When the National Pension System (NPS) matures upon reaching the age of 60, certain rules govern the allocation of the accumulated funds, particularly concerning annuity purchases.
Let’s delve into the specifics of annuity purchase, providers, and available options.
Purchasing Annuity: Key Guidelines
Upon maturity of the NPS, 40% of the total fund must be allocated towards purchasing an annuity plan, while the remaining 60% can be withdrawn as a tax-free lump sum.
However, subscribers have the option to invest more funds in annuities if desired.
Annuity for Life with ROP (Return on Purchase Price)
This option guarantees a lifelong pension for the subscriber.
Upon the subscriber’s demise, the entire amount used to purchase the annuity is returned to the nominee.
Allocation of Funds
Upon maturity, 40% of the NPS fund must be utilized to purchase an annuity plan, providing a regular pension.
The remaining 60% can be withdrawn as a lump sum, which is tax-free. Additionally, the subscriber has the option to invest more funds into annuities if desired.
Joint Life Annuity with ROP
Subscribers receive a pension for life, and upon their death, their spouse continues to receive the pension.
After the demise of both spouses, the nominee receives the total annuity amount.
Family Income with ROP
Under this option, the subscriber receives a pension for life. After their demise, the pension transfers to their spouse, then to dependent parents, and finally to children or legal heirs.
Upon the last beneficiary’s demise, the annuity amount is given to the nominee.
Annuity for Life without ROP
Subscribers receive a lifelong pension, but upon their demise,
no amount is returned to the nominee with no return of purchase amount upon death.
Joint Life Annuity without ROP
Pension is provided for life, extending to the spouse upon the subscriber’s death.
However, no amount is returned to the nominee after both spouses pass away.
These annuity options offer subscribers flexibility and security in planning for their retirement income.
These annuity options provide retirees with flexibility in choosing a plan that best suits their financial needs and preferences, ensuring a stable income during retirement years.
