An annuity applies to the monthly payment you obtain from the Annuity Service Provider (ASP) as a subscriber after exiting the National Pension Scheme (NPS). Annuity Service Provider is a licensed insurance firm of the Insurance Regulatory and Development Authority (IRDA) identified by the Regulatory and Development Authority of the Pension Fund (PFRDA) for the distribution of annuity benefits to NPS customers following their exit from the scheme. Currently there are 12 ASPs that provide NPS customers with annuity services. Some of these are Life Insurance Corporation of India, SBI Life Insurance Co. Ltd., HDFC Standard Life Insurance Co Ltd and so on. The purchasing of an annuity plan from the mentioned ASPs at the period of superannuation and premature exit is mandatory for all NPS subscribers. At the time of the filing of their withdrawal application, the subscriber picks the ASP or halts the payment of the withdrawal in lump-sum.
The annuity value depends on the duration of the annuity plan and the purchase balance of the annuity. The minimum age to earn an annuity is predefined by each ASP as per the details available on the NSDL – the central record keeping Agency for the National Pension System. For eg, the annuity from the age of 30 is given by HDFC and LIC, whereas the annuity is only offered by SBI Life after the subscriber hits the age of 40. The period of the annuity policy depends on the annuity plan of the subscriber’s preference.
Annuity schemes available under NPS with ASPs
Annuity for life: Throughout your life after death, you get your annuity. Obviously, payment of the annuity ends on the death of the annuity holder. The annuitant is a person entitled to obtain monthly payments in respect of a pension or contribution rendered in the annuity.
Annuity for life with return of purchase price on death: The payment of the annuity ends upon the annuitant’s death and the purchase price is credited back to the nominee.
Annuity payable for life with 100% annuity payable to spouse on the death of the annuitant: During a lifetime, an annuity is paid to the spouse upon the death of the annuitant. If the partner predeceases the annuitant, the annuity payment terminates until the annuitant’s demise.
Annuity payable for life with 100% Annuity payable to spouse on the death of annuitant with return on the purchase of Annuity: In such a scenario, the annuity will be paid to the spouse during the lifespan of the annuitant’s death and the purchase price will be credited back to the nominee following the spouse’s demise.
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