The Pension Fund Regulatory and Development Authority (PFRDA) has authorised Annuity Service Providers (ASPs) to withstand surrender applications from annuitants and intermediaries, such as Nodal officers of Government Sector without referring to PFRDA, National Pension System Trust (NPST) or Central Record Keeping Agency (CRA), according to the circular issued by the pension fund regulator on July 22, 2021. PFRDA has said in the statement that "Under the National Pension System (NPS), the Subscribers are allowed to exit as per PFRDA (Exit and Withdrawal) Regulations. Exit regulations of PFRDA mandates for the utilization of the specified amount of accumulated corpus to purchase immediate Annuity to be provided by Annuity Service Providers (ASP) which are empaneled with PFRDA. ASPs are Life Insurance Companies which are regulated by Insurance Regulatory and Development Authority of India (IRDAI)."
Regarding handling Surrender requests of Annuity Policies issued to NPS Subscribers by ASPs, the pension fund regular has said that "PFRDA has been receiving requests for surrender of annuity policies post its issuance from the annuitants (who were erstwhile NPS Subscribers) or from other intermediaries with whom such Annuitants were associated earlier as NPS Subscribers. The Surrender is of two types viz surrender due to the applicability of Old Pension in case of Govt Sector subscribers and surrender due to any personal reasons including critical illness."
Regulation 22 of the PFRDA (Exits and Withdrawals under the NPS) Regulations 2015 describes the responsibilities of the ASP, as described below:
- (a) to provide different kinds of immediate annuities to the subscribers at the time of exit from the NPS.
- (b) to provide minimum immediate annuity variants options as required by the PFRDA and to be able to provide any new variant as required by the PFRDA from time to time in the interest of subscribers in conformity with the Insurance Act, 1938 (4 of 1938) and the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) and the rules, regulations and guidelines made there under.
In a circular dated July 22, 2021, the pension fund regulator said "In view of the above, ASPs may handle the surrender requests received from Annuitants and intermediaries including Nodal officers of Government Sector without referring to PFRDA, National Pension System Trust (NPST) or Central Record Keeping Agency (CRA). The Surrender requests can be handled based on the specific annuity scheme features, contractual terms, surrender clause and applicable IRDAI guidelines."
The regulator has also clarified that "ASPs are also advised to deal those cases of surrender on their own, after conducting their own due diligence in line with the existing provisions of the contract entered with the Subscriber at the time of issue of annuity policy. They also need to ensure that the Annuitants are made well aware of the surrender implications."
Source: PFRDA, Circular no.: PFRDA/2021/30/SUP-ASP/6, Date: July 22, 2021