New PFRDA guidelines: How is the NPS annuity handled if a subscriber dies after taking a lump sum?


Withdrawal from the National Pension System (NPS): The Pension Funds Regulatory and Development Authority (PFRDA) has observed that in some cases NPS subscribers have met an unfortunate death after taking advantage of the lump sum but before the annuity is issued. In such cases, the amount intended for the annuity can be found in the CRA (Central Record Keeping Agency).

While exit and withdrawals under NPS are covered by the PFRDA (Exit and Withdrawals under NPS) Regulations 2015 and its amendments, the regulator has issued new guidelines for the treatment of corpus for the issuance of policyholders’ annuity deceased.

Government sector subscribers

Per PFRDA guidelines, the annuity must be purchased by the spouse (if applicable) by providing a life annuity to the spouse with a provision for refund of purchase price (ROP).

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Upon the death of the spouse, the annuity may be reissued to family members in the following order. The premium rate in effect at the time of annuity purchase, using the purchase price to be repaid under the annuity contract until family members in the order specified below are covered:

  • Dependent mother of the deceased subscriber
  • Dependent living father of the deceased subscriber

“After taking charge of the family members specified above, the redemption price or the amount that was to be used to purchase the annuity is returned to the surviving children of the subscriber and in the event of the absence of children, to the other legal heir. (s) of the subscriber, as the case may be,” the regulator said in a circular dated October 19, 2022.

All citizen and business subscribers

The regulator said all accumulated pension wealth paid can be paid out to nominees or legal heirs. However, legal heirs or proxies, if chosen, can purchase the annuity.

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“NPS Trust (NPST), POP, Corporate and Nodal Officers may engage with all claimants of such deceased subscribers who received a lump sum payment but did not purchase an annuity in accordance with the provisions mentioned above. NPS Trust advised to monitor progress and engage with respective Nodal Agents, Subscribers, POPs, Businesses and Stakeholders to ensure that all pending Death Requests are addressed in a timely manner,” said the circular.


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