National Pension System: LIC, other annuity service providers allowed to handle surrender requests

By: |
July 27, 2021 11:36 AM

Under the National Pension System (NPS) rules, the subscribers can exit as per the provisions of PFRDA (Exit and Withdrawal) Regulations

NPSRepresentative image/Pixabay

NPS surrender Rules: The Pension Fund Regulatory and Development Authority (PFRDA) has allowed Annuity Service Providers (ASPs) to handle surrender requests from annuitants and intermediaries including Nodal officers of Government Sector without referring to PFRDA, National Pension System Trust (NPST) or Central Record Keeping Agency (CRA).

Under the National Pension System (NPS) rules, the subscribers can exit as per the provisions of PFRDA (Exit and Withdrawal) Regulations which mandates the utilization of a specified amount of accumulated corpus for the purchase of an immediate annuity from any of the listed ASPs like LIC, SBI Life Insurance and HDFC Life Insurance Company etc.

There are two types of surrenders: Surrender due to applicability of Old Pension Scheme in case of government sector subscribers and surrender due to personal reasons including critical illness.

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The regulator took this decision after receiving several requests for surrender of annuity policy post its issuance from the annuitants (who were erstwhile NPS subscribers) or from other intermediaries with whom such annuitants were associated earlier as NPS subscribers.

“In view of the above, ASPs may handle the surrender requests received from Annuitants and intermediaries including Nodal officers of Government Sector without referring to PFRDA, National Pension System Trust (NPST) or Central Record Keeping Agency (CRA). The Surrender requests can be handled based on the specific annuity scheme features, contractual terms, surrender clause and applicable IRDAI guidelines,” PFRDA said in a circular dated 22nd July 2021.

The ASPs have also been advised to deal with cases of surrender on their own after conducting their own due diligence in line with the existing provisions of the contract entered with the Subscriber at the time of issue of annuity policy. They also need to ensure that the Annuitants are made well aware of the surrender implications, the regulator said.

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