New guidelines for annuity cancellations and transfers in NPS

The Pension Fund Regulatory and Development Authority (PFRDA) issued Circular No. PFRDA/2024/18/SUP-ASP/01 on October 24, 2024 to all affiliated annuity service providers (ASPs) and NPS stakeholders. This circular replaces an earlier guidance from July 2021 and clarifies compliance with Regulation 10(3) of the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015. The Regulation provides that once an annuity has been purchased, cancellation or reinvestment in another annuity is possible. only allowed within the free viewing period specified by the ASP. The new guideline emphasizes that no surrender or cancellation of annuities will take place after this period. It also outlines the procedures for transferring the proceeds of canceled annuities to the Trustee Bank for issuing new policies, allowing for the choice of ASPs. Exceptions to this rule may apply due to regulatory requirements or specific causes as determined by the authority, requiring operational instructions to be provided by PFRDA.

CIRCULAR REGULATIONS AND DEVELOPMENT AUTHORITY OF THE PENSION FUND

Circular No.: PFRDA/2024/18/SUP-ASP/01 Date: 24^e October 2024

Nasty,
All affiliated annuity service providers and other NPS stakeholders

Subject: Compliance with Regulation 10(3) of the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 for cancellation/surrender by annuity policies issued to NPS subscribers by ASPs

1. This Circular is issued under Section 14 of the PFRDA Act 2013, replacing Circular No. PFRDA/2021/30/SUP-ASP/6 dated 22 July 2021 on “Handling requests for surrender of annuity policies issued to NPS subscribers by ASPs” and shall be effective from the date of issuance of this circular.

2. The National Pension System (NPS) and other pension schemes regulated by the Authority under the PFRDA Act, 2013 aim to provide income security for the elderly to the subscribers and their families at large. As per the architecture of NPS, regular income after attainment of specified age/retirement is assured through annuities and for this purpose, IRDAI regulated insurance companies have been included under PFRDA (Exits and Withdrawals under NPS) Regulations, 2015 as annuity service providers ( ASPs). ) and specific conditions/provisions for annuities to be issued under NPS are laid down there.

3. Regulation 10(3) of the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 reads as follows:

“Once an annuity has been purchased, there is the option to cancel it and reinvest in another one annuity service provider or in any other annuity plan is not permitted unless within the time limit specified by the annuity service provider, for the free look period as provided in the terms of the annuity agreement or as specifically determined by the Insurance Authority and Development Authority.”

4. In line with the intent of the Act & Regulations and to ensure that the NPS continues to receive annuity payments as per the terms of the annuity agreement, it has been decided that no surrender/cancellation of the annuity will henceforth be permitted or permitted by the ASP except and except during the free viewing period, to provide for the cancellation of the annuity at the option of the annuitant and the issuance of another annuity to him/her with the same ASP or with any other ASP, at his /her choice. In the event that the annuitant elects to purchase an annuity with a new ASP, the proceeds of such cancellation amount shall be transferred to the Trustee Bank’s account (i.e., source account) solely upon direction of the CRA for the issuance of a new policy.

Provided that, where the requirement of purchase of any other annuity is avoided due to statutory requirements or any specific cause as specified by the Authority, the same shall be carried out in accordance with the operational instructions to be issued by PFRDA, which in will provide for such requirements. causes.

Yours faithfully

Akhilesh Kumar
General manager