The Buyt Desk
To allow more flexibility to the National Pension System (NPS) there have been 3 key changes. Pension Fund Regulatory and Development Authority’s (PFRDA) new gazette notification has specified the new rules. NPS is very strict when it comes to withdrawal of money. At the time of maturity i.e when the subscriber turns 60 he/she can withdraw a lumpsum of just 60% from their accumulated corpus but with new provision in place a subscriber will be allowed to withdraw 100% of the corpus with certain conditions.
What is NPS and how does it work?
NPS is an investment cum retirement plan. You can start the investment with a monthly contribution of only Rs 1000. You will contribute to market linked pension funds and accumulate a corpus. The performance of the pension fund will add return to your deposit. Once you turn 60 years of age you can withdraw 60 % of the pension corpus and you will have to mandatorily purchase an annuity plan from the rest of the 40% of the corpus.This 60-40% rule has been relaxed by PFRDA. Let’s dive deep and look at the new rules of NPS and how it will impact the NPS investors.
Withdrawal Rules Relaxed
The NPS subscriber is now allowed to withdraw the full contribution amount in one go without diverting any part toward annuity if his/her accumulated pension corpus is equal to or less than Rs 5 lakh. Small investors with a smaller corpus i.e upto Rs 5 lakh and less are allowed to withdraw the full amount thuus giving them the option to choose to further invest it in instruments of their liking or use it as per their own situation. This increases freedom for small investors.
Entry Age Increased
The maximum entry age of NPS has been 65 but now as per the new gazette notification of PFRDA the entry age has risen to 70 years. The exit age limit has also been increased and it is now 75 years. A person upto the age of 70 years is allowed to join NPS and the final age of NPS maturityuy goes up by 5 years and will be upto 75 years.
Premature Withdrawal Limit
As per the existing rules an NPS subscriber can partially withdraw upto 25% of the corpus for specific reasons like illness, higher education of children or purchase of house. Now PFRDA increases the premature withdrawal limit to Rs 2.5 lakh which was earlier Rs 1 lakh. This increase in threshold means that the investor whose accumulated corpus is just Rs 2.5 lakh or less he/she can withdraw the entire 100% lumpsum.
