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National Pension System (NPS) pensioners will soon be able to port their annuity plans. The Pension Fund Regulatory and Development Authority (PFRDA) is in talks about the same with the Insurance Regulatory and Development Authority of India (IRDAI).
If the proposal is accepted, NPS pensioners would be able to change their pension policies. Thus, if an NPS pensioner is not happy with the current annuity rate being offered by pension providing insurance firm, then the person would be allowed to switch to another plan offered by a different life insurance company.
This should be noted that pensioners were allowed to port health insurance policies by the IRDAI some years ago.
How will the annuity plan for NPS subscribers work?
After retirement, NPS subscribers get a regular pension from the life insurance company which they have an annuity plan with. When an NPS subscriber buys an annuity with a firm, the person is investing the money with the insurance company, and in return, the insurer pays the pensioner a certain amount at a specified frequency as a pension. The periodicity of the pension depends on the annuity plan option chosen by the subscriber.
As of now, an NPS subscriber can buy annuity plans only through one insurance firm, out of the 14 empanelled with the PFRDA. This includes Life Insurance Corporation of India (LIC), SBI Life Insurance, and HDFC Life Insurance, among others.
What is PFRDA proposing?
The PFRDA chairperson Supratim Bandyopadhyay has said, "The problem is once the annuity product is selected, it cannot be changed anymore except till the initial cooling-off period of 15-20 days. But it is found that many subscribers decide in a hurry and realise afterwards that another option was better and wish to rectify," quoted PTI.
If PFRDA's proposal is approved, pensioners will be able to shift the annuity plan to an insurance firm to get a higher return. Currently, the interest rate on annuities varies from 5.39 per cent to 6.81 per cent.
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First Published: Wed, September 14 2022. 11:20 IST