National Pension System: Here's Everything You Must Know Before Selecting An Annuity Option

To get the best value for your pension scheme, you should choose a plan that considers the dependent members on your pension and your immediate cash requirements.

Pension Income

Apart from stocks or mutual funds, annuity schemes are often considered a favored alternative investment to make your retirement smoother.

The National Pension System (NPS) allows you to withdraw 60% of the total corpus invested at the time of your retirement (i.e. age 60) and the remaining 40% should be used to purchase any annuity plan.

Though the data published by the Pension Fund Regulatory and Development Authority of India (PFRDA) shows that Annuity for life with Return of Premium (ROP) has the most extensive subscriber base, let us help you know some more about it.


  • Annuity schemes provide fixed pensions and are immune from open market conditions.

  • Only 40% of the total NPS investments are required to purchase an annuity scheme on retirement.

  • Lifetime pension with ROP is the most subscribed scheme as per PFRDA data.

  • ROP schemes yield comparatively lower income than those without ROP ones.

Types of pension schemes

Types of pension schemes

Read Tax Deductions On NPS. Want To Get Additional Tax Breaks Via NPS? Know How.

How to pick the best annuity plan?

  1. Firstly, you need to assess the regular cash requirements after your retirement and then determine your investment amount for a higher pension.

  2. It's important to consider the dependency of family members on pension income. And then you can choose without ROP schemes to get a higher pension or any ROP plans to secure your dependents also.

  3. You should pick your Annuity Service Provider (ASP) wisely. A trustworthy and technology-savvy ASP can be the best option to choose among all.

Read: How To Open An NPS Account Online?

The bottom line

Annuity schemes in NPS provide you with regular and periodic income to maintain your standard of living after retirement. Additionally, the rate of pension income is immune from inflation and other financial market volatility. One can rely on these schemes as they are under the safety net of PFRDA.

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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.


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