Withdrawing a lump sum from National Pension System (NPS) account and applying for an annuity has become easy now. The Pension Fund Regulatory and Development Authority (PFRDA) recently announced that the NPS withdrawal form would now also be treated as the annuity proposal form as well.
The PFRDA announced the new decision after consultation with the insurance regulator, IRDAI as the annuity under NPS is provided by empanelled Life Insurance companies.
The decision to treat the NPS withdrawal form as an annuity proposal form will result in multi-fold benefits for both subscribers and other stakeholders. In a circular dated 14th November, PFRDA listed these benefits:
- Ease of Annuity and speed of its issuance
- Parallel Processing of Lump sum payment and Annuity issuance
- Payment of Retirement Income through Annuity immediately after one’s retirement and hence uninterrupted income flow to the retirees ensured.
- Ease of Old Age Income Support.
- Ease of doing business for the associated stakeholders.
What should subscribers do?
As per the PFRDA circular, at the time of initiation of the exit request, subscribers will have to upload completely filled proposal form along with supporting documents in the respective CRA systems.
“All Subscribers are hereby informed that at the time of initiation of the exit request, the completely filled proposal form along with the specified supporting documents including KYC is to be uploaded in the respective CRA system through their login
credentials. The nodal officers, POPs & NPST are advised to ensure the same for the benefit of Subscribers,” the regulator said.
Withdrawal form upload to be mandatory
The PFRDA has proposed to make the upload of the Withdrawal form/document mandatory at a future date. Also, for the benefit of senior citizens including NPS retirees, the Aadhar-enabled authentication for Life Certificate (Jeevan Pramaan) will be provided.
What was the previous practice?
Earlier, NPS subscribers had to submit the online/offline withdrawal form to the associated intermediaries viz nodal offices, POPs etc at the time of their exit.
After processing of the withdrawal, the eligible amount was paid as a lump sum to the Subscribers’ Bank Account and the information of those subscribers was shared with ASPs for processing the Annuity request. ASPs then engaged with the subscribers for obtaining the application (annuity proposal form) for the issue of Annuity. Thus, subscribers had to submit the exit form to the intermediaries of PFRDA and apply for an annuity to the ASPs selected by them.