In a major reform of the national pension system (NPS), the pension regulator has proposed to increase the lump sum payout to non-government sector subscribers to 80% and reduce annuitisation to 20% of their corpus at the time of exit from the scheme.
Higher flexibility and financial freedom for subscribers
In its proposed amendments to the norms, the Pension Fund Regulatory and Development Authority (PFRDA) has also proposed that private sector subscribers can also exit from NPS schemes after 15 years of investing.
As per extant norms, a private sector subscriber can withdraw a maximum 60% as a lump sum after attaining 60 years of age, while the remaining 40% has to be annuitized for a regular monthly pension.
Expanded age limits and liquidity options
The draft norms have also proposed to increase the age limit for entry into NPS from up to 70 years to 75 years and exit from NPS from 75 years to 85 years. Subscribers can also withdraw as many as six times from three times now during the vesting period, to meet their liquidity requirements. It has also proposed enabling provision for subscribers to seek financial assistance from regulated financial institutions against their individual pension account.
The proposed changes are in addition to PFRDA’s recent move to permit fund managers to customise and offer multiple schemes with equity exposure up to 100% to private-sector subscribers.