National Pension System New Premature Exit Rules (2021): This 80:20 rule for premature exit will apply to both the Government and Non-Government sector subscribers of NPS joining between 18-60 years.
Want to make a premature exit from National Pension System (NPS)? You will get only 20% of your accumulated wealth under NPS as a lump sum while the remaining amount needs to be utilized for buying an Annuity, according to the new premature exit rules of Pension Fund Regulatory and Development Authority (PFRDA).
This 80:20 rule for premature exit will apply to both the Government and Non-Government sector subscribers of NPS joining between 18-60 years. However, in the case of the Non-Government sector, the person should be a subscriber for 10 years.
Under PFRDA (Exit and Withdrawal) (Amendment) Regulations, 2021 dated 14th June 2021, the provisions related to the lump sum withdrawal were modified for the benefit of subscribers.
According to a PFRDA circular dated 21st September 2021, if the corpus is equal to or below Rs 2.5 lakh, then the full amount will be paid as a lump sum to the subscriber.
Normal exit from NPS is allowed at the age of 60 or above. So, premature exit rules will be applicable for anyone planning to exit before 60 years of age.
In normal exit, the full amount can be withdrawn as a lump sum if the corpus is less than or equal to Rs 5 lakh. If the corpus is above Rs 5 lakh, then at least 40% of the accumulated pension wealth of the Subscriber has to be utilized for the purchase of an Annuity.
Norms for Lump sum payment of corpus (On-boarded NPS 18-60 years)
Exit due to death of subscriber
In case of unfortunate death of the subscriber, the entire accumulated pension wealth of the subscriber is payable to the nominee or legal heirs of non-Government subscribers. In the case of Government subscribers, the lump sum is payable to the nominees/legal heirs if the corpus is less than or equal to Rs 5 lakh. However, if the corpus is above Rs 5 lakh, then at least 80% of the accumulated pension wealth of the subscriber has to be utilized for the purchase of “Default” Annuity by dependents and the balance 20% is paid as a lump sum to the nominee/legal heir.
According to PFRDA, the “Default Annuity Scheme” fo Government sector subscribers provides for Annuity for life of the subscriber and the spouse with provision for return of purchase price of the annuity. Upon the demise of such annuitants, the annuity can be re-issued to the family members. After the coverage of the family members, the purchase price will be returned to the surviving children of the subscriber and in the absence of children, the legal heirs of the subscriber, as may be applicable.