A big relaxation for NPS pensioners: Exit form itself to be considered as proposal form

At present, NPS pensioners have to submit an exit form to PFRDA and then submit a detailed proposal form to the insurance companies. Now, this practice comes to an end. Read on to find out more. 

If you are a National Pension System (NPS) pensioner, then from now onwards you are not required to submit a separate proposal form. According to the old process, NPS pensioners have to submit an exit form to Pension Fund Regulatory and Development Authority (PFRDA) on withdrawal and then submit a detailed proposal form to the insurance companies while selecting the desired annuity. 

As per the circular dated September 13, 2022, the Insurance Regulatory and Development Authority of India (IRDAI) states that "The Exit Form submitted by NPS retiree must be considered as the proposal form, for offering the immediate annuity product by the insurance companies.”  

The insurance regulator observed that PFRDA in its exhaustive exit captures necessary details that are needed by insurance companies in the proposal form. Moreover, NPS pensioners can now submit life certificates digitally as allowed by the IRDAI.  

The circular further stated that "Given the duplication and to facilitate ease of doing business and simple onboarding of NPS retirees for immediate annuity products, after due consultation with the industry, IRDAI in the exercise of power conferred under Section 14(2) (e) of the IRDA Act, 1999 and Section 34 of Insurance Act, 1938 issues direction."  

As per present norms, at least 40% of the total accumulated corpus, NPS users are mandated to invest in an annuity plan at the time of maturity. And 60% of the corpus is allowed to be withdrawn as lumpsum.  

However, if the total corpus is less than or equal to Rs 5 lakh, then the NPS user has an option of 100% lumpsum withdrawal at maturity. Moreover, in case of premature exit before the age of 60, the NPS user needs to dedicate at least 80% of the total accumulated corpus to insurance companies’ annuity plan.