Death, Disability, Nomination and Unclaimed Amounts under the NPS

A pension system must deal not only with the subscriber who lives to retire, but also with one who dies, becomes disabled or goes missing before retirement. In those situations, what matters is who receives the money, in what form, and how quickly. The answers under the NPS come from the Exit and Withdrawal Regulations, the rules on nomination, and, for Government employees, the Central Civil Services (Implementation of National Pension System) Rules, 2021.

1. Nomination

• Right to nominate: a subscriber may nominate one or more persons, commonly up to three, specifying the share of each.
• Change: the nomination may be changed at any time during the subscriber's life, online or through the point of presence or nodal office.
• Minor nominee: where a nominee is a minor, a guardian acts on the minor's behalf when the claim arises.
• No changes after death: PFRDA clarified in October 2022 that any change in nomination made after the subscriber's death, for example by using the deceased's login credentials, is invalid.
• Employer records: for Government and corporate subscribers without a valid NPS nomination, PFRDA has permitted nominations recorded in employer service records to be treated as valid.

2. Death of a Non-government Subscriber

• Whole corpus: on death before exit, the entire accumulated pension wealth is payable to the nominee, or to legal heirs if there is no valid nomination.
• Choice of form: after the 2025 amendment, the nominee may take the corpus wholly as a lump sum or use it wholly to buy an annuity, whatever its size.
• Death after annuity purchase: payments depend on the annuity chosen. A joint life annuity continues to the spouse, and an annuity with return of purchase price returns the amount to the nominee.
• Claim: the claimant submits a death withdrawal form, death certificate, KYC documents, bank details and, where required, an indemnity.

3. Legal Heirs Where There Is No Nomination

• Proof of entitlement: the claimant must produce a legal heir certificate issued by the competent State authority or a succession certificate from a court.
• Several heirs: all heirs entitled must join in the claim, or the corpus is divided according to the certificate.
• Delay: obtaining a succession certificate can take months. This is the strongest practical reason for every subscriber to keep the nomination up to date.

4. Death or Disability of a Government Employee

• Option (Rule 10 of the 2021 Rules): on joining, a Central Government NPS employee exercises an option (in Form 1) to receive, on death, invalidation or disability in service, either NPS benefits or benefits under the CCS (Pension) Rules, 1972 or the CCS (Extraordinary Pension) Rules, 1939, which provide family pension and invalid or disability pension as under the old system.
• Revision: the option may be revised any number of times before retirement, and a further option is available at the time of discharge on disability. On death, the last option binds the family.
• Default: where no option has been exercised, the rules provide a default that gives the family the old-system benefits in specified cases.
• Corpus: where old-system benefits are taken, the Government's contributions with returns go to the Government, while the employee's own contributions with returns are paid to the employee or family. An Office Memorandum of 14 October 2024 applied this to cases of death or disablement before the 2021 Rules, with interest for the period of delay.
• Missing employees: Government orders also extend benefits to the families of missing NPS employees.

5. Disability of a Non-government Subscriber

• Partial withdrawal: disability or incapacitation, and the treatment of specified illnesses, are grounds for partial withdrawal of up to 25 per cent of own contributions.
• Exit: the subscriber may exit under the general rules, using the small-corpus provisions where applicable.
• Insurance: the NPS itself does not provide disability insurance; subscribers rely on separate cover.

6. Missing Subscribers

• Interim relief: under the 2025 amendment, nominees or legal heirs of a subscriber who is missing may receive 20 per cent of the corpus as interim relief.
• Balance: the remainder is paid when the subscriber is presumed dead in law, that is, when he has not been heard of for seven years by those who would naturally have heard of him, under the law of evidence (now Section 111 of the Bharatiya Sakshya Adhiniyam, 2023).
• Rationale: families should not be left without support for seven years while the legal presumption matures.

7. Unclaimed Amounts

• How amounts go unclaimed: a subscriber dies without the family knowing of the account; a nominee cannot be traced; or a subscriber stops contributing, loses touch and does not claim at exit.
• What happens: unclaimed NPS money ordinarily remains in the subscriber's account, invested, until claimed. The Act does not transfer it to the Subscriber Education and Protection Fund, unlike the Investor Education and Protection Fund under company law.
• Inactive accounts: accounts without the minimum contribution may be frozen and revived on payment of arrears.
• Tracing: CRAs, nodal offices and PFRDA conduct drives to trace subscribers and claimants, using contact details, employer records and Aadhaar-linked information.

8. Related Topics and Provisions

• Exit, withdrawal and annuity under the NPS
• Rights of subscribers
• Subscriber Education and Protection Fund (Sections 29 and 41)
• Central Civil Services (Implementation of NPS) Rules, 2021
• Attachment, insolvency and succession