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Your annuity pension payout option is needed, now

As you know, when your Pension Policy matures, you have to buy an Annuity Plan with the maturity amount.

It is this Annuity Plan, under which your pension is paid out, post retirement.

A typical Annuity Plan offers you many options to receive this pension.

Presently, the insurance companies approach the policy holders to choose their Annuity payout option just before the vesting date. (Vesting date is when your Pension Policy matures and the payment of pension begins under the Annuity Plan.)

In many instances, there is a delay in receiving the policy holder's choice of annuity payout. This, naturally, delays the start of pension payment; thereby causing needless inconvenience and loss to the annuitants. This is more particularly applicable to the deferred annuity plans.

To ensure that the policy holders do not unnecessarily suffer because of procedural delays, Insurance Regulatory and Development Authority of India (IRDAI) has laid down certain guidelines with regards to 'Obtaining Annuity Options from the Policy holders'.

The salient aspects of the same are discussed below.

1. Henceforth, you will have to exercise the Annuity Payout Option right at the start, while buying the Pension Policy itself. The proposal form, that the insurance company asks you to fill up, will have a provision to obtain this information from you.

2. For all the deferred annuity policies issued in the past, the insurance companies have to immediately start obtaining the policy holder's choice of the annuity plan. In case you hold such a pension policy, you can soon expect a letter from your insurance company. So be prepared with your choice.

Have you thought which Annuity Option would you choose for your pension?

3. But don't worry. What option you choose now is not sacrosanct. Your insurance company will approach you again... at least six months before the date of vesting. It will present you the details of Annuity amount under various options available, as also under the option you had chosen earlier. Thus, based on this latest information, you can either retain your earlier Annuity option or choose a new one.

4. The last date for informing the insurance company of this change, would be specified in the above communication. This should be at least 90 days before the vesting date.

5. The insurance company will start your annuity pension as per the revised option, provided the same has been received at least 90 days prior to the date of vesting.

6. However, if your revised option is not received before the specified date, the insurance company would begin making the annuity pension payment as per your original choice.

7. These new guidelines will be applicable to all annuity plans falling due from April 1, 2016.

A good move indeed by IRDAI to reduce the inconvenience and loss to the policy holders.

Of course, as you may recall, I have very serious reservations against Pension Policies and Annuity Plans. In case you missed them, following are my blog posts on this subject:
- Thou shall NOT BUY Pension Plans 
- Why I don't like Annuity Plans?

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