The idea behind parking money in the National Pension System (NPS) is to save enough for retirement without having to rely on low-income annuity pension plans offered by myriad insurance companies. The idea behind the Pension Fund Regulatory and Development Authority (PFRDA) launching this scheme was to avail people with a long-term solution that would provide Indian citizens returns in sync with the market while also taking care of their future fund requirements.
Without a sufficient retirement income in place, there is no way that you can hail your financial planning as complete. Investing in NPS makes this possible. This voluntary, defined contribution retirement savings plan allows its subscribers to choose from the services of various pension fund managers depending on their returns and past performance. Moreover, subscribers can put their money into it via systematic and planned instalments or at random intervals depending on market movements and willingness to invest. Since investments in NPS can be done till one turns 60 years old, investors have the option to continue saving consistently throughout their working lives.
The PFRDA (Exits and Withdrawals provision under NPS) Regulations 2015 & Amendments Act clearly states that in the event of the death of a subscriber, his or her fully accrued pension will be made available to the subscriber’s nominees or legal heirs depending on the nominations made. The fully accrued pension amount would be equivalent to the full amount of the NPS corpus that includes the contributions made to both Tier-1 and Tier-2.
However, the distribution of the corpus is subject to the choice made by the nominees. In many instances, the nominees or legal heirs have shown interest in receiving an annuity (in the form of a regular pension). They must therefore select an annuity service provider (ASP) and its corresponding annuity scheme on the Death Withdrawal Form.
Documents needed to file nomination
The nominees cannot claim the NPS corpus until they have submitted the necessary documents. This includes filling up and submitting a properly completed Death Withdrawal Form. This form must be submitted along with supporting documents including the death certificate of the NPS subscriber issued by the concerned authority, KYC documents of both the nominee and subscriber, their bank account details and other necessary papers. If there are multiple claimants or nominees to the NPS corpus, each nominee must fill out a separate withdrawal form.
Nominees rejecting the claim to NPS corpus
It is not new when one or more nominees rescind their intent to claim the corpus amount in favour of the others. In this scenario, when nominee(s) decline the claim to the NPS corpus, they must
- File a relinquishment deed to announce their decision against claiming NPS benefits of the subscriber’s account.
However, the nominees willing or intending to seek NPS benefits must
- Submit an Indemnity Bond.
The nominees can download both the Indemnity Bond and Relinquishment Deed from the NPS website.
Age matters when it comes to filing nominations to the NPS corpus. If one nominee is a major with the other remaining a minor during the claim process, the major nominee may claim his or her part of the amount by submitting a withdrawal form. The claim process for the minor involves having a guardian or custodian. The guardian of the minor must submit the withdrawal form along with the minor’s certificate while making a claim to the amount.
In the absence of a nomination
Retirement planning also involves securing your loved ones’ future. This means that the NPS subscribers must take care to fill in the details of the nominee(s) to which they wish to bequeath their wealth after they are gone. However, many subscribers either postpone their decision to fill in the nomination details or are simply careless enough to ignore such an essential detail.
If the deceased subscriber had failed to name the nominee, the accumulated corpus would be passed on to his or her family members based on the legal heir certificate issued by the State’s Revenue Department. The legal heirs can also claim the amount based on a succession certificate issued by a court of competent jurisdiction.
The nomination must be valid in the eyes of the State before the amount is passed on to its rightful claimants. However, if the claimants are unable to prove their right to the amount or unable to submit documents proving themselves as the subscriber’s nominee(s), the State shall render such nomination invalid.
The PFRDA Exits and Withdrawals (Under the NPS) Regulations 2015 & Amendments thereto state clearly if the nominees are unable to submit the validity of their claims through necessary documents, the nomination would be treated as invalid.
What if the nominee requests a pension?
The timing of the annuity matters as the nominee might be financially dependent on the amount that would be disbursed as a monthly pension. The ASP would first scan the documents submitted by the claimant and check if the nominee or claimant desires an annuity. Post verification of the documents, the ASP would issue an annuity policy. The nominees must take care to submit all the necessary documents to avoid rejection of the claim.
The ASP will then confirm the annuity request online in the Central Recordkeeping Agency (CRA) system once all annuity requirements have been completed. The annuity corpus would be then sent to the ASP for the issue of the pension amount within the timeframe specified by the PFRDA. The ASP must start crediting the annuity amount to the nominee(s) as specified in the claim application form within two working days of receiving the subscriber’s corpus amount.