NPS subscribers can soon buy multiple annuity schemes from the same Annuity Service Providers (ASPs) or life insurance companies. At present, NPS subscribers can buy only one annuity scheme from the ASP at the time of exit.
PFRDA appoints ASPs to maintain the annuity contribution of subscribers through their various schemes. Currently, 14 ASPs are empanelled under the Pension Fund Regulatory and Development Authority (PFRDA).
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The PFRDA circular, dated 10 May 2023, states, “The option of multiple Annuities shall be provided for those Subscribers who earmark the annuity corpus more than Rs 10 lakhs wherein Rs 5 lakhs utilised to buy each annuity scheme.” This means subscribers will get the option of investing in multiple annuities only if they have accumulated a corpus of more than Rs 10 lakh, wherein they need to invest Rs 5 lakhs in each annuity scheme.
Here are some benefits NPS subscribers can avail by investing in multiple immediate annuities schemes.
1. Diversification: With various annuity options, NPS subscribers can diversify their investments across several schemes. The latest change in the rule will provide them with a broader range of annuity options and help them optimise their retirement income in many ways.
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2. Flexibility: NPS subscribers can choose varying pay-out options while investing in annuity schemes. This way, they can mitigate risk across schemes and get better value for their invested money. Further, you can select different pay-out modes by investing money in different schemes. For instance, you can opt for a monthly mode pay-out option from one scheme, while from the other, you can opt for an annual one.
3. Proper planning: Subscribers generally accumulate huge corpus over a period of time, which requires proper financial planning for them to get a stable income and meet their financial goals, such as estate planning and vacation goal, during the retirement phase. Thus, subscribers can better plan their finances and meet their goals on time by getting a wider range of options to buy immediate annuity schemes from an insurer. The expected rate of return from insurers is around 4-6%. This can vary from scheme to scheme and insurer to insurer.
The PFRDA has advised Central Recordkeeping Agencies (CRAs) to build the necessary system-level functionality to facilitate implementing this change. Until this feature is developed, ASPs can handle the requests for multiple annuities received from subscribers and provide the necessary information to CRA through Reverse Information Flow (RIF), as per the PFRDA circular.
PFRDA believes this change will greatly benefit subscribers by providing them with a wider range of annuity options and optimising their retirement income.
