The Pension Fund Regulatory and Development Authority (PFRDA), through Circular No. PFRDA/2026/30/SUP-ASP/01 dated 14 May 2026, clarified the permissibility and procedure for surrender of annuity policies in specific cases. Earlier, the PFRDA circular dated 24 October 2024 prohibited surrender or cancellation of annuities except during the free-look cancellation period, with proceeds required to be used for purchasing another annuity. Following representations highlighting hardship faced by annuitants, especially where older policies contained surrender clauses and in cases involving critical illness, PFRDA decided to relax the restrictions. Surrender of annuity policies is now permitted in cases of critical illness of the annuitant or family members, subject to assessment by the Annuity Service Provider (ASP), and for annuity policies issued before 24 October 2024 that contain explicit surrender clauses. ASPs must disclose the final surrender amount with breakup of charges and taxes, obtain written consent from the annuitant, remit the surrender proceeds to the bank account, inform the concerned CRA within seven working days, and report such cases in monthly cancellation reports.
Pension Fund Regulatory and Development Authority
Circular No: PFRDA/2026/30/SUP-ASP/01 | Dated: Date: 14th May 2026
To,
All empanelled Annuity Service Providers (ASPs) and Other NPS Stakeholders
Subject: Clarification on permissibility and procedure for surrender of annuity policies in certain cases
1. Reference is invited to the PFRDA circular no. PFRDA/2024/18/SUP-ASP/01 dated October 24, 2024, which inter alia provided that no surrender or cancellation of annuities shall be entertained or permitted by the Annuity Service Provider (ASP) except for the cancellation during free look cancellation period and the proceeds of such cancellations shall be utilised for issuance of another annuity from the same ASP or any other ASP at the option of the annuitant. The primary objective of the restriction being to ensure long-term old-age income security for subscribers.
2. PFRDA has received representations citing hardship faced by annuitants on account of such restriction, specifically in cases wherein the annuities issued prior to issuance of referred circular provided explicit surrender clause in specific circumstances. Requests have also been received to allow surrender of annuity in case of critical illness of the annuitant or any family member of the annuitant.
3. Upon review and to protect the interests of subscribers, it has been decided to relax the restriction of surrender of annuity policies in the following cases:
a. Critical illness of the annuitant or his/her family members, subject to assessment by the ASP as per the standard process and policy adopted by the ASP for allowing such surrender for critical illness.
b. Annuity policies issued before October 24, 2024, which contain an explicit surrender clause in the policy document.
4. The surrender process shall be in strict accordance with the terms and conditions of the original policy contract, specific annuity scheme features and applicable PFRDA and IRDAI guidelines.
5. To ensure transparency and protect interests of the annuitants, ASPs shall adhere to the following procedure for such surrender requests:
a. Prior to processing the surrender request, the ASP shall communicate the final amount transferable upon surrender, providing a clear bifurcation of all applicable charges and tax in writing to the annuitant.
b. The surrender shall only be processed after receiving the annuitant’s explicit written consent regarding the final surrender proceeds and upon receipt of such consent, the surrender value shall be remitted to the annuitant’s bank account.
c. The reverse information flow regarding the surrendered annuity shall be shared with the respective
CRA within seven (7) working days.
d. All such cases shall be reported in the monthly cancellation report submitted to the Authority, along with appropriate narration.
6. All other stipulations as contained in the abovementioned circular shall remain in full force and effect.
Yours sincerely
Gurminder Kaur
General Manager
