The National Pension System (NPS) allows people to withdraw up to 60 per cent from their accumulated retirement fund, and the rest of the money must be used to buy annuity schemes, allowing subscribers to earn regular interest income.

NPS was launched in 2004 as a pension scheme for government employees, but in 2009 it was made available for all citizens. The Pension Fund Regulatory and Development Authority (PFRDA) of India controls NPS.

Those aged 18 to 70 can join NPS, which allows withdrawals under three circumstances: Retirement or on reaching 60, premature withdrawal, and death.

On retirement, one can withdraw up to 60 per cent of the fund in a lump sum, the rest for buying for an annuity. For premature withdrawal, the subscriber can withdraw 20 per cent, the rest for purchasing annuities. In case of death, the nominee or the legal heir can withdraw 100 per cent.

Here, we discuss the annuity schemes available for subscribers if they take annuity on retirement. 

What Is An Annuity?

It is the pension amount paid to the subscriber by the Annuity Service Provider (ASP) under the NPS system.

Annuity Service Providers (ASP)

These are insurance companies empanelled under NPS to provide annuity services. PFRDA, through its circular on July 27, 2023, allowed subscribers to select their ASP. As there are no intermediary expenses while purchasing an annuity from the ASP, one may decide which suits them depending on the ASPs’ annuity schemes.

Let us see the different types of annuity options offered by the ASPs.

Annuity Without Return Of Purchase (ROP): As the name suggests, the annuitant receives the annuity for a lifetime. The pension payment ceases after the annuitant’s death, and no amount is paid further.

Annuity For Life With ROP: Under this option, the pension or the annuity is paid to the annuitant for a lifetime. On the annuitant’s death, the annuity payment is stopped, and 100 per cent of the purchase price is returned to the nominee of the annuitant.

Annuity To Spouse Without ROP: In this option, the subscriber gets a pension for a lifetime. After the death of the subscriber, the spouse will get the pension; after the spouse’s death, the payment ceases, and no amount is further payable.

Annuity To Spouse With ROP: The subscriber (annuitant) gets the pension for a lifetime; after death, the subscriber’s spouse receives the pension for a lifetime. The annuity ceases on the spouse’s death, and 100 per cent of the purchase price is returned to the nominee.

Family Income With ROP: Under this option, the subscriber gets the annuity for a lifetime. On the death of the subscriber, the spouse receives a pension for a lifetime. On the spouse’s death, the dependent mother of the subscriber will get the pension, and after her, the dependent father of the subscriber. After the last annuitant, the annuity ceases to exist, and 100 per cent of the purchase price will be returned to the legal heirs of the subscriber.

Few ASPs offer more options, such as increasing interest rates per year, 50 or 100 per cent of the annuity payable to a spouse after the subscriber’s death, etc. Depending on the annuity scheme, the pension amount will differ. Also, the pension amount may vary from one ASP to the other. So, the subscriber can compare the pension amount offered by different ASPs to select the best option.

One can do so on the https://cra-nsdl.com/CRAOnline/aspQuote.html site by providing the subscriber, spouse’s date of birth, and the corpus amount.