Pension fund regulator PFRDA has made a proposal before the insurance industry regulator IRDAI to allow the portability of annuity policies for NPS (National Pension System) subscribers.
At the time of superannuation, NPS subscribers have to put a part of their retirement corpus into annuities depending on the scheme.
The minimum annuity purchase for central government employees is 40 per cent of the accumulated wealth.
However, the annuity service providers have shown to offer varying returns from 5.39 per cent to 6.81 per cent.
The pension fund regulator has empanelled 14 annuity service providers of PFRDA, including LIC and other private life insurance companies.
An annuity service provider once chosen cannot be changed anymore at present. The return on the annuity is guaranteed, but the subscribers may not end up selecting the service provider which offers the highest return.
With portability, the subscriber will have the option to shift to a player which can offer a higher return.
“We have requested the IRDAI and also service providers to allow portability,” said PFRDA chairperson Supratim Bandyopadhyay. The PFRDA has already started working on the proposal.
“The benefit of an annuity is that once selected, the rates will be guaranteed for a lifetime But, the problem (at present) is once the product is selected it cannot be changed anymore. There is a cooling-off period of 15-30 days. But a subscriber may realise afterwards that another option is better,” said Bandyopadhyay.
He was in the city to interact with service providers and subscribers. There are about 5.8 crore subscribers in various schemes under NPS and Atal Pension Yojana, of which a little less than 4 crore subscribers are with the Atal Pension Yojana, which is focused on the unorganised sector.
Bandyopadhyay said that the regulator is working with various industry bodies and chambers of commerce to grow its subscribers.
The distribution channels have been increased to include banks and partners such as individuals which sell mutual funds.
