Annuity is a monthly pension scheme provided to subscribers by the National Pension System (NPS). NPS subscribers can withdraw up to 60 per cent of the accumulated funds in the NPS corpus at maturity or upon reaching 60 years of age, and the rest of the amount is locked with annuity service providers (ASPs) for monthly pensions.

The subscriber reinvests40 per cent of the capital in annuity schemes provided by ASPs.

Also Read: NPS Tier 2 Account Explained: Features, Benefits, Eligibility—All You Need To Know

What Is an Annuity Service Provider?

Annuity service providers are life insurance companies that the Pension Fund Regulatory Development Authority (PFRDA) impanel to provide annuity services to NPS subscribers. These insurers are registered with the Insurance Regulatory and Development Authority of India (IRDAI). An ASP offers various annuity schemes to meet the subscribers’ individual needs.

Here are some annuity schemes the ASPs offer to NPS subscribers:

Annuity for Life: Under the scheme, the annuitant or the subscriber receives a monthly pension for life.

Annuity for Life with Return of Purchase Price: Under this scheme, the pension stops after the annuitant’s death, and the purchase price is returned to the nominee.

Annuity Payable to Spouse after Death: If the subscriber dies, the spouse continues to receive the monthly pension till death. If the spouse is also dead, the annuity discontinues.

Payment to the Nominee and Spouse: Under this scheme, the spouse continues to receive the monthly pension till death and the purchase price is returned to the declared nominee.

Default Annuity Scheme: Applicable for subscribers who worked in the government sector. After the annuitant’s death, the spouse can receive a pension or collect the purchase price. If the spouse opts for an annuity, after their death, the children will continue receiving a pension, and if there are no children, the legal heir will receive it.

Also Read: NPS Partial Withdrawal Rules To Come Into Effect From Feb 1: All You Need To Know

In Case of Pre-Mature Exit

If the subscriber fulfills the age and corpus criterion but decides to exit from NPS prematurely, the annuity starts immediately after the request has been approved, depending on where the annuitant has allocated the funds. Subscribers must contact the point-of-presence (POP) for requirements like fund withdrawals, generating exits Claim IDs, and reporting death.

What Is Exit Claim ID?

Six months before superannuation, the Central Recordkeeping Agency generates a Claim ID and sends it to subscribers through emails, letters, or SMSs. CRA generates the ID to inform and enable subscribers to make changes before initiating a withdrawal request.