NPS Subscriber Corner

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What is National Pension System (NPS) ?

National Pension System (NPS) is a defined-contribution pension system in India regulated by the Pension Fund Regulatory and Development Authority (PFRDA). NPS helps to inculcate a habit of saving for retirement amongst Indian citizens during their earning age. It facilitates NPS-subscribers to generate adequate & regular income after retirement by utilising the accumulated NPS-corpus for purchase of Annuity. The below diagram will simplify understanding the process-flow.

What is an Annuity under NPS?

Annuity refers to the regular income or monthly payment received from an annuity plan offered by the Life Insurance Corporation of India (LIC). Under the NPS, annuity provides a regular income to NPS-subscribers once they retire. The annuity amount depends on the NPS- corpus invested, the type of annuity option chosen and the prevailing Annuity rates. Individuals who subscribe to the NPS must utilise at least 40% (can invest full 100% also) of their accumulated corpus to purchase an immediate annuity plan from LIC, empanelled by PFRDA as one of the Annuity Service Provider (ASP) for NPS. The Annuity policy of LIC will provide a steady source of income post-retirement.

How to Purchase Annuity from NPS-corpus?

Before purchasing an annuity plan from LIC, the subscriber must first exit from the NPS. An exit is defined as closure of the individual’s pension saving account under the National Pension System. On successful exit from NPS, individuals can select LIC as their preferred ASP and get invested the NPS-corpus in LIC’s approved immediate annuity plans. Depending on the type of your exit from NPS, the NPS-subscriber has to annuitize a portion of the accumulated corpus for purchase of Annuity.

Approved Annuity Plan of LIC

PFRDA mandates issuance of an Immediate Annuity plan only by utilising the subscriber’s NPS-corpus. LIC offers following two immediate Annuity-plans LIC’s as approved by the PFRDA. Under both these plans, the Annuity payment disbursement commences as early as from the very next month:

1)LIC’s Jeevan Akshay VII (Plan-857).
2)LIC’s Smart Pension (Plan-879).

Annuity options from LIC

LIC’s Jeevan Akshay Plan offers following ten Annuity options to meet varied needs of NPS-subscribers :

Annuity Type	Annuity option	Description of the option (LIC’s Plan-857)
Single Life Annuity options	Option-A	Annuity/ pension payable for lifetime at a uniform rate.
	Option-B	Annuity payable for 5 years certain and thereafter as long as the annuitant is alive.
	Option-C	Annuity payable for 10 years certain and thereafter as long as the annuitant is alive.
	Option-D	Annuity payable for 15 years certain and thereafter as long as the annuitant is alive.
	Option-E	Annuity payable for 20 years certain and thereafter as long as the annuitant is alive.
	Option-F	Annuity for life with return of purchase price on death of the annuitant.
	Option-G	Annuity payable for life increasing at a simple rate of 3% p.a.
Joint Life Annuity options	Option-H	Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
	Option-I	Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of thE annuitant.
	Option-J	Annuity for life with a provision of 100% of the annuity payable to spouse during his / her life time on death of annuitant. The purchase price will be returned on the death of last survivor.

LIC’s Smart Pension Plan offers following twenty-one Annuity options to meet varied needs of NPS-subscribers (terms and conditions apply as prescribed by PFRDA):

Annuity Type	Annuity option	Description of the option (LIC’s Plan-879)
Single Life Annuity options	Option-A	Life annuity
	Option-B1	Annuity Certain for 5 years and life thereafter
	Option-B2	Annuity Certain for 10 years and life thereafter
	Option-B3	Annuity Certain for 15 years and life thereafter
	Option-B4	Annuity Certain for 20 years and life thereafter
	Option-C1	Life Annuity increasing at a simple rate of 3% p.a.
	Option-C2	Life Annuity increasing at a simple rate of 6% p.a.
	Option-D	Life annuity with Return of Balance Purchase Price
	Option-E1	Life annuity with 50% Return of Purchase Price after attaining age 75 years
	Option-E2	Life annuity with 100% Return of Purchase Price after attaining age 75 years
	Option-E3	Life annuity with 50% Return of Purchase Price after attaining age 80 years
	Option-E4	Life annuity with 100% Return of Purchase Price after attaining age 80 years
	Option-E5	Life annuity with 5% Return of Purchase Price each year after attaining age 76 years to 95 years
	Option-F	Life annuity with Return of Purchase Price
Joint Life Annuity options	Option-G1	Joint Life annuity with a provision of 50% of annuity to Secondary Annuitant on death of the Primary Annuitant
	Option-G2	Joint Life annuity with a provision of 100% of annuity to Secondary Annuitant on death of the Primary Annuitant
	Option-H1	Joint Life annuity increasing at a simple rate of 3% p.a. with a provision of 50% of annuity to Secondary Annuitant on death of the Primary Annuitant
	Option-H2	Joint Life annuity increasing at a simple rate of 6% p.a. with a provision of 50% of annuity to Secondary Annuitant on death of the Primary Annuitant
	Option-I1	Joint Life annuity increasing at a simple rate of 3% p.a. with a provision of 100% of annuity to Secondary Annuitant on death of the Primary Annuitant
	Option-I2	Joint Life annuity increasing at a simple rate of 6% p.a. with a provision of 100% of annuity to Secondary Annuitant on death of the Primary Annuitant
	Option-J	Joint Life annuity with a provision of 100% of the annuity payable as long as one of the Annuitant survives and Return of Purchase Price on death of Last Survivor

Different Exit Types Under NPS

There are following three types of exits under NPS:

1)Superannuation Exit : On reaching 60 years or superannuation age, at least 40% of the accumulated corpus is to be converted into annuity. The balance amount of maximum 60% is paid in lump sum to subscriber. In case total accumulated corpus is ∠= 5 lacs, subscriber can opt for 100% withdrawal.
2)Premature Exit : Before reaching 60 years or superannuation age, minimum 80% of the accumulated corpus is to be converted into annuity. The balance amount of maximum 20% is paid in lump sum to subscriber. In case total accumulated corpus is ∠= 2.5 lacs, subscriber can opt for 100% withdrawal. However, non-government subscribers can exit the NPS only after completing 10 years in NPS.

Page Last Update Date : Wed, 01 Oct 2025 12:12:56 +0000

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