Insurance behemoth Life Insurance Corporate (LIC) is all set to withdraw its flagship pension plan Jeevan Akshay, which provides a guaranteed return of 6.75-7 per cent.
After a sharp drop in the yield on 10-year government bond, which slipped to 6.5 per cent levels in recent times, insurance regulator IRDA had asked LIC to lower the promised rate on the product.
The pension product has seen record inflow in recent months, as it provides regular income for lifetime on payment of one-time lumpsum premium, and helped the insurer increase its premium mopup as well as market share in this segment.
The single-premium plan is said to have mopped up ₹10,000 crore premium for LIC this financial year and some Rs 23,000 crore over the past two years.
On Wednesday, ET reported that LIC will stop selling the popular annuity product from next month. The report said falling interest rates have made it impossible to sustain returns at the current level. However, the plan may be reintroduced at a lower rate on a later date, it said.
LIC had launched the product to take on bank savings products when interest rate were high. The product had made other pension products in the market unattractive as LIC offered very competitive yield on the same.