By introducing a new withdrawal form, the pension fund body PFRDA has enabled parallel processing of requests for lumpsum and annuity in order to give a seamless experience to NPS (National Pension System) subscribers. This means at the time of exit from the scheme, subscribers do not need to apply separately for annuity and lumpsum components – something that currently happens.
For the unversed, the NPS subscribers, at the time of exit, can avail of a defined amount as a lump sum and the remainder amount is to be utilised for the purchase of immediate annuity from the empanelled annuity service providers.
What happens as of now?
At the time of exit of the scheme, subscriber is supposed to fill a withdrawal form and submit the same to the intermediary via nodal offices. Once the case is processed, the lumpsum amount is disbursed to the subscriber’s bank account. Later, the details are shared with annuity service provider (ASP: which is an insurance company) responsible for giving annuities.
The insurance company then asks the subscriber to fill another form ‘annuity proposal form’ and complete other formalities before annuities can be processed.
What has changed?
With the latest changes being introduced, subscribers will not need to submit the ‘annuity proposal’ form apart from the ‘withdrawal form’. The latter will serve the purpose of proposal form as well. This is likely to turn things quite simpler and convenient for the National Pension System (NPS) subscribers.
Since annuity service providers are insurance companies, Pension Fund Regulatory and Development Authority has to seekinsurance regulator’s nod as well for this amendment’s rollout. After consultation with the insurance industry, the IRDAI gave its approval.
Consequently, the NPS withdrawal form will be considered as annuity proposal form as well.
How do subscribers stand to benefit?
There are a number of benefits of these changes that will come into effect with coordinated action to subscribers and stakeholders. These include the following:
1. Convenience in getting annuity and speed of its issuance
2. Simultaneous processing of lump sum and annuity issuance
3. Disbursal of retirement income via annuity right after one’s retirement, thus avoiding the interruption of income flow.
