Deepening of the annuity market? Focus on other issues first

The RBI report expresses the need to develop the pension sector, but fails to focus on other major issues. The Reserve Bank of India (RBI) in its latest Financial Stability Report (FSR) mentioned that more steps are needed to “boost the annuity market to deepen and widen the pension sector”. The RBI laments that though 40% of the pension wealth needs to be annuitized for a regular stream of income, this may not be providing the optimal outcomes in terms of returns. Moneylife Research has found that annuity products from insurance companies yield just about 6%-7% pre-tax at best. Thus, RBI expresses the need to develop deferred annuity and other post retirement products, which ensure optimal post-retirement returns to subscribers. However, the FSR fails to address several other issues that riddle retirement products.

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