The Buyt Desk
The National Pension System is a contributory pension scheme. NPS is an equity-based investment that ensures better return from many other small saving schemes or bank FDs.It helps you in fund accumulation for your old age. You make a regular deposit in this scheme till the age of 60 years and after that subscriber is eligible to withdraw 60% of the corpus and compulsorily buy an annuity from the 40% of the corpus. The Pension Fund Regulatory and Development Authority (PFRDA) has recently changed a few rules of NPS making it more attractive. Here are the new changes
-
Entry Age barrier increased
Individuals up to the age of 70 years can join NPS. Earlier the entry age barrier for NPS was 65. A person more than the age of 65vyears was not allowed to open an NPS account. This will encourage people to join late if they haven’t started early.
-
Exit Age Increase
As the entry age barrier has been expanded so has been the exit age. The new exit age is 75 years now which was earlier 65 years. But for someone who enters the NPS post, 65 will have a mandatory 3-year lock-in.
-
Subscriber can Increase the Pension scheme
When the subscriber turns 60 years of age the scheme reaches its maturity. The subscriber can request for the extension of the scheme beyond the age of 60. He/She will have to give a written request for the extension. They can extend it for how many years they want to but it can’t be extended beyond 70 years.
-
Full Withdrawal from NPS
The NPS subscribers are not allowed to withdraw the entire corpus. He/She will have to split the maturity amount in two parts. The 60% of the corpus can be withdrawn in one go but the rest of the 40% will be used to mandatorily buy an annuity scheme. The PFRDA has relaxed this rule and if the entire corpus is Rs 5 lakhs or less then the subscriber is allowed to withdraw the full amount in one go upon the maturity without buying the annuity.
-
Pre-mature Exit Rules
Whenever a premature exit option is exercised the 80:20 rule is applied. As per this rule if the subscriber chooses to exit the scheme before its maturity he/she can withdraw only 20% of the corpus and the rest of the 80% will be paid as pension through an annuity plan. According to PFRDA’s September 2021 circular, if the corpus is equal to or less than Rs 2.5lakhs then the subscriber is permitted to withdraw the entire amount as a lump sum. The 80:20 rule will not be applied to premature exits.
