NPS subscribers can soon avail multiple annuity plans from the same Annuity Service Provider (ASP) at the time of exit from the National Pension System (NPS), Deepak Mohanty, Chairman, PFRDA has said.

The necessary system-level functionality (software) to facilitate the implementation of this change is being built by the Central Record Keeping Agency (CRAs) and would be ready by October end, Mohanty said.

Initially, the pension regulator has decided to allow NPS subscribers to avail a dual option —two types of annuity plans from the same ASP. 

Hitherto, NPS subscribers were allowed to buy only one annuity scheme from the ASP at the time of exit.

Currently, at the time of retirement, an NPS subscriber looking to withdraw NPS corpus has to park 40 per cent in annuities. They can choose from a menu of seven annuity variants for their retirement. 

By allowing NPS subscribers to avail annuity mix (buy two variants from the same ASP), the pension regulator believes this change will greatly benefit subscribers by providing them with a wider range of annuity options and optimising their retirement income.

The option of multiple annuities will be allowed to those NPS subscribers who earmark the annuity corpus of over ₹10 lakh, wherein ₹5 lakh will have to be utilised to buy each annuity scheme.

Currently, there are 15 ASPs empanelled by PFRDA to maintain the annuity contribution of subscribers. The ASPs are life insurance companies regulated by the insurance regulator IRDAI and empanelled by the PFRDA to provide the annuity to the NPS subscribers.

“Annuity …now one can mix. That is being enabled. Somebody who wants both pensions for life at a uniform rate (pension payable for 5, 10, 15 or 20 years) and also pension for life with return of purchase price on death of the annuitant can opt for the mix”, Mohanty said.

From the policy and regulatory side, necessary instructions have already been issued to the ASPs, Mohanty added.

Mohanty said that PFRDA is committed to implementing both the multiple annuity facility and systematic withdrawal plan for the benefit of NPS subscribers in this calendar year itself. 

India’s NPS assets under management hit a milestone of ₹10 lakh crore on August 25 this year on the back of robust returns from equity and debt markets. as well as a surge in enrolment of new subscribers in the corporate and ‘All citizen model’ categories. 

Individuals looking for post-retirement support in their golden years are voluntarily opting for NPS in a big way. Last fiscal, over a million new subscribers joined NPS under these categories. PFRDA is confident of onboarding at least 13 lakh new subscribers this fiscal in these two categories.

National pension system (NPS) was introduced as a defined contribution pension plan with co-contribution by the government and the employees who joined Central government (except for armed forces) with effect from January 1, 2004. Subsequently, a number of State governments adopted NPS. It was extended to all citizens in May 2009 and to corporates in 2010. 

Since then, NPS has made significant progress. Between March 2019 and August 2023, the number of subscribers have increased from 80 lakh to 136 lakh, and assets under management increased over threefold from ₹3.1 lakh crore to ₹10 lakh crore now. 

The NPS corpus is invested in equity and debt. It has generated competitive returns. For example, since inception, the equity scheme has given an annual average return of about 12.5 per cent and the government debt scheme has given a return of over 8.6 per cent.

NPS is a flexible scheme giving the investor the choice of fund managers and asset allocation. Currently, there are ten pension fund managers.

NPS is portable across employers and across employment (salaried or Self-employed). NPS can be continued, even with change in residency status, as it is open to NRIs (Non Resident Indians) and OCIs (Overseas Citizens of India).

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