The Pension Fund Regulatory and Development Authority (PFRDA) is in discussion with the Insurance Regulatory and Development Authority of India (IRDAI) to allow National Pension System (NPS) pensioners to port their annuity plans. If the resolution is passed, the insurance regulator will allow NPS pensioners to change their pension policies. This would mean that if an NPS pensioner is not happy with the current annuity rate offered by the insurance company providing the pension, he/she will be allowed to switch to another annuity plan by a different life insurance company.

PFRDA President Supratim Bandyopadhyay said, “We have discussed with IRDAI and service providers to allow portability. It is in the initial stage of discussion.”

It may be noted that porting of health insurance policies was permitted by IRDAI a few years back.

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To understand how this proposal could be affected, NPS subscriber Need to know the current rules.


NPS Withdrawal rules:
At present, it is mandatory for a subscriber to use at least 40 per cent of the accumulated NPS corpus to purchase an annuity (pension plan) at the time of maturity. The remaining 60% can be withdrawn as a lump sum. If the total corpus is less than or equal to Rs 5 lakh, the subscriber will have the option to withdraw in full lump sum on maturity.

For premature exit before the age of 60 years, an NPS subscriber needs to utilize 80 per cent of the total NPS corpus to purchase a pension plan (annually) from a life insurance company. Only 20 per cent of the total fund can be withdrawn as a lump sum. In case of premature withdrawal, if the total amount at the time of premature withdrawal is less than or equal to Rs 2.5 lakh, the subscriber can withdraw the entire amount without investing in the annuity.

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How does annuity plan work for NPS subscribers?

Simply put, the annuity plan of the life insurance company will provide regular pension after retirement to the subscribers. , Buying an annuity means that a subscriber invests money with an insurance company and in return, the insurer pays out a fixed amount at a fixed frequency in the form of a pension. The periodicity of pension to be paid depends on the option opted by him while purchasing the annuity plan i.e. monthly, quarterly, yearly etc.

What are the options for buying an annuity?
An NPS subscriber can buy an annuity plan through only one of the 14 insurance companies listed with PFRDA. list includes Life Insurance Corporation of India ,LIC, SBI Life Insurance, HDFC Life Insurancee.t.c.

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What is PFRDA proposing?

“The problem is that once an annuity product is selected, it cannot be changed beyond an initial cooling-off period of 15-20 days. But it is found that many customers make hasty decisions and later I feel another option was better and want to improve,” the PFRDA chairman said as reported by PTI.

Currently, can an NPS subscriber change the existing annuity plan?

Presently, an NPS subscriber does not have the option to change the annuity plan once purchased.

How it can affect NPS subscribers
At present the interest rate on annuity ranges from 5.39 percent to 6.81 percent. With the portability option, pensioners will have a chance to transfer the annuity plan to another pension provider to get higher returns. However, since the proposal is still in the discussion stage, it is not clear how the porting of annuity plans will work.