No additional fees on NPS subscriber when buying annuity plans from insurer: PFRDA

To provide relief to National Pension System (NPS) subscribers, the Pension Fund Regulatory and Development Authority (PFRDA) has clarified exit rules from the pension corpus. 

Currently, it is mandatory for an NPS subscriber retiring at 60 to buy at least 40 per cent of the total accumulated corpus to purchase an annuity plan from life insurers at the time of maturity. The subscriber can withdraw the remaining 60 per cent corpus as a lump sum.  However, if the corpus is less than or equal to Rs 5 lakh, the subscriber can withdraw all amounts at maturity.

The circular dated July 27, 2023, the PFRDA (Exits and Withdrawals from NPS) Regulations, 2015, said the following things for all NPS subscribers.

At the time of exit from NPS, an individual subscriber, in terms of Section 20(2)(h) and Regulation of the PFRDA (Exits and Withdrawals from National Pension System) Regulations, 2015 (Exit Regulations), is mandatorily required to purchase an annuity that provides a monthly or periodical annuity (pension), as specified in the said regulations from an ASP empanelled with the Authority, In certain situation, the limited exemption has been allowed by the Authority, from the requirement of a purchase of an annuity, as per PFRDA circular.

Subscribers are empowered to choose ASP as per their choice:

1. NPS Subscribers are entitled to exercise their individual choice when selecting an Annuity scheme and ASP, based on their individual requirements and specific needs.

2. To ensure a seamless transition into the post-retirement phase, nodal officers under the Government sector, Point of Presence (POPs), and National Pension System Trust (NPST) are required to assist subscriber(s) in making informed decisions based on their requirements, on the choice of the ASP and the Annuity Scheme as per their individual needs and providing necessary guidance throughout the process.

3. By empowering subscribers to exercise their choice in selecting the Annuity scheme and ASP, the aim is to optimize the retirement planning experience, enhance overall satisfaction for NPS Subscriber(s) and comply with the law.

Fees and charges: The fees and charges levied on subscribers by ASP in respect of the provision of Annuity shall be in adherence to the Exit regulations. In this regard, there will be no additional fees or charges on the subscriber(s) other than the premium approved by the Insurance Regulatory and Development Authority of India (IRDAI) for the annuity product, according to the PFRDA circular.

However, any taxes or other levies payable to the Government or any charges by the regulator are excluded from this limitation. Also, there should be no additional intermediation expense or charge for the annuity product issued to the subscribers. Hence, ASP can deploy no agency or intermediary for sourcing Annuity from NPS subscribers. The annuities under NPS are to be issued under the direct channels.

Compliance by ASP: The compliance officer of ASP shall be responsible for monitoring compliance with the duties and obligations as laid down under the Exit Regulations and circulars issued by the Authority, besides other applicable laws, governing annuity and shall give a compliance certificate to the Authority. ASP and the Compliance Officer shall also take steps to address the grievances reported to them by subscribers who have purchased annuities from the ASP upon exit from the NPS.

ASPs will take notice of the aforementioned stipulations as soon as possible and ensure they comply as required. These shall form part of and be included in the half-yearly supervisory compliance of ASPs effective from 1st Sep 2023. 

Besides compliance by ASPs, the circular is also for the information of nodal officers under the Government sector, Point of Presence (POPs), and National Pension System Trust (NPST), who shall bring it to the notice of subscribers, said PFRDA circular.