The Pension Fund Regulatory and Development Authority (PFRDA) issued Circular No. PFRDA/2024/18/SUP-ASP/01 on October 24, 2024, to all empanelled Annuity Service Providers (ASPs) and NPS stakeholders. This circular supersedes a previous directive from July 2021 and clarifies compliance with Regulation 10(3) of the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015. The regulation states that once an annuity is purchased, cancellation or reinvestment in another annuity is only permitted within the designated free look period specified by the ASP. The new directive emphasizes that no surrender or cancellation of annuities will be entertained beyond this period. It also outlines the procedures for transferring the proceeds of cancelled annuities to the Trustee Bank for issuing new policies, allowing for the choice between ASPs. Exceptions to this rule may apply due to legal requirements or specific causes as determined by the Authority, with operational instructions to be provided by PFRDA.
PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY CIRCULAR
Circular No.: PFRDA/2024/18/SUP-ASP/01 Date: 24th October, 2024
To,
All empanelled Annuity Service Providers and Other NPS Stake holders
Subject: Compliance with Regulation 10(3) of the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 for cancellation/surrender of annuity policies issued to NPS Subscribers by ASPs
1. This circular is issued under Section 14 of the PFRDA Act 2013 in supersession of Circular No. PFRDA/2021/30/SUP-ASP/6 dated July 22, 2021 on “Handling Surrender requests of Annuity Policies issued to NPS Subscribers by ASPs” and shall be effective from the date of issuance of this circular.
2. The National Pension System (NPS) and other pension schemes regulated by the Authority under the PFRDA Act, 2013 aims to provide old age income security to the subscribers and their families at large. As per the architecture of NPS, the regular income after attaining the specified age/ superannuation is ensured through Annuities and for the purpose, IRDAI regulated Insurance companies are empaneled under PFRDA (Exits and Withdrawals under NPS) Regulations, 2015 as Annuity Service Providers (ASPs) and specific conditions / provisions for Annuities to be issued under NPS are stipulated thereunder.
3. Regulation 10(3) of the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015, states as under:
“Once an annuity is purchased, the option of cancellation and reinvestment with another annuity service provider or in another annuity scheme shall not be allowed unless the same is within the time limit specified by the annuity service provider, for the free look period as provided in the terms of the annuity contract or as specifically provided by the Insurance Regulatory and Development Authority.”
4. In line with the intent of the Act & Regulations and to ensure that NPS continue to receive annuity benefits as per the terms of the annuity contract, it has been decided that henceforth no surrender/cancellation of the annuity shall be entertained or permitted by the ASP save and except during free look period to provide for cancellation of annuity at the option of the annuitant and issuance of another annuity to him/her with the same ASP or with another ASP, as per his/her choice. In case of annuitant making choice for purchase of annuity with new ASP, the proceeds of such cancellation amount shall be transferred to the account of Trustee Bank (i.e. source account) only under intimation to the CRA, for issuance of a new policy.
Provided that, where the requirement of purchase of another annuity is obviated due to any legal requirements or any specific cause as specified by the Authority, the same shall be carried out in accordance with the operational instructions to be issued by PFRDA which shall provide for such causes.
Yours sincerely
Akhilesh Kumar
Chief General Manager
