Pension Fund Regulatory And Development Authority (PFRDA) has recently disseminated a circular, intended for all National Pension System (NPS) stakeholders and Annuity Service Providers (ASPs). This crucial document serves to clarify that the choice of an ASP is to be individually exercised by subscribers upon exiting from the NPS, and emphasizes no additional charges or intermediation expenses are payable by these subscribers.
This directive affirms the subscribers’ right to choose an ASP that best suits their individual needs and circumstances. It necessitates that the involved parties, including nodal officers in the government sector and National Pension System Trust (NPST), provide assistance and guidance to subscribers in making an informed selection.
The circular is also explicit in detailing the fees and charges related to the provision of Annuity, asserting that there shall be no additional fees or charges on the subscriber beyond the premium approved by the Insurance Regulatory and Development Authority of India (IRDAI) for the annuity product.
The onus of compliance with these regulations falls upon the ASPs, particularly their compliance officers, who are responsible for monitoring adherence to the rules and addressing any grievances presented by subscribers.
Pension Fund Regulatory And Development Authority
Circular No: PFRDA/2023/14/SUP-ASP /03 27th July, 2023
To,
All NPS Stake holders & ASPs
Subject: Clarification that selection of Annuity Service Provider (ASP) is the individual choice to be exercised by Subscribers upon exit from NPS and no Additional Charges or Intermediation Expenses are payable by subscribers under NPS, while opting for or purchasing annuity from any empanelled ASP.
1. This circular is issued in exercise of powers conferred under section 14 (1) and section 20(2) (h) and (i) of The Pension Fund Regulatory & Development Authority Act, 2013 and Regulation 3 of the PFRDA (Exits and Withdrawals from National Pension system) Regulations, 2015.
2. At the time of exit from NPS, an individual subscriber in terms of Section 20(2)(h) and Regulation of the PFRDA (Exits and Withdrawals from National Pension system) Regulations, 2015 (Exit Regulations) is mandatorily required to purchase an annuity that provides a monthly or periodical annuity (pension), as specified in the said regulations from an ASP empanelled with the Authority, In certain situation, limited exemption has been allowed by the Authority, from requirement of purchase of an annuity.
3. Subscribers are empowered to choose ASP as per their Choice:
a. NPS Subscribers are entitled to exercise their individual choice when selecting an Annuity scheme and ASP, based on their individual requirements and specific needs.
b. To ensure a seamless transition into the post-retirement phase, nodal officers under the Government sector, Point of Presence (POPs), and National Pension System Trust (NPST) are required to assist subscriber(s) in making informed decisions, based on their requirements, on the choice of the ASP and the Annuity Scheme as per their individual needs and providing necessary guidance throughout the process.
c. By empowering subscribers to exercise their individual choice in selecting the Annuity scheme and ASP, the aim is to optimize the retirement planning experience, enhance overall satisfaction for NPS Subscriber(s) and be compliant of the law.
4. Fees and Charges: The fees and charges levied on subscribers by ASP in respect of provision of Annuity shall be in adherence to the Exit regulations. In this regard, There shall be no additional fees or charges on the subscriber(s) other than the premium approved by the Insurance Regulatory and Development Authority of India (IRDAI) for the annuity product.
However, any taxes or other levies payable to the Government, or any charges by the regulator are excluded from this limitation. Additionally, there should be no additional intermediation expense or charge in respect of the annuity product issued to the subscribers and hence ASP can deploy no agency or intermediary for sourcing Annuity from NPS Subscribers. The annuities under NPS are to be issued under direct channel.
5. Compliance by ASP: The compliance officer of ASP shall be responsible for monitoring compliance with the duties and obligations as laid down under the Exit Regulations and circulars issued by the Authority, besides other applicable laws, governing annuity and shall give a compliance certificate to the Authority. ASP and the Compliance Officer shall also take steps to address the grievances reported to them by subscribers who have purchased annuities from the ASP, upon exit from the NPS.
ASPs to take notice of the stipulations aforementioned and ensure compliances as are required. These shall form part of and be included in the half-yearly supervisory compliance of ASPs effective from 1st Sep 2023.
Besides compliance by ASPs, the circular is also for the information of nodal officers under the Government sector, Point of Presence (POPs), and National Pension System Trust (NPST) who shall bring it to the notice of subscribers.
This circular is available at www.pfrda.org.in under the Regulatory Framework > Circular tab.
Chief General Manager
Annexure
Subject: Compliance Certificate by ASP on Fees, Charges & Intermediation
We, [ASP Name], hereby certify that we are in full compliance with the regulations and guidelines set forth by the PFRDA regarding fees and charges levied on subscribers in relation to annuity products issued through the NPS.
As an Annuity Service Provider, we confirm the following compliance measures:
A. Premium (Purchase Price): We ensure that the fees and charges imposed on subscribers for annuity products strictly adhere to the premium rates approved by the IRDAI. There are no hidden or additional fees or charges imposed.
B. Exclusion of Government Taxes: Any tax imposed by the Government are excluded from the fee limitations. We do not charge any taxes to subscribers beyond the amounts determined by the Government.
C. No Additional Intermediation Expenses: We confirm that there are no additional intermediation expenses or charges levied on subscribers for the annuity products. We do not deploy any agency or intermediary for the purpose of sourcing annuities from NPS subscribers and annuity issued to NPS Subscribers under direct channel.
D. Compliance Officer Responsibilities: We diligently monitor and ensures compliance with all duties and responsibilities outlined in the PFRDA (Exits and Withdrawals from NPS) Regulations, 2015, besides addressing grievances reported by subscribers who have purchased annuities from us] upon exit from the NPS.
We are committed to upholding the highest standards of transparency, fairness, and regulatory compliance in our operations as an ASP and as specified under the provisions of exit regulations of PFRDA. The statements contained in this compliance certificate as true and correct to the best of my knowledge and nothing material has been omitted to be disclosed.
Name of Compliance officer & Signature
