In reference to NPS, an annuity is a plan which provides a fixed monthly amount to the subscriber. In case of premature exit minimum 80% and in case of exit after maturity, a minimum 40% of NPS corpus will be used to purchase an annuity plan. There are various annuity service providers (ASP), and subscribers can choose any one according to their preference.
In this article, we will understand what is an annuity and why do you need to buy it.
What is an annuity?
An annuity is a kind of financial instrument which pays its subscriber a fixed sum at regular intervals. Think of an annuity as a reverse insurance plan. An insurance plan provides financial protection to your family from your untimely demise. You make regular premiums for the insurance plan and receive a lump sum in case of death. In an annuity, you pay lump sum payments to annuity service providers (ASP) and it pays you regular payments for the rest of your life. An annuity provides financial protection to you in case of living a long life without employment after 60 years of age.
Types of annuity
There are various types of annuities being offered by annuity service providers (ASPs). You can choose anyone as per your requirement. For example, someone may want to start the monthly payouts immediately after the superannuation but someone else might want to defer in starting the monthly payouts. These different qualities of annuities cater to different individuals as per their financial requirements.
|Frequency of Premium||Single, |
|Type of Payouts||Fixed, |
|Time Payouts Start||Immediate, |
|Duration of Payouts||Life Annuity, |
|No. of People Benefitting||Single Life,|
|Nature of Purchaser||Individual, |
There are even more annuity options available. Someone may want to choose to increase his monthly pension amount to tackle inflation whereas someone else might want to cover his spouse also for pension.
Some other common annuity types are as below:
|Common Annuity Options|
|Life Annuity||Pays uniform rate of pension till subscriber survive|
|Life and Certain||Pays 5, 10, 15 or 20 years of certain pension & then till the time subscriber survive.|
|Life and Repurchase||Pays for life with an increase in pension amount @ 3% p.a.|
|Inflation-Linked||Spouse is also covered. Pension is paid till the life of the subscriber, and post-death is also paid to the spouse.|
|Life and Survivor||Spouse is also covered. Pension is paid till the life of the subscriber, and post-death also paid to the spouse.|
Features of annuity in NPS
Here are some features of annuity that you must know before buying an annuity or exiting from your NPS account:
- In case of exit after maturity, a minimum 40% of the NPS corpus will be used to purchase an annuity.
- In case of a pre-mature exit minimum, 80% of NPS corpus will be used to purchase an annuity.
- If after the maturity period, your investment is less than 5 lakhs you don’t have to buy an annuity, you can withdraw the whole amount.
- If before the maturity period your investment is less than 2.5 lakhs you don’t have to buy an annuity, you can withdraw the whole amount.
- The annuity paid to the subscriber is taxable as per applicable tax slab rates.
- Lump-sum amount paid to the nominee / legal heir after the death of the subscriber is exempted from tax.
Benefits of annuity in NPS
Purchasing an annuity under NPS allows you to receive a monthly pension for a lifetime after retirement. You can also choose to include your spouse in this plan by choosing a life and survivor plan under annuity in which pension will be paid to your spouse after your death.
No investment cap
There is no investment limit in NPS and in the annuity. If you wish to receive a higher pension after retirement you simply do so by increasing your NPS investment.
Different annuity plans under NPS give you the flexibility to choose from any available options which suit your needs.
Monthly pension calculator under NPS
You can use this calculator created by NSDL to know the amount of monthly pension that you will receive after your retirement.
Moreover, you can also use this calculator made by NPS Trust to calculate the tentative pension and lump sum amount you will get after retirement.
Annuity options under NPS
There are many insurance companies that sell annuity plans but NPS subscribers can buy annuity only from one of the 14 companies empanelled with PFRDA.
The list of these companies is as below:
|List of Annuity Service Providers (ASPs) impanelled by PFRDA|
|S.no||Name of ASPs||Contact person||Address||Email id||Contact no.|
|1||Life Insurance Corporation of India||Mr. Biswajit Das, Dy. Secretary (Direct Marketing) &|
Mr Avinash Raulwar, Admn. Officer (Direct Marketing)
|LIC of India, Central Office, Distance Marketing Centre, New India Building, Ground floor, Santa Cruz (W) Mumbai firstname.lastname@example.org||022 – 26139094 022 – 67819280 022 – 26117044 022 – 67819288|
|2||HDFC Standard Life Insurance Co. Ltd||Customer Service Helpline||HDFC Life, 13th Floor, Lodha Excelus, Apollo Mill Compounds, N M Joshi Marg, Mahalakshmi, Mumbai – email@example.com||+91- 8916687777|
|3||ICICI Prudential Life Insurance Co. Ltd.||Mr. Vishal Pradhan,|
Mr. Mohit Vats,
Mr. Abhimanyu Patil,
Mr. Paawan Dayaramani,
Mr. Mukesh Kumar.
|ICICI Prudential Life Insurance Company, ICICI Prulife Towers, 1089 Appasaheb Marathe Marg, Prabhadevi, Mumbai- firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.com firstname.lastname@example.org||022 – 62955609 +91 – 9910643310|
+91 – 7875518916
+91 – 8827824160
+91 – 9999078665
|4||SBI Life Insurance Co. Ltd.||SBI Life Insurance Co Ltd, New Business Department, Central Processing Centre, Seawoods Grand Central, Tower 2, 8th level, Plot No. R-1, Sector-40, Seawoods,Nerul Node, Navi Mumbai – email@example.com|
|022 – 66456236 / 66456178 / 66456139 / 66456107|
|5||Star Union Dai-ichi Life Insurance Co. Ltd.||Ms. Debasmita Guru, Manager & Ms. Shabana Shaikh, Senior Manager||Star Union Dai-ichi Life Ins. Co Ltd, Raghuleela Arcade, 11th Floor, IT Park, Sector 30A, Vashi, Navi Mumbai – 400703,||firstname.lastname@example.org email@example.com||022 – 39546274|
|6||Bajaj Allianz Life Insurance Company Limited||Mr. Anil Verma||Bajaj Allianz House, Airport Road, Yerwada, Pune, Maharashtra – 411 006||Anil.Verma@bajajallianz.co.in||020 – 66026789|
|7||Edelweiss Tokio Life Insurance Company Limited||Mr. Benu Singhal||3rd & 4th floor, Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kirol Road, Kurla (W), Mumbai – 400 070||Benu.firstname.lastname@example.org||+91 – 9584055786|
|8||India First Life Insurance Company Limited||Mr. Pankaj Rathour||301, B Wing, The Qube, Infinity Park, Dindoshi – Film City Road, Malad (East), Mumbai – 400 email@example.com||022 – 68570596|
|9||Canara HSBC Oriental Bank of Commerce Life Insurance Company Limted||Mr. Harpreet Singh||2nd floor, Orchid Business Park, Sector – 48, Sohna Road, Gurugram- firstname.lastname@example.org||+91 -7307701414|
|10||Kotak Mahindra Life Insurance Company Limited||Mr. Deepak Gupta|
Ms. Trupti Boraste
|7th floor, Kotak Infiniti, Building Number 21, Infinity Park, Off W.E. Highway, General A K Vaidya Marg, Malad (E), Mumbai – 400 email@example.com firstname.lastname@example.org email@example.com||022 – 66057369 022 – 66057514|
|11||Max Life Insurance Co. ltd.||Mr. Karan Mehra||3rd, 11th, 12th Floor DLF Square Building, Jacaranda Marg, DLF Phase – 2, Gurgaon, Haryana 122002||Nodal.Officer@maxlifeinsurance.com||1860 120 5577|
|12||Tata AIA Life Insurance Company Limited||Mr. Adil Husain Siddiqui||14th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai 400013.||Adilhusain.Siddiqui@tataaia.com||+91 – 8446055533|
|13||PNB MetLife India Insurance Co. Ltd||Mr. Krishnendu Bhunia||Unit No. 701, 702 and 703, 7th floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnatakafirstname.lastname@example.org||022 – 41790000|
|14||Shriram Life Insurance Company Limited||Plot no 31 & 32, 5th & 6th Floor, Ramky Selenium, Besides Andhra Bank Training Center, Financial District, Gachibowli, Hyderabad – 500032||1800-103-6116|
Can you take 100% annuity from NPS?
Yes, at the time of retirement, the subscriber can purchase an annuity up to 100% of the NPS corpus.
What happens to an annuity after death?
After the death of the subscriber annuity will be paid to the spouse for the lifetime. After the death of the spouse payment of annuity ceases and the remaining amount will be returned to the nominee / legal heir.
Can subscribers change annuity service providers after buying an annuity?
After the purchase of an annuity, a subscriber can only change the annuity service provider within the time limit (free look period) specified by the annuity service provider.