PFRDA Allows Surrender of Annuity Policies in Select Cases; Issues Procedure for Requests

The Pension Fund Regulatory and Development Authority (PFRDA) has relaxed its earlier restrictions on surrender of annuity policies and has allowed surrender in certain specified cases.

Earlier, PFRDA had stated that annuity surrender or cancellation would not be permitted except during the free-look cancellation period. The restriction was aimed at ensuring long-term income security for subscribers after retirement.

However, PFRDA said it received representations highlighting hardships faced by annuitants due to the restriction. Concerns were raised especially in cases where annuity policies issued before the October 2024 circular already contained surrender provisions. Requests were also received seeking surrender options in cases involving critical illness.

Following a review, PFRDA has now allowed surrender of annuity policies in the following situations:

• Critical illness of the annuitant or any family member, subject to assessment under the standard policy and process adopted by the Annuity Service Provider (ASP).
• Annuity policies issued before October 24, 2024, where the policy document contains an explicit surrender clause.

PFRDA clarified that the surrender process must be carried out strictly according to the terms and conditions of the original policy contract, the features of the annuity scheme and applicable regulatory guidelines.

To ensure transparency and protect the interests of annuitants, ASPs have been directed to follow a prescribed process while handling surrender requests.

Before processing any request, ASPs must provide the annuitant with details of the final surrender amount in writing, along with a clear breakup of all applicable charges and taxes.

The surrender request can be processed only after receiving explicit written consent from the annuitant regarding the final surrender proceeds. Once consent is received, the surrender value will be credited to the annuitant’s bank account.

PFRDA has also directed ASPs to share details of surrendered annuities with the respective Central Recordkeeping Agency (CRA) within seven working days. Such cases must also be included in the monthly cancellation report submitted to the Authority.

All other provisions of the earlier circular will continue to remain in force.

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