What is an Annuity?
Annuity or Pension is a financial product that provides a regular stream of income during retirement. It is essentially a contract between an individual and an insurance company. The individual makes either a lumpsum payment to the insurance company, and in return, the insurance company provides a steady income stream in the future.
This income is to be paid out for the rest of the individual's life, depending on the type of annuity chosen.
How to get NPS Annuity?
It is a very simple process to start annuity post retirement from the funds accumulated in NPS. The Subscriber needs to login to the NPS App provided by CRA and initiate the exit request.
This request is further approved by the Point of Presence (PoP) and the Annuity Service Provider is notified to start the process of issuance of Annuity.
Who are the Annuity Service Providers?
Annuity Service Providers (ASPs) are be appointed by PFRDA to give annuity to NPS subscribers through their various schemes.
Subscribers will have the option to invest their amount into one annuity scheme upon retirement.
- ASPs would be responsible for delivering a regular monthly pension (Annuity) to the subscriber for the rest of their life.
- Currently, 15 Annuity Service Providers have been appointed and the subscribers can opt for any one of them, as per their requirements.
Frequently Asked Questions on Annuity
Here are some frequently asked questions about Annuity.
An exit is defined as closure of individual pension account of the Subscriber under National Pension System (NPS).
The PoP, which is registered in NPS records of the Subscriber, will be responsible for verification & authorization of an online Exit request raised by the Subscriber.
An annuity is a financial product that provides you with a guaranteed regular income. Once the subscriber exits from NPS, they have to select their preferred plan from the registered annuity service providers (insurance companies).
Indian Life Insurance companies which are licensed by Insurance Regulatory and Development Authority (IRDA) can act as Annuity Service Providers. However, Annuity Service Providers need to be empanelled by PFRDA to provide Annuity services to the NPS Subscribers. The list of Annuity Service Providers empanelled by PFRDA to provide annuity under NPS can be accessed at: https://www.npscra.nsdl.co.in/Annuity-service-providers.php.
The amount of annuity depends on the NPS Corpus of the Subscriber and on other factors such as the Annuity Service Provider (ASP) selected, age of Subscriber/Claimant etc. The scheme wise Annuity rates and other details can be checked at: https://www.npscra.nsdl.co.in/Annuity-service-providers.php.
Once an Annuity is purchased, the option of cancellation or reinvestment with another Annuity Service Provider or in other Annuity scheme shall not be allowed unless the same is within the time limit specified (free look cancellation period as provided in terms of the Annuity contract or specifically provided by the IRDAI) by the Annuity Service Provider.
The mode and manner of payment of amount (if any) will depend on the type of Annuity scheme selected by the Subscriber/Claimant while buying the Annuity. Family members of the deceased Annuitant need to contact concerned Annuity Service Provider.
Facility of a phased Withdrawal is available for NPS Subscribers who have opted for the “Deferment” option at the time of attaining 60 years/Superannuation. A Subscriber can opt for Withdrawal of lumpsum amount in a phased manner over the period from 60 years (or any other retirement age as prescribed by the employer) to 75 years. However, Subscriber has to buy Annuity prior to Phased Withdrawal.