FAQ >>Annuity FAQs

General information about a Group Annuity scheme
Swarn Jeevan - Group Immediate Annuity
 

General information about a Group Annuity scheme
 
1.
What is an Annuity?
Annuity is a contract between an annuity provider and the annuity purchaser whereby the annuity provider agrees to make periodic payments for the agreed tenure in exchange for an upfront purchase price.

In effect the bulk payment made by the client is converted into periodic cash flows during the term of the annuity contract.
 
2.
How is an annuity scheme different from the fund management schemes?
Annuity is a long term contract where the rates are locked in for the term of the contract. Unlike in the case of fund business (Gratuity, LE and SA fund management) in case of an annuity contract the annuity provider guarantees to make the promised payments for the duration of term as defined in the scheme. In essence the client's risk is transferred to the annuity provider.
 
3.
Why should a client go for an annuity scheme?
By buying annuities the client completely outsources the liability and the risks associated with managing those liabilities to the annuity provider. Risks of longevity, expected returns, operational hassles, etc. are the major risk associated with the employer which he transfers to the annuity provider.
 
4.
Also in case of an Income Tax approved Superannuation Trust it is compulsory for the client as per IT Rule 87 to make pension payments through an annuity.

What is the annuity purchase price?

The amount of purchase price payable by the Master Policy Holder in return for annuity payments for the covered members.

The annuity rates are also quoted as 'Monthly/Annual Annuity Payouts for Rs. 1,000 Purchase Price': This is the total amount of monthly/annual annuity that a member will get for 1,000 Rupees of Annuity purchase price.
 
5. What are the different types of annuity options offered by insurance companies?
In general the following annuity options are available in the market:

Single Annuity:
 










Life Annuity: Annuity is payable during the life time of the member.
Life Annuity with Refund of Purchase Price: Annuity is payable during the life time of the member. On death of the annuitant the original Annuity Purchase Price is refunded to the nominee.
Life Annuity with Refund of Balance Purchase Price: Annuity is payable during the life time of the member. On death of the annuitant the balance (if any) of the original Annuity Purchase Price (Purchase Price - Annuity Paid) is refunded to the nominee/trust.
Annuity Certain for 'X' Years and Annuity for Life Thereafter: Annuity amount will be payable to the annuitant or in case of his death to the nominee for the chosen number of years. After the completion of the chosen number of certain years the annuity payment will continue to be paid if the annuitant is still alive for the life time of the annuitant.
Increasing Life Annuity: Annuity is payable during the life time of the member. The annuity amount will increase by the chosen percentage annually.
Joint and Survivor Annuity Options:
Joint Life (Last Survivor) Annuity: Annuity continues to be paid as long as the annuitant or the annuitant's spouse is alive.
Joint Life (Last Survivor) Annuity with refund of Purchase Price: Annuity continues to be paid as long as the annuitant or the annuitant's spouse is alive. Annuity is payable during the life time of the member. On death of the annuitant the original Annuity Purchase Price is refunded to the nominee.
 
6.
Can insurance companies offer pure certain annuities?
As per IRDA guidelines insurance companies can only offer variations of life annuity. Certain Annuities - annuities where the payout is for a fixed number of years only - cannot be offered by insurance companies as per current guidelines.
 
7. What would motivate an employer to purchase annuities?
 




Improved longevity of an average Indian - This has resulted in annuities to be paid for a longer tenure than usual.
Corporate governance - to have an insurer handling the payments ensures smooth monthly transactions.
Aging workforce - State / Central PSU's have a huge aging workforce and every year they have large number of employees retiring. Managing the payments of pension / annuities at their end is becoming very tedious task and they would prefer to outsource the administrative task.
Employee pressures - The labour unions and other employee associations are also driving forces to take the bulk annuity payout route.

8.
How can an Insurance company better manage the retirement liability through annuities than the employer?
 

The insurer can through specialized modeling tools and skills can make better mortality predictions.
The insurer has an expertise in fund management and thus can thus better utilize the annuity corpus.
The insurer enjoys economies of scale in administration and operations and is thus able to make annuity payments at a lower cost.
 

Swarn Jeevan - Group Immediate Annuity
 
1. What is Swarn Jeevan Immediate Annuity?
Swarna Jeevan from SBI Life Insurance is a Group Immediate Annuity Plan.

Group means that the plan is not available for single persons and only explained for Groups as specified in the boundaries below.

Immediate Annuity means that the annuity payouts will start immediately (from the specified due date) on the purchase of the annuity.
 
2. What is the target segment for Swarn Jeevan?
Swarn Jeevan targeted at Corporate Clients (ie. Employer-Employee groups) and other Group Administrators, who wish to purchase annuity to provide for their annuity liability (existing or emerging or both) totally or partially from SBI Life.
 
3. What are the different annuity options available under Swarn Jeevan?
Currently the following annuity options are available with Swarn Jeevan:
 
Life Annuity
Life Annuity with Refund of Purchase Price
 
4. What are the boundaries for this plan?
Boundaries for this plan are:
 


Min group size is 10 in case of approved SA [50 in other cases]
Min entry age: 35 for member and 18 for spouse
Max entry age: 85 yrs for member and spouse
Min annuity amount should be Rs.1200 pa
  As per present company guidelines for the purchase of Group Bulk Immediate Annuity, minimum purchase price for the group has to be Rs. 20 crores.
 
5. What are the different annuity payout options available?
Annuity payouts can occur as per the following options chosen by the client:
 


Monthly
Quarterly in advance
Semi Annually in advance
Annually in advance
 
6. What are the different annuity payout mechanisms available?
 

Bank Transfer (Only available if the annuitant has an account in SBI Core banking branch or HDFC Bank Ltd.)
Post Dated Cheques - issued till the following March (As survival checks are done in March annually)
Annuity Card
 
7.
What is an 'Existence Certificate'?
As in the case of an annuity the payout is to be made by the insurance company uptill the day the annuitant is alive, it is important to do survival checks to ensure that invalid payments are not being made. Survival checks are done in March every year and the Existence Certificate so produced enables us to continue making the annuity payouts.
 
8. What is the data required for the generation of a Swarn Jeevan quote?
The following data accompanied by the relevant Quote Request Form will be required:
 







Employee Id
Name
Gender
DOB
DOJ
DOR
Salary
Annuity Amount
Annuity Option.
 
9. What are the documents required for Master Policy Issuance under Swarn Jeevan?
 







Completely filled proposal form (Signed and stamped by the client)
Quotation (signed and stamped by the client)
Cheque Copy
Deposit slip with acknowledgement
Employee Data (Employee ID, Name, Gender, Communication and Permanent Address, DOB, DOJ, Date of Retirement, Salary, Annuity Start Date, Annuity Amount, Annuity Option, Eligible Salary, Purchase Price remittance details, employee bank account details to which annuity to be transferred or in case of post dated cheques account number to be printed.): (Signed and Stamped by the client)
Annuity Form(Signed by the employee opting for annuity)
Copy of Trust Deed/Rules (If annuity is to be purchased by a superannuation trust)
 
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