Here are the New PFRDA guidelines on NPS annuity payment if the subscriber dies after taking the lumpsum

Rules for annuity payment if the NPS subscriber dies after withdrawing the lump sum.

NPS scheme allows lump sum withdrawal after maturity

The National Pension System (NPS) allows you to save up a corpus for retirement and enjoy tax benefits. The scheme is managed and administered by the Pension Fund Regulatory and Development Authority (PFRDA) which makes the rules for NPS exit and withdrawals.

Related- Know how to open an NPS account online

Rules of NPS withdrawal

On maturity, the NPS scheme allows you to withdraw up to 60% of the accumulated corpus in a lump sum. After that, you can choose to receive annuities from the remaining portion. These annuity payments create a regular source of income in your golden years.

While the NPS withdrawal rules are quite simple, they apply when the subscriber is alive. But what would happen if the subscriber died after availing of the lump sum and before the annuity began?

NPS annuity rules after the subscriber’s death

The PFRDA has set new guidelines about the payment of annuity if the subscriber dies after availing of the lump sum benefit and before the annuity payments have begun. Here are the new rules that are applicable:

If the subscriber is a government employee

With government subscribers, the rules for NPS annuity payment are as follows –

  • After the subscriber’s death, the annuity will be paid to the surviving spouse, if any. The annuity will be paid till the spouse is alive. If the spouse also dies, there’s a provision for the return of the purchase price (the corpus value at the conclusion of the accumulation phase.)
  • Alternatively, after the spouse’s death, the annuity can be re-issued to the subscriber’s family members at the rate prevalent at that time. The surviving dependent mother of the subscriber is given priority for annuity payment. If the mother is not alive or if the mother dies afterwards, the annuity will be re-issued to the surviving dependent father.
  • On the family member's death, the purchase price will be refunded either to the subscriber’s children or his legal heirs.

​​​​If the subscriber is not a government employee (all other types of subscribers)

  • With normal citizens or non-government employees, if the subscriber dies, the entire accumulated corpus can be withdrawn by the nominee or the legal heirs.
  • Alternatively, if the nominee or legal heirs want, they can avail of annuity payments from the remaining corpus.

Other aspects of the new rules

The PFRDA issued the aforementioned new guidelines in a circular issued on the 19th of October, 2022. Besides the rules for annuity payments, the circular also specified the following –

  • The nodal and corporate officers, NPS Trust, and POPs (Point of Presence) will have to interact with the claimants of the NPS scheme after the subscriber’s death if the lump sum has been withdrawn, but no annuity has been availed.
  • The NPS Trust monitor the progress of payment of the NPS benefits in the case of the death of the subscriber and ensure that the claims are timely settled.

The bottom line

If you are an NPS subscriber, know these amended rules. Educate your family members about the new PFRDA guidelines, so they know how to claim your NPS corpus in your absence and use it for their financial needs.

Related- Know the exit process for eNPS subscribers


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