New NPS rule from April 1 — Uploading withdrawal/KYC documents mandatory for processing exit

New rule for National Pension System (NPS) will come into effect from April 1, 2023 as Pension Fund Regulatory and Development Authority (PFRDA) has mandated uploading withdrawal or Know Your Customer (KYC) documents for subscribers willing to exit and receive annuity payments. This would speed up and simplify annuity payments after exiting NPS, PFRDA said.

The fund regulator, in February 2023, said that it has, in regulatory collaboration with the Insurance Regulatory and Development Authority (IRDAI), simplified the process of "buying annuity wherein Annuity Service Providers (ASPs) shall use the NPS withdrawal form submitted at the time of exit by the subscribers at nodal officers/POPs for issuing Annuity".

ASPs are life insurance companies regulated by IRDAI and empanelled with PFRDA to serve NPS subscribers and secure their old age with a regular stream of periodical income.

PFRDA said this common proposal for exit from NPS and for buying annuity from ASP facilitates parallel processing of the lump sum component and annuity due to which "the time taken by ASPs while issuing Annuity Policies is significantly reduced which results in faster subscriber servicing and timely annuity issuance".

PFRDA said that the subscribers and the associated nodal officers/POPs/corporates need to ensure that the following documents uploaded in the respective CRA user interface are to be legible:

NPS Exit/Withdrawal Form

Proof of Identity and address as specified in the withdrawal form

Bank account proof

Copy of PRAN card

PFRDA said the process flow is further illustrated in an annexure for ready reference of stakeholders. "All nodal offices/POPs/Corporate can educate the associated subscribers about the importance of upload of documents and perform suitable quality checks about the legibility of those documents," it added.

Last year, insurance regulator removed the need to fill a separate proposal form for NPS  subscribers to choose the annuity after exiting.

Under the NPS, the subscriber who superannuates is required to purchase an immediate annuity (excluding the commuted value) from any life insurance company. At the time of purchasing immediate annuities, a separate application form was previously collected by life insurance companies. Since the information required in the application form was already available under NPS, in order to avoid duplication, IRDAI advised life insurance companies to treat the exit form as the proposal form for NPS retirees purchasing annuities — instead of again collecting information from customers.