Annuity

 



In the context of NPS, Annuity refers to the monthly sum received by the Subscriber/Claimant (Family Member - Spouse/Mother/Father of Subscriber, exit due to death) from the Annuity Service Provider (ASP). A percentage of the pension wealth as decided by the Subscribers/Claimants (minimum 40% or 80% is to be invested with ASP in case, Withdrawal is due to Superannuation & Pre-mature Exit/death exit respectively) is utilized for purchase of Annuity from the empaneled Annuity Service Providers


Types of Annuity

Following are the most common variants of annuity schemes that are available to NPS Subscribers:

  1. Annuity for Life with Return of Purchase Price - Subscriber will get annuity for life time and on death of the Subscriber, payment of annuity ceases & 100% of the purchase price will be returned to the nominee(s).
  2. Annuity payable for life - Subscriber will receive payment of annuity till he/she is alive and payment stops after the death of the subscriber. However, return of purchase price will not be returned to nominees / legal heirs.
  3. Joint Life Annuity without Return of Purchase Price - Subscriber will get annuity for life time and on death of the Subscriber, annuity will be payable to Spouse for life time. On death of the Spouse, payment of annuity ceases and no further amount will be payable.
  4. Annuity for life increasing at simple rate of 3% p.a. – Subscriber will receive payment of annuity till he/she is alive increasing at simple rate of 3% p.a. and payment stops after the death of the subscriber. However, return of purchase price will not be returned to nominees / legal heirs.
  5. Annuity for life with a provision for 50% of the annuity to the spouse of the annuitant for life on death of the annuitant/subscriber- Subscriber will receive payment of annuity till he/she is alive and thereafter spouse will receive 50% of payment of annuity till he/she is alive. Payment of annuity stops after the death of spouse. If the spouse predeceases the subscriber, payment of annuity will cease after the death of the annuitant. It may be noted that this annuity variant may be taken with or without return of purchase price.
  6. Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant/subscriber- Subscriber will receive payment of annuity till he/she is alive and thereafter spouse will receive payment of annuity till he/she is alive. Payment of annuity stops after the death of spouse. If the spouse predeceases the subscriber, the annuity ceases after death of the annuitant. It can be with or without return of purchase price.

Nominee and who can be a nominee?


  • Subscriber is allowed to register up to three nominees in NPS. Subscriber needs to provide name, nominees’ relation with Subscriber and Percentage share. Value of Percentage share must be an integer. Sum of percentage share across all the nominees must be equal to 100. If sum of percentage is not equal to 100, entire nomination will be rejected. A fresh nomination is required to be made by the subscriber upon his/her marriage. You can change the nomination any number of times.
  • In case of a male Subscriber, his legally wedded wife, his children, whether married or unmarried, his dependent parents and his deceased son’s widow and children.
  • In the case of a female Subscriber, her legally wedded husband, her children, whether married or unmarried, her dependent parents, her husband’s dependent parents and her deceased son’s widow and children.
  • In case of subscribers who does not identify themselves as male or female-their legally wedded spouse, their children, whether married or unmarried, their dependent parents and their deceased son’s widow and children.


Default Annuity : The default annuity contract that will be applicable and wherein the annuity contract shall provide for annuity for life of the subscriber and his or her spouse (if any) with provision for return of purchase price of the annuity and upon the demise of such subscriber, the annuity be re-issued to the family members in the order specified hereunder at a premium rate prevalent at the time of purchase of such annuity by utilizing the purchase price required to be returned under the annuity contract (until all the family members in the order specified below are covered) :

(a) living dependent mother of the deceased subscriber;

(b) living dependent father of the deceased subscriber.

  • After the coverage of all the family members specified above, the purchase price shall be returned to the surviving children of the subscriber and in the absence of children, the legal heirs of the subscriber, as may be applicable.
  • The subscriber who wishes to opt out of the default option mentioned above and wishes to choose the annuity contract of his choice from the available annuity types or contracts with the annuity service providers, shall be required to specifically opt for such an option. However, default annuity option is mandatory in case of exit due to death and also in case of a missing person.