The Pension Fund Regulatory and Development Authority (PFRDA) has made some changes to the National Pension System (NPS) in order to make annuity payments faster and simpler for subscribers. Starting from April 1, 2023, uploading certain documents will become mandatory for NPS subscribers who want to withdraw their pension corpus.
The documents that need to be uploaded are the NPS exit/withdrawal form, proof of identity and address as specified in the withdrawal form, bank account proof, and a copy of the Permanent Retirement Account Number (PRAN) card. This new rule will ensure that subscribers can receive their annuity income in a timely manner.
The PFRDA has also requested subscribers and associated nodal officers/POPs/corporate to educate subscribers about the importance of uploading documents and perform quality checks about the legibility of those documents. This change will make the NPS withdrawal process paperless and easier for subscribers.
The NPS withdrawal process for subscribers will involve the following steps
a) The subscriber will initiate an online exit request by logging into the CRA system.
b) At the time of initiation of request, the relevant messages about e-Sign/OTP authentication, authorization of request by nodal office/POP, etc. will be displayed to the subscriber.
c) During request initiation, details like address, bank details, nominee details, etc. will be auto-populated from the NPS account.
d) The subscriber will select fund allocation percentage for lump sum/annuity, annuity details, etc.
e) The subscriber's bank account registered in CRA will be verified through online bank account verification.
f) The subscriber needs to upload KYC Documents (identity & address proof), copy of PRAN card/ePRAN, and bank Proof at the time of submitting exit request.
g) Scanned documents should be appropriate i.e. scanned images should be legible. h) The subscriber authorizes the request by using either OTP authentication or e-Sign using Aadhaar.
The PFRDA has made other changes to the NPS withdrawal process to make it easier for subscribers. Last year, the pension body announced that NPS subscribers would not need to fill out a separate proposal form to choose the annuity after exiting the pension corpus. The exit form submitted by the NPS subscribers would be treated as an annuity proposal form.
At present, an NPS subscriber must use at least 40% of the total accumulated corpus to purchase an annuity plan at the time of maturity. The remaining 60% of the NPS corpus can be withdrawn as a lump sum. If the total corpus is less than or equal to Rs 5 lakh, the subscriber will have an option of complete lump sum withdrawal at maturity. For premature exit before the age of 60, an NPS subscriber needs to use 80% of the total NPS corpus to buy a pension plan (annuity) from a life insurance company.
Overall, these changes to the NPS withdrawal process will make it easier and more convenient for subscribers to receive their annuity income. By making the process paperless and mandatory for certain documents, subscribers can expect a faster and more streamlined experience. The PFRDA's goal is to ensure that subscribers receive their annuity income in a timely and efficient manner, and these changes are a step in the right direction.
The author is a CA with 2 decades of experience into Accounting, taxation, auditing, due diligence, credit management, treasury. Currently the author is founder and Managing Partner at RRL Global Services. The author can be reached at rrlglobal@yahoo.com.
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