NPS withdrawal: What is the current rule?
At present, once an NPS subscriber turns 60, she can withdraw up to 60 per cent of the retirement corpus as a lump sum. The remaining 40 per cent of the corpus mandatorily goes into buying annuity. NPS subscribers also have the option to defer lump sum withdrawal till the age of 75 years. While deferring the lump sum withdrawal, NPS investors also get an option of ‘phased withdrawal’ annually. Under this option, the NPS subscriber can withdraw partially on an annual basis, but she has to submit the request every year.
NPS exit rule to change: Subscribers can opt for period pension
Now, PFRDA is planning to offer subscribers the flexibility to not withdraw 60 per cent corpus, instead letting it be with NPS and get it back in a staggered manner such as monthly, quarterly, semi-annual, or annual basis till the age of 75. Despite this withdrawal, the remaining NPS corpus will remain invested and keep earning returns until the corpus is completely withdrawn.
NPS subscribers can take their 60 per cent at one go when they retire at 60 or opt for the Systematic Lumpsum Withdrawal option for the next 15 years till they turn 75, Mohanty further explained.
This facility will be provided for both tier-I and tier-II accounts. For tier II accounts, the Systematic Lumpsum Withdrawal option can be initiated before a subscriber turns 60 years.
How will NPS Systematic Lumpsum Withdrawal option work?
NPS investors have to initiate one-time requests through online or offline modes to activate this periodic payout option, according to the draft proposal released by PFRDA on September 29, 2022. While making a request, NPS investors need to specify the amount, start date, end date, and so on. Do note that once the Systematic Lumpsum Withdrawal option is activated, NPS subscribers cannot make any further contributions to the tier-I account. Further, partial withdrawal will not be allowed once after initiating the Systematic Lumpsum Withdrawal option, it added. At the time of requesting Systematic Lumpsum Withdrawal, NPS investors have to mandate the number of units or the amount they want at what interval. The balance amount after each payment will stay invested in NPS. “This option allows the subscribers to participate and reap market-linked investment gains for the amount not withdrawn which continue to lie in PRAN and remain invested as per the choice of investment,” as per the draft proposal.
The subscribers will have multiple options at the time of exit — one-time lump sum withdrawal, Systematic Lumpsum Withdrawal, deferment, and continuation.
The choice of Systematic Lumpsum Withdrawal at periodical intervals through automation would add flexibility, provide liquidity and hence, optimise the retirement benefits, PFRDA said in its draft proposal.
NPS: Will there be an option to choose between Systematic Lumpsum Withdrawal and annuity purchase rule?
NPS subscribers will have the option to choose a systematic lump sum withdrawal option for the 60 per cent lump sum component. The remaining 40 per cent will be used to purchase an annuity. The annuity purchase rule will remain as it is, clarified the PFRDA chairman.