National pension system: check the current rules for withdrawing, leaving and opening an account
National pension system (NPS) subscribers may soon be able to withdraw their contributions in full. According to sources, the Regulatory Authority and Development of Pension Funds (PFRDA) aims to establish a new alternative for retirees that would allow them to take all of their investment in one go if their corpus reaches Rs 5 lakh. During the current phase of the coronavirus pandemic, the high threshold of Rs 5 lakh will provide improved liquidity to a particular subset of subscribers. Beneficiaries can currently withdraw up to Rs 2 lakh from their NPS account, while retirees can withdraw 60% of their contributions once this limit is exceeded. According to sources, the regulator would allow policyholders to keep part of their pension funds for investment in annuities or through pension fund managers directly. In accordance with existing NPS guidelines, check the current withdrawal, exit, partial withdrawal and account opening rules below.
Current NPS Withdrawal Rules
If the entire accumulated corpus is less than or equal to Rs. 2 lakh at the time of retirement pension / at the age of 60, a subscriber can claim a withdrawal of 100 percent. In the event of early exit, if the total accumulated corpus is less than or equal to Rs. 1 lakh, the subscriber has the option of withdrawing the entire amount. However, you can only exit the NPS after ten years have elapsed. In the event of a partial withdrawal, the subscriber must have been a member of the NPS for at least three years and the amount of the withdrawal must not exceed 25% of the contributions paid. A maximum of three withdrawals are allowed throughout the subscription period. Investors can withdraw funds in part for their children’s higher education, marriage, home purchase / construction (under certain conditions) and treatment of serious illnesses. Subscribers can request a partial withdrawal online. Subscribers can also submit a physical partial withdrawal form (601-PW) with supporting documents to POP, which will allow a POP to initiate an online request, on the other hand, POP must “ authorize ” the request withdrawal in the CRA system. Subscribers can also request a withdrawal online by logging into their NPS account. This request must be confirmed and approved by the concerned POP. If a Subscriber is unable to make a withdrawal request online, he must submit a physical withdrawal form to the POP, along with the required documents. POP will process the opt-out request on behalf of the subscriber based on the subscriber’s preference.
Current NPS exit rules
An exit is considered to be the closure of a subscriber’s pension account under the national pension system. According to the 2015 PFRDA (exits and withdrawals under NPS) regulation, subscribers can exit NPS under the following circumstances:
At the time of retirement pension: When a subscriber reaches the retirement pension / 60 years, he or she must use at least 40% of the accumulated pension fund to purchase an annuity which will give him a regular monthly income. Suspended funds can be withdrawn all at once. Subscribers can opt for a lump sum withdrawal of 100% if their entire accumulated pension corpus is less than or equal to Rs. 2 lakh.
Premature discharge – In the event of a premature withdrawal (before reaching retirement age / 60 years) from NPS, at least 80% of the subscriber’s accumulated retirement corpus must be used to purchase an annuity that would result in a regular monthly annuity. The remaining money can be withdrawn in one go. However, after ten years, one can leave the NPS. Subscribers who have a total corpus less than or equal to Rs. 1 lakh can choose a lump sum withdrawal of 100%.
Upon the death of the subscriber: The entire accumulated pension corpus (100%) would be handed over to the policyholder / legal heir of the subscriber.
NPS output options
Subscribers have the option of staying invested in NPS for up to 70 years or leaving NPS. NPS subscribers have the following options to choose from according to npscra.nsdl.co.in:
NPS Account Continuation: Subscribers can continue to contribute to their NPS account once they reach age 60 / retirement pension up to age 70. This contribution paid over the age of 60 is also eligible for tax deductions under the NPS.
Postponement (annuity and lump sum): Subscribers can delay withdrawals and stay invested in NPS until they turn 70. Subscribers can choose to defer lump sum withdrawals only, annuity only, or both lump sum and annuity.
Start your pension: Subscribers can exit NPS if they do not wish to continue / defer their account. He or she can submit a discharge request online and begin receiving a pension according to the NPS discharge guidelines.
To note: If the subscriber meets the age and corpus conditions to purchase an annuity, the annuity begins immediately, based on the annuity plan chosen by the respective annuity service provider (ASP).
New rule for opening an NPS account
The pension regulator has approved the seamless digital integration of new subscribers through points of presence (POP) and central record keeping agencies (ARC). CRAs will continue to create electronic copies of NPS subscriber requests for accounts created digitally in CRA platforms, including eNPS. Under the revised guidelines, NPS subscribers will no longer be required to submit a physical request form to their respective CRAs. Before the activation of a permanent retirement account number (PRAN), subscribers will have the alternative of e-Sign or OTP authentication. This rule will also apply to NPS accounts registered through POPs.
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Article first published: Saturday, May 29, 2021, 13:31 [IST]