NPS subscribers with corpus up to Rs 5 lakh can withdraw entire sum on exit

By: |
June 16, 2021 1:15 AM

The pension regulator has also enhanced the entry age into NPS from 65 to 70 and exit age from 70 to 75 for all citizen and corporate models. Among other changes, it has permitted individuals to sell NPS products to widen retirement plan coverage.

national pension systemRepresentative image

National Pension System (NPS) subscribers with a corpus of up to Rs 5 lakh will now be able to withdraw the entire amount upon superannuation/ exit, instead of investing 40% of the amount in low-yield annuities as for other subscribers, according to a Pension Fund Regulatory and Development Authority (PFRDA) notification.

The pension regulator has also enhanced the entry age into NPS from 65 to 70 and exit age from 70 to 75 for all citizen and corporate models. Among other changes, it has permitted individuals to sell NPS products to widen retirement plan coverage.

The full withdrawal facility will benefit a section of government sector and private sector subscribers who have joined NPS late in their lives. Earlier, full withdrawal was allowed if a subscriber’s NPS corpus was up to Rs 2 lakh. With returns from annuities around 5-5.5%, if a subscriber invests 40% of his corpus of Rs 2.5 lakh, she will get a paltry `400-450/ month. According to extant norms, at the time of exit from NPS, a subscriber gets 60% lump sum in cash and balance 40% must be used to buy annuities.

Since the defined contributory pension system was rolled out from January 1, 2004, to contain the pension bill, about 21.8 lakh central government employees and 52 lakh state government employees are enrolled in the scheme with 82% share in NPS AUM as on April 30, 2021. About 2.82 crore people are enrolled under the Atal Pension Yojana (APY), a government-backed pension scheme for the masses, as on April 30, 2021. The flow of new entrants from the government sector is slowing down due to saturation, and most new entrants are now from corporate sector and APY.

To widen the NPS base, the PFRDA has permitted engagement of individuals who are working as business correspondents or agents within their existing business structure to facilitate the distribution of pension schemes.

“Where the accumulated pension wealth in the Permanent Retirement Account of the subscriber is equal to or less than a sum of five lakh rupees, or a limit as specified by the Authority, the subscriber shall have the option to withdraw the entire accumulated pension wealth without purchasing annuity and upon such exercise of this option, the right of such subscriber to receive any pension or other amount under the National Pension System or from the government or employer, shall extinguish,” the PFRDA notification said.

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