The life insurance industry is experiencing 90% fall in Life Insurance pension business due to the implementation of a special tax treatment for the New Pension System (NPS). The new regulatory clause was introduced in 2009-10 financial year which made it mandatory for life insurers to offer a guaranteed return to its subscribers on pension products. As a result, the pension business of life insurance players has come down to Rs 2,000 crore in 2014-15 which was Rs 20,000 crore in 2009-10.The current budget has included a provision of Rs 50,000 additional tax-free incentive to the NPS added to the decline of business of life insurers.
V Manickam, Council Secretary General of Life Insurance announced that the regulator has already asked the insurers to offer a guaranteed return to its pension subscribers which they find it difficult to pay in a volatile market condition and the exemption of Rs 50,000 by NPS has snatched the pension business from life insurers. Life Insurance Corporation (LIC), the largest life insurer in India has the view its pension business will be under pressure due to the extra benefit which the government has made for NPS. The retail segment of NPS was laying back for the past five areas .But after the declaration of tax-free additional incentive by the government its headway on the back of this in the Budget.
At current stage, there are seven fund managers in India that are managing the pension fund and their total Asset under Management (AUM) stands at Rs 700 crore. Shailendra Kumar, CEO of SBI Pension said that the AUM of SBI Pensions has grown by Rs 5,700 crore in the past four months and is Rs 36,700 crore at present. They are targeting a growth of 25-30% increase in the AUM in the current fiscal year. The retail AUM of HDFC Pension has also increased by 2.5 times and reached Rs 12.5 crore after the new provision included in the budget.