The National Pension System (NPS) aims to offer social security to citizens of India, including residents and non-residents, employed and unemployed individuals, and organised and unorganised sector workers. One of the noticeable features of NPS is its flexibility, starting from deposits to withdrawal options. While some may feel the rule of 60:40 withdrawal is stringent, where one can withdraw a maximum of 60 per cent of the corpus at superannuation, and the remaining 40 per cent mandatorily goes to the annuity. In short, NPS tries to meet a person’s different needs in a single product. For lifetime financial security, the NPS offers various annuity options one can select from.
In the case of NPS, an annuity is provided by the Annuity Service Provider (ASP).
The annuity could be useful for those who don’t have a pension option or don’t know which one to invest in.
Here are different types of annuities offered under NPS.
Lifetime Annuity Without Return Of Purchase (ROP): A subscriber gets a lifetime annuity under this option. The annuity ends with the death of the subscriber.
Lifetime Annuity To Spouse Without ROP: Under this, the annuity is continued to the surviving spouse after the subscriber dies. It ends after the death of the spouse.
Lifetime Annuity With ROP: A subscriber gets a lifetime annuity under this option. When the subscriber/annuitant dies, the annuity is stopped, 100 per cent of the initial purchase price is returned to the nominee, and the policy is terminated.
Lifetime Annuity With Spousal Benefit And ROP: Under this, a subscriber receives the annuity for life, and after the subscriber’s death, the spouse is entitled to receive it. After the demise of both the subscriber and spouse, 100 per cent of the initial purchase price is returned to the nominee.
Lifetime Annuity With Family Benefits And ROP: It is the most comprehensive annuity type that provides coverage to the maximum number of family members. Under this, the subscriber is covered for a lifetime, and after that, the annuity is given to the spouse. After the death of the spouse, it is given to the mother of the subscriber and after her to the dependent father of the subscriber. After their death, 100 per cent of the purchase price is returned to the nominee or the legal heirs of the subscriber.
Note that these are the generic annuity schemes and the ASPs can offer other annuities with some variation or combination of these.
If one does not select any of the following options, the Life Insurance Corporation of India (LIC) becomes the default ASP, and ‘Annuity for life and after death 100 per cent annuity to spouse for life’ becomes the default option.
