Exposure Draft on Operational Withdrawal Process-Request for feedback/comments from Public and All concerned
PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY
ON PROPOSED OPERATIONAL WITHDRAWAL PROCESS FOR NPS SUBSCRIBERS
Issued on: 26th December, 2013
Last date to accept Comments: 31st January, 2014
In order to provide an efficient and system driven withdrawal process to NPS subscribers, PFRDA is proposing the following operational procedure for withdrawal of benefits under NPS.
Keeping the above in perspective, the draft operational withdrawal process is proposed and comments from the public and all concerned are invited. It may also be noted that suggestions on improving/ simplifying the process can also be given. Comments/Feedback may be forwarded by email to the e-mail id email@example.com latest by 31.01.2014. Comments should be given in the following format:
Name of entity/person
Pertains to which Section/sub-section and page number
Written comments in the above format may be addressed to:
Mr. Sumit Kumar
Dy. General Manager
Pension Fund Regulatory & Development Authority
1st Floor, ICADR Building, Vasant Kunj Institutional Area Phase - II
Vasant Kunj, New Delhi – 110070
PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY
National Pension System is a long term retirement savings product which strives to accumulate and generate maximum pension wealth at the time of planned retirement or while moving away from the regular work life due to the age related factors. NPS is mandatory for all Central government employees who have joined the service on or after 01/01/2004 and almost all the state governments have also entered into agreement with PFRDA, making NPS mandatory for their employees. Apart from government employees, NPS is open to any and all the citizens of India with effect from 1st May, 2009 subject to the eligibility criteria as laid down by PFRDA. Currently, the following are the different variants of NPS that are in existence:
· NPS for Government Sector (Central, State govt’s, Central and State Autonomous bodies etc)
· NPS for All citizens including corporates covering their employees.
· NPS - Swavalamban scheme targeted towards low income individuals.
Under NPS, the subscriber is encouraged to save as much as possible during his younger years so that he can accumulate adequate pension wealth through proper and effective investment management of his corpus. This prudential investment management and maintenance of his Permanent retirement account is regulated and managed as an effective system providing for a lump sum corpus and an annuity providing for the monthly pension to the subscriber when he attains 60 years of age or normal age of superannuation as provided in the exit rules for NPS.
The Central Recordkeeping Agency (CRA) has been entrusted with the responsibility of receiving instructions related to all types of withdrawals under NPS. CRA has created a special NPS claim processing cell (NPSCPC) for this purpose and which would be operating on the basis of such instructions as provided by PFRDA regarding the withdrawals. The CRA shall process and monitor the abovementioned instructions through the Settlement process which will run on daily basis.
Under NPS, a withdrawal claim can be made for the benefits based purely on the permitted ways of exit only. However, the exit rules allow maximum possible leverage to the subscriber in case if he wishes to exit from the scheme at any point of time. The complete details of the exit rules / guidelines are provided in the next section and which shall act as the guiding rules for the entire withdrawal claim processes and procedures.
The exit rules vary slightly between the government employee subscribers and all other subscribers covered under the National Pension System. The primary difference being the maximum age up to which a person can continue to contribute to the NPS and seek complete withdrawal after reaching maximum age permissible under normal circumstances.
EXIT / WITHDRAWAL GUIDELINES UNDER NATIONAL PENSION SYSTEM (NPS)
The exit / withdrawal guidelines under NPS are framed in such a manner that the subscriber has a long period of accumulation of corpus for providing him with a decent accumulated pension wealth when he retires or he moves out of the regular work routine due to age. Also, it lets the subscriber have the freedom to move out of the scheme at any point of time, irrespective of cause or reason.
The following are the current rules/guidelines for withdrawals under NPS as approved by PFRDA:
a) Exit from NPS upon attaining the age of Normal superannuation (for govt. employees only) or upon attaining the age of 60 years (for all subscribers other than govt. employees): At least 40% of the accumulated pension wealth of the subscriber needs to be mandatorily utilized for purchase of an annuity providing for the monthly pension of the subscriber and the balance is paid as a lump sum payment to the subscriber.
b) Exit from NPS before attaining the age of Normal superannuation (for govt. employees only) or before attaining the age of 60 years (for all subscribers other than govt. employees): At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension of the subscriber and the balance is paid as a lump sum payment to the subscriber.
c) Upon Death: The entire accumulated pension wealth (100%) would be paid to the nominee / legal heir of the subscriber.
For Swavalamban withdrawals under (a) & (b) in the previous page, there is an overriding condition on the lump sum payment payable due to which the entire accumulated pension wealth would be annuitised in case if the monthly pension obtained by using the 40%/80% of the pension wealth is below Rs.1000/- per month. Also, these exit/withdrawal rules as applicable to NPS can be modified/altered from time to time by the Authority as the NPS progresses.
ANNUITY, ANNUITY SERVICE PROVIDERS (ASP’S) AND ANNUITY SELECTION
Under NPS, the subscriber can choose/opt for any of the variants of annuity that are available in the Indian market but from any of the IRDA registered life insurance companies empanelled by PFRDA as Annuity Service Providers (ASP’s) for providing the annuity services to the NPS subscribers. The list of existing ASPs is provided on PFRDA’s website at pfrda.org.in. At the time of exit from NPS for reasons other than death of the subscriber, the subscriber is required to purchase an annuity providing for a monthly pension to the subscriber.
BACKGROUND ON OPERATIONAL WITHDRAWAL PROCESS
Currently the withdrawal claims are handled through an interim arrangement by way of manual processing which involves lot of time and efforts to process the withdrawal claims. The proposed process is a system driven process followed by manual documentation and runs at macro level asper below mentioned steps:
· Intimation of claim to the Claimant/Nodal office
· Online submission of claim form by Claimant/Nodal Office.
· Claimant to submit the duly signed and completed withdrawal form along with the complete set of required documents
· CRA NPS Claim cell to take decision on the withdrawal basing on the application and documents submitted and verify the claim through online module.
· CRA to settle the claim by making the necessary payments as per the product structure.
FEEDBACK /COMMENT PERIOD
The Feedback /Comments on this exposure draft received till 31st January, 2014 would be considered for evaluation by PFRDA. The decision of PFRDA on all and any matters related to the subject matter is final and binding on all stakeholders.
Proposed Operational Withdrawal Process for claims under National
Pension System (NPS)
Basically, the withdrawal process at NPSCPC of CRA would involve the following:
A. Claim Registration
B. Monetization of Accumulated Pension Wealth
C. Claim settlement
D. MIS and data management
A. Claim Registration
The permitted type of withdrawals Under NPS are as follows:
1. Upon attaining the age of normal superannuation or attaining 60 years of age involving payment of a certain lump sum amount and a payment to ASP towards the purchase of annuity ( a minimum of 40% of the monetary value of total accumulated pension wealth)
2. Upon death of the Subscriber involving a lump sum payment of 100% of accumulated pension wealth.
3. Before attaining the age of normal superannuation or attaining 60 years of age involving payment of a certain lump sum amount and a payment to ASP towards the purchase of annuity ( a minimum of 80% of the monetary value of total accumulated pension wealth)
4. For Subscribers re-employed after the age of superannuation (60 years) in regulatory bodies where Chairman/Members are appointed after the age of superannuation (60 years) and the retirement age being the age prescribed by their employer. The process and procedure for the withdrawal would be same as per the normal exit and entire accrued pension wealth would be paid to the subscriber in one lump sum without any mandatory annuitisation.
a) Upon attaining the age of normal superannuation or attaining the age of 60 years: CRA will initiate the withdrawal process 6 months prior to his/ her attaining age of 60 years or on attaining normal age of superannuation by suo motto registration of the claim and allotment of a specific system generated claim number which would act as a Claim Ack ID for all future references and tracking. Additionally, NPSCPC would send communications on a quarterly basis to all the PAO/DDO/DTO’s seeking information on the impending superannuation cases due in next 6 months to take care of those cases where the age of normal superannuation is below 60 years and register the claim and generate the Ack ID. The NPSCPC would send a reminder after 3 months through a system generated auto communication followed by monthly reminder till the application form is submitted by the subscriber. Also, pop-up windows would be generated on the PAO/DDO/DTO’s/POP-SP/Aggregator system, the moment they log on to the CRA system for any activity informing them the details of pending withdrawal applications and the requirements thereof.