The Central Government is set to change the National Pension System (NPS) withdrawal rule, according to reports. Pension Fund Regulatory and Development Authority (PFRDA) which manages the NPS may soon allow subscribers to withdraw lump sum amounts.
Once the NPS withdrawal rules are changed, the NPS subscribers will be able to withdraw their pension through the Systematic Lumpsum Withdrawal (SLW) option. The changes are expected to be implemented by the end of this quarter, according to reports.
Through the Systematic Lumpsum Withdrawal feature, NPS subscribers will be able to opt for periodic withdrawals, like monthly, quarterly, half-yearly, or annually, till the age of 75 years.
Withdrawal from NPS rules
Currently, NPS subscribers, who are above the age of 60 years, can withdraw up to 60 percent of the retirement corpus as a lump sum. The remaining 40 percent of the amount goes into buying annuity. NPS subscribers also have the option of deferring lump sum withdrawals till the age of 75 years. NPS investors can opt for a ‘phased withdrawal’ by deferring the withdrawal.
This option allows the NPS subscriber to withdraw partially on an annual basis.
Suggested NPS withdrawal changes
Under the new rules of withdrawal, PFRDA will offer subscribers a flexible option of not withdrawing the entire 60 percent corpus at one go.
The subscribers will be able withdraw the amount in a staggered manner, such as monthly, quarterly, semi-annual, or annual basis till the age of 75.
Under the SLW rule, the balance NPS corpus with the PFRDA will remain invested. So, the subscriber will keep earning returns until the corpus is completely withdrawn.
It is worth noting that NPS subscribers will be able to choose the Systematic Lump sum Withdrawal option for the next 15 years till they turn 75 at the time of their retirement.
National Pension Scheme (NPS) is a government-sponsored pension scheme subscribed by millions of salaried Indians. Although this scheme was initially launched only for government employees, it was opened to all sections in 2009.
A subscriber can deposit regularly in a pension account during his or her employment years and withdraw a part of the corpus in a lump sum. The remaining corpus is used to buy an annuity, which secures a regular income after retirement.