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Pension regulator PFRDA has come out with guidelines to handle the NPS corpus — meant for issue of annuity — lying unutilised due to the death of subscribers during the transitory time between their withdrawal of lumpsum amount and issue of annuity.
This comes in the wake of PFRDA observing — in certain cases — that some subscribers post availing lumpsum, but before issuance of annuity, had passed away and the amount meant for purchasing annuity remains in the Central Record Keeping Agency (CRA) system.
In case of government sector NPS subscribers, the annuity has to be taken by the spouse and in case of non-government NPS subscribers, the amount can be paid as lumpsum to the nominee, the PFRDA said in its latest circular.
There is a change as regards Government sector NPS subscribers as, earlier, PFRDA had said monies lying unutilised in the account of NPS subscribers, upon demise, should be handed over to the nominee concerned, sources said. Now, the annuity has to be purchased by the spouse, they added.
For each NPS subscriber, there are two transactions at the time of exit from NPS — lumpsum withdrawal and purchase of annuity.
When the NPS subscriber exits NPS on retirement, there could be lumpsum withdrawal of 60 per cent, with the remaining 40 per cent mandatorily going for the purchase of annuity.
The other situation is premature withdrawal from NPS, where the lumpsum could be a maximum of 20 per cent, with the remaining 80 per cent to be used for purchase of annuity.
For Govt sector NPS subscribers
In the case of government sector subscribers, the annuity would have to be mandatorily purchased by the spouse (if any) providing annuity for life of the spouse with provision for return of purchase price (ROP), the latest PFRDA circular said.
On demise of the spouse, the annuity has to be re-issued to the family members in the order specified at the rate of premium prevalent at the time of purchase of the annuity, utilising the purchase price required to be returned under the annuity contract to the family members in the order specified — (i) Living dependent mother of the deceased subscriber (ii) Living dependent father of the deceased subscriber.
After coverage of the family members, the purchase price or the amount which was to be utilised for purchase of annuity should be returned to the surviving children of the subscriber and in the case of absence of children, to the other legal heir(s) of the subscriber, as the case may be, PFRDA has said.
All citizens and corporate subscribers
PFRDA has said the entire accumulated pension wealth has to be paid to the nominees or legal heirs. However, the legal heirs or nominees, if they opt to, can buy the annuity, according to the PFRDA circular.
Meanwhile, PFRDA has also said that NPS Trust (NPST), POPs, Corporate and Nodal Officers can engage with all those claimants of deceased subscribers, who have availed of lumpsum but not bought annuity.
“The latest PFRDA circular is basically related to those who have expired. We are clarifying and have made guidelines on how corpus should be handled by intermediaries. Then, they need not refer the matter to PFRDA every time. Earlier, we were handling it case by case. This is a sort of Standard Operating Procedure that is being spelt out,” sources in the PFRDA said.
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