Budget 2021: Bring parity between pension products offered by life insurers and NPS, says Aditya Birla Sun Life Insurance MD Kamesh Rao

As budget 2021 is only less than a week away, every sector has pinned hopes on Finance Minister Nirmala Sitharaman to make provisions for their sectors in the Union Budget. The finance minister has further raised the hope by saying budget 2021 will be 'one like never before and historic one.'

Talking about expectation from Budget 2021, Kamesh Rao, MD & CEO, Aditya Birla Sun Life Insurance, said the government should announce measures to bring parity between pension products offered by life insurers and NPS.

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He said, "The importance of a safety net, in the form of insurance cover has gained immense prominence, especially in the past one year. Both, Insurance companies as well as policy holders are expecting that the upcoming budget will focus on deepening insurance penetration in the country. One such goal will be to secure one’s life after retirement." 

He added, "A large population in our country use pension products offered by life insurers to have regular income post retirement to lead a comfortable life. From a social security standpoint, both pension products offered by life insurers and NPS are serving the same cause of building corpus for retirement income. While, investment in NPS offers additional tax deductions of Rs 50,000 under section 80CCD, life insurer’s pension plans do not enjoy this benefit, making it unattractive for customers".

Aditya Birla Sun Life Insurance MD and CEO said the budget should announce measures to bring parity between pension products offered by life insurers and NPS.  

Additionally, life insurers offer annuities as retirement income, for which they generally invest the fund in government securities for long-term guaranteed return, which also plays a significant role in nation-building, he said .  

"Government should increase the supply of long dated (40-50 years) bonds for increased liquidity in the market. It should further develop the corporate bond market, where insurance companies can source long-term, credit worthy or enhanced corporate bonds, and generate better long-term yields for such annuity plans," he said.  

Rao said these measures will not only encourage long-term savings but will also promote capital formation. "We are also hopeful to see an expanded bond market. This will generate better yields and thereby help customers to amass greater sum for their retirement and better social security," he added.