns in line with rates of long-term government securities.

You know the exact amount that you will receive on your vesting date for each premium paid. But the catch is that the rate used to calculate guaranteed returns may vary each year, depending on the government securities rate declared by the Fixed Income Money Market and Derivatives Association (FIMMDA). So, the corpus you are accumulating will depend on FIMMDA rates; but the positive side is that the premium you pay will get the government securities rates without any charges.

Retiresurance is a long-term product that has an accumulation phase and a payout phase. The duration of the accumulation phase can be over 10, 15, 20 or 25 years. In the payout phase, you could draw from your retirement corpus for a regular pension.

There is a single premium as well as a regular premium option with a minimum premium payment term of three years. The single premium option has a minimum premium of Rs25,000 and it is Rs20,000 for the regular premium. There is no upper limit for investment.

If someone chooses a 25-year term and pays a premium of Rs1,00,000, the FIMMDA rate for 25-year government securities is 8.6% today. With this rate, the policyholder is guaranteed Rs5,50,000 at the end of 25 years. For the next premium that you pay the remaining policy term will be 24 years. The FIMMDA rate for 24-year government securities at that time will determine what will be your guaranteed maturity value for your second year premium and so on. At the end of the accumulation phase (25 years in this case), the policyholder has the option to take out a one-third lump sum and use the remainder to buy annuity or to buy annuity for the full corpus. The annuity rates and terms will depend on what is offered at the time of the payout phase.
 
According to GV Nageswara Rao, managing director and chief executive officer, IDBI Federal Life Insurance, "We have designed Retiresurance to suit the definitive needs of people post-retirement. With an increase in life expectancy, many Indians could be spending a good 20 to 25 years of their life in retirement. The product offers a guaranteed corpus for every premium paid. Moreover, if the customer continues the policy till maturity, the plan offers guaranteed loyalty additions."

Retiresurance also comes with a death benefit to ensure that the policy holder's nominee gets money which could be the higher of either the premiums paid, along with a 5% compounded interest, or the special surrender value.

Under the current tax laws, contributions by way of premiums are eligible for deduction under section 80CCC. Under section 10 (10A), the tax benefits are on any payment in commutation of pension received from the fund.

IDBI Federal plans to also come out with a single-premium pension ULIP in the near future. They have already filed for the product with the Insurance Regulatory and Development Authority. The regular-premium pension ULIP is avoided by most insurers-except LIC-as it is perceived to be risky to offer a guaranteed 4.5% per annum.