Subscribers of NPS or National Pension Scheme can, as per extant rules, withdraw a maximum of 60% as a lump sum and use a minimum of 40% as annuity when they reach the age of superannuation or attain the age of 60 years. Let’s do it. In case of premature withdrawal, customers can withdraw only 20% as a lump sum and the remaining 80% is to be used to buy an annuity. Subscribers have the option of deferring the lump sum withdrawal and annuity up to 75 years.
Now, pension fund regulator PFRDA Or the Pension Fund Regulatory and Development Authority proposes that lump sum payments can be made periodically monthly, quarterly, half-yearly or annually for a period of up to 75 years, if the subscriber so desires.
PFRDA has invited feedback on its proposal and it is open till 19 October 2022. NPS was launched from 1 January 2004 for government subscribers (except armed forces) and was later extended to state governments and all citizens and corporate customers of India.
Here are some of the PFRDA proposals for systematic withdrawal of lump sum amount from NPS:
Systematic Lump sum Withdrawal (SLW) of any defined unit/amount may be provided to the Subscriber if selected and requested.
This facility can be provided in both Tier I and Tier II accounts of NPS
But after SLW request, there will be no further contribution in Tier I and amount in Tier I will be marked for annuity and lumpsum as per withdrawal rules.
Partial withdrawal will not be allowed after setting up a systematic lump sum withdrawal
For Tier-II NPS account, systematic lump sum withdrawal can be availed at any time i.e. even before attaining the age of 60 years. This is mainly due to the fact that one can withdraw from Tier-II anytime and this facility will act as a monthly income for the subscriber or his family members when launched.
A customer can mandate systematic lump sum withdrawals on monthly, quarterly, half yearly and yearly basis with start and end date. If the expiry date is blank, the SLW will be triggered at a predetermined frequency till the corpus becomes available.
During SLW, an NPS subscriber can opt for Plan Preference/ or Pension Fund Manager. However, this would be applicable only for the lump sum portion. Annuity portion, if not already withdrawn, will remain as per the option of the existing plan only and no change will be applicable.
In case of death of the subscriber during SLW, his/her respective Nodal Office/POP/NPST will have to initiate the death withdrawal request, in which the entire amount will be paid to the nominee.
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