New Rules Under The NPS

Subscribers will not only have the choice to change from one annuity plan to another of a particular insurer, they will be able to move across insurers to select an annuity of their choice

- Narayan Krishnamurthy

In recent times, several developments initiated by the Pension Fund Regulatory and Development Authority (PFRDA) are changing the way the NPS (National Pension System) is structured for the benefit of subscribers. A recent step is the discussion between the Insurance Regulatory and Development Authority (IRDAI) and PFRDA to allow NPS subscribers to port their annuity plans. At present, at the time of vesting of the NPS funds into an annuity, the NPS subscribers get a regular pension from the life insurance company from whom they buy the annuity.

There are 14 life insurers empanelled by the PFRDA who can offer annuity and there is a choice within insurers on the structure of annuities. For instance, annuity could be for life or a limited period, it could also have different frequency of payouts and so on. Effectively, once the subscriber takes an annuity plan, there is no room for any change in the annuity variant or annuity provider. This is a very restrictive practice and barring a window of 15 days to a month provided by insurers where a subscriber can exit the annuity option, there is no flexibility once the choice is made.

With this new proposal, subscribers will not only have the choice to change from one annuity plan to another of a particular insurer, they will be able to move across insurers to select an annuity of their choice. This is a big shift and change in the evolving pension market and it is likely to keep progressing as subscriber experience and circumstances change. The NPS has witnessed several changes in its architecture, scope and benefits since its operational launch over a dozen years ago.