The fight for investors' retirement monies has entered regulatory corridors.
Barely five days after Insurance Regulatory and Development Authority (IRDA) came out with an advertisement to create awareness for unit linked insurance plans (pen- sion), the Pension Fund Regulatory and Development Authority (PFRDA) released its own awareness campaign for New Pension System (NPS) on Wednesday. “The Indian space has low insurance penetration and it is part of the job of the regulator to tell them (people) about the various types of products that exist,“ IRDA chairman J. Hari Narayan told Hindustan Times. IRDA plans to continue with this awareness initiative till December. “The campaign looks more like asking investors to go and buy ULIP (Pension),“ a Mumbai-based financial plan- ner said. “What's needed is awareness about the extreme- ly high charges the product car- ries and the manner in which it is mis-sold.“ About 70-80 per cent of the Rs 83,891 crore premium col- lected between April 2009 and February 2010 came from ULIPs, whose first-year commission can go as high as 35 per cent (Rs 35 out of Rs 100 can go to the agent selling the pol- icy, though rate are different across companies). “We have only placed the advertisements and it is for the customers to decide whether they want to buy or not,“ anoth- er senior IRDA official said. “We will be talking about the fee structure in our next series of advertisements.“ Almost on cue, on Wednesday, the PFRDA advertisement for NPS -- the world's cheapest retirement planning product -- stressed on trans- parency, and low costs. “We have a product (NPS) which is on a low cost model and even serves individuals who are economically disadvantaged,“ said Rani S Nair, executive direc- tor, PFRDA. “The government is supporting the product and I think it is a product that people should be aware of.“ The same day, IRDA released another advertisement for term insurance. A low-cost pure insurance product, a term plan is something that insurance companies have not been pro- moting --- less than 10 per cent of the premium collected between April 2009 and February 2010 came from term plans, according to industry sources.