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IRDAI has announced new rules for pensioners which will provide to people opting for National Pension System’s(NPS) annuity. Less paperwork will make pensioners’ life easy. Let us see what it is.
From now on, under the new NPS rule, Indian pensioners’ paperwork is reduced by one form. IRDAI has reformed a few rules to provide relief to pensioners. Till now, National Pension System (NPS) retirees had to submit the exit form to the Pension Fund Regulatory and Development Authority (PFRDA) and submit the proposal form to the insurance company at the time of superannuation. Now Insurance Regulatory and Development Authority of India (IRDAI) says there is no need to fill one more proposal form for NPS subscribers for annuity selection after exiting. IRDAI has relaxed the requirements for the same with the interests of policyholders as it wants ease of doing business in the insurance industry. As per IRDAI, this new rule that provides relief to pensioners will come into force immediately.
What is the New Rule?
As per the IRDAI statement on September 13, 2022, the Exit Form presented by NPS retirees will be considered as the Proposal Form going forward. The submitted Exit Form will be Proposal Form for presenting the immediate annuity product by the insurance companies
What was the Need For This Change?
Under the National Pension System rules, the subscriber who superannuates must purchase an immediate annuity, not including the commuted value from any insurer (Life Insurance Company). When buying immediate annuities, the subscriber must submit a separate application form that is collected to the life insurance company.
All the data that needs to be filled in the proposal form is already present in the exit form. So to avoid this unnecessary duplication of information, IRDAI directed insurance companies to consider exit forms as proposal forms henceforth. Now, NPS retirees on submitting exit forms can purchase annuities without any more forms to be submitted. This move will make doing business in the insurance industry easy while protecting the interest of policyholders.
How is the new Rule Different?
At the time of superannuation, rules to date asked NPS retirees to submit an Exit form to PFRDA and a Proposal form to insurance companies. Now as per the new rule, the insurance company will treat the exit form of NPS as a proposal form for purchasing an annuity.
How will it impact pensioners?
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This new rule will smooth the progress of servicing annuity policies purchased by annuitants.
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This new rule will reduce the time taken to purchase an annuity
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This new rule will reduce the work of senior citizens as well as insurers.
Who presents annuities to NPS subscribers?
As per the norms of the Pension Fund Regulatory and Development Authority, a minimum of 40% of the accumulated pension wealth of a subscriber must be used towards the purchase of an annuity that provides for a monthly pension to the subscriber while the balance is paid in a lump sum.
Regulated by IRDAI and empanelled by PFRDA the Annuity Service Providers (ASPs) are insurance companies that provide the annuity to the NPS subscribers. ASP offers a bouquet of annuities and one should be selected by the subscriber. ASPs are responsible for providing a monthly annuity pension to the subscribers. The PFRDA has pension fund managers under the NPS who have to invest the pension corpus of the subscribers prudently and judiciously.
Current withdrawal rules of NPS
As per current withdrawal rules, pensioners are allowed to withdraw up to 60 % of the contributions as a lump sum. And it is mandatory to park a minimum of 40 % of the pension contributions in government-approved annuities.
