The NPS Corpus: Attachment, Insolvency and Succession

A subscriber's NPS savings may be claimed by others: by creditors seeking to recover a debt, by an insolvency professional administering an estate, or by family members after death. The PFRDA Act says little directly on these questions, so the answers come from the general law read with the structure of the NPS. This note examines the position of the corpus against creditors, in the insolvency of an intermediary or a subscriber, and on succession.

1. No Express Protection in the PFRDA Act

Unlike provident fund law, which has long protected provident fund balances from attachment, and the Pensions Act, 1871, which protects Government pensions, the PFRDA Act contains no express provision making the NPS corpus immune from attachment or assignment. Any protection must therefore be found in other laws or in the nature of the account.

2. Attachment in Execution of Decrees

Section 60 of the Code of Civil Procedure, 1908: lists property exempt from attachment in execution of a decree, including pensions granted by the Government and certain provident fund deposits.
Pension once paid: an annuity or pension payment received from the NPS may be argued to fall within the protection for pensions, especially for Government employees, but the point depends on how courts characterise it.
Corpus before exit: the accumulated corpus is locked in until exit and not payable to the subscriber on demand, which makes it difficult to attach in practice even without an express exemption. A creditor cannot ordinarily force a withdrawal that the subscriber himself could not make.
After withdrawal: once the lump sum has been paid into the subscriber's bank account, it ordinarily loses any special character and can be attached like other money.

⚠ Note

The absence of express statutory protection is a gap in the law. Clear protection of the corpus from creditors, as provided for provident funds, would support the Act's purpose of securing income in old age. The 2025 rules allowing a subscriber to pledge the account for a loan up to 25 per cent of own contributions show that PFRDA treats the account as available as security only to a limited, consensual extent.

3. Tax and Government Dues

Tax authorities and other public authorities have statutory powers of recovery that may reach amounts payable to a defaulter by third parties. Whether such powers can be used against an NPS account before exit, when nothing is yet payable to the subscriber, is not settled. Amounts actually paid out on exit are within reach in the ordinary way.

4. Insolvency of an Intermediary

Trust structure: the assets of the NPS are held in the name of the NPS Trust for subscribers, with securities held by a custodian and cash in accounts of the Trust with the Trustee Bank. They are not assets of the pension fund, CRA or point of presence.
Insolvency and Bankruptcy Code, 2016: under Section 36(4), assets held by a corporate debtor in trust for third parties, and sums due to employees from provident, pension and gratuity funds, do not form part of the liquidation estate. Subscriber assets are therefore outside the reach of an insolvent intermediary's creditors.
Continuity: PFRDA may transfer the subscribers' assets and records to another intermediary, and may appoint an Administrator under Sections 19 or 31 to protect them during the process.
Client money: the penalty under Section 28(4) for failure to segregate clients' money reinforces this separation.

5. Insolvency of a Subscriber

If an individual subscriber becomes insolvent under the personal insolvency provisions of the IBC or the older insolvency laws, the question is whether the NPS corpus forms part of the estate available to creditors. Pension and provident fund benefits are commonly treated as excluded assets, and the lock-in of the NPS supports a similar approach, but the treatment of the NPS corpus has not been clearly settled by statute or decision.

6. Succession

Payment on death: the whole corpus is paid to the nominee, or to legal heirs on a legal heir certificate or succession certificate if there is no valid nomination.
Nominee's position: following the approach in Sarbati Devi v. Usha Devi (1984) and Shakti Yezdani v. Jayanand Jayant Salgaonkar (2023), a nominee generally receives the money for those entitled under the law of succession, unless the governing law makes the nominee the owner. The PFRDA rules do not expressly make the nominee the owner.
Personal law: the heirs entitled are determined by the applicable law, such as the Hindu Succession Act, 1956, the Indian Succession Act, 1925 or Muslim personal law, and a will may direct how the subscriber's estate, including the corpus, is distributed.
Disputes: disputes among heirs are for the civil courts, since they are not matters the adjudicating officer or SAT can determine under Section 37.
Government employees: where the family opts for old pension rules benefits under Rule 10 of the CCS (Implementation of NPS) Rules, 2021, family pension goes to the family members defined in those rules, which follow their own order of entitlement.

⚠ Key point

The PFRDA Act has no express protection of the NPS corpus from attachment or assignment. Under Section 60 CPC, pension payments may be protected, the locked-in corpus is hard to attach before exit, but a lump sum once paid out can be attached. In an intermediary's insolvency, assets held by the NPS Trust are not in the liquidation estate (IBC Section 36(4)), and PFRDA can transfer them or appoint an Administrator. A subscriber's insolvency raises unsettled questions. On death, the corpus goes to the nominee or legal heirs; a nominee generally holds for heirs (Sarbati Devi, Shakti Yezdani), personal law and wills govern entitlement, and disputes go to civil courts.

7. Related Topics and Provisions

Death, disability, nomination and unclaimed amounts
Pension funds and the NPS Trust (Section 23)
Interim protection, attachment and supersession (Section 31)
Public servants, good faith and other laws (Sections 47, 48 and 55)
Exit, withdrawal and annuity under the NPS