In a circular issued on May 14, the regulator clarified that while the earlier framework largely prohibited surrender of annuity policies—except during the free-look period—the restriction has now been eased in select circumstances to address subscriber grievances.
What has changed
PFRDA will now permit surrender of annuity policies in two cases:
Critical illness cases of the annuitant or immediate family members, subject to assessment by the Annuity Service Provider (ASP) as per internal processes.
Legacy policies issued before October 24, 2024, provided they explicitly contain a surrender clause in the contract.
The regulator said the move follows representations highlighting hardship faced by annuitants, especially where older policy documents had allowed surrender under defined conditions.
Process safeguards
To ensure transparency, PFRDA has mandated a structured process for all approved surrender requests. Annuity Service Providers must:
- Inform annuitants in writing about the final surrender value, including deductions and taxes.
- Process surrender only after receiving explicit written consent.
- Transfer proceeds directly to the annuitant’s bank account.
- Report details to the Central Recordkeeping Agency (CRA) within seven working days.
- Include all such cases in monthly regulatory reporting.
Policy intent
PFRDA said the relaxation is intended to balance long-term retirement income security with “exceptional hardship” situations, while maintaining strict procedural safeguards under existing policy and insurance regulations issued by the authority and the Insurance Regulatory and Development Authority of India (IRDAI).
All other provisions of the earlier annuity framework remain unchanged and continue to apply.
