New NPS withdrawal rule changes: Ten things subscribers must know

National Pension System: All you need to know about the new withdrawal rule changes

1)PFRDA has provided the facility of Systematic Lump Sum Withdrawal (SLW) for NPS subscribers. “…it is proposed to provide the option of phased withdrawal of the lump sum through Systematic Lump Sum Withdrawal (SLW) facility,” the PFRDA said in its circular dated 27 October 2023. “This will allow subscribers to set a cadence of how much and when they want to withdraw their balance, instead of being tied down with an annuity for the entire post-retirement period. This withdrawal can then be used to meet specific needs, where a larger corpus may be required,” said Archit Gupta, Founder, and CEO, of Clear

2)NPS subscribers are allowed to withdraw up to 60% of their pension corpus, through the SLW on a monthly, quarterly, half-yearly, or annual basis for a period till 75 years of age as per the choice at the time of their normal exit.

3) For the withdrawal of funds by NPS subscribers, the pension regulator has also made ‘penny drop’ verification mandatory.

4) “The penny drop verification has to be necessarily successful with name matching, for processing the exit/withdrawal requests, and also for modifying the subscriber’s bank account details,” PFRDA said.

5) “As of October 25, 2023, instant bank account verification is now mandatory for advance withdrawals and exiting the NPS scheme. This change is aimed at ensuring the timely transfer of NPS funds to subscribers’ accounts during withdrawals or scheme exits,” said Amit Gupta, MD, SAG Infotech.

6)If the Central Record Keeping Agency (CRA) fails in penny-drop verification, they will involve the relevant nodal office or intermediary to rectify the subscriber’s bank account information, the pension regulator said.

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7)Subscribers will be promptly informed of verification failures through mobile and email, with guidance to contact the nodal officer or POP for resolution.

8) The circular also said that “no request” for exit/withdrawal, and modification of the subscriber’s bank account details will be allowed in case of failure of penny drop verification by the CRA.

9) The provisions will apply across NPS, Atal Pension Yojana (APY), and NPS Lite for all types of exits/withdrawals as well as for modification in subscribers’ bank account details.

10) The NPS withdrawal limits remain unchanged. Subscribers having a total deposit and interest of less than ₹5 lakh can withdraw the entire amount at once. “If you have more money than the limit, you have to use 40% of it for regular payments over time (annuities). You can take out the other 60% all at once,” said Amit Gupta.

NPS interest rates

NPS is a government-backed retirement scheme regulated by PFRDA. The NPS has delivered impressive long-term market-linked returns, outperforming other comparable retirement options such as the Public Provident Fund (PPF) and the Employees Provident Fund (EPF).

“NPS interest rates vary between 9% and 12% depending on the chosen scheme. NPS investments don’t offer a fixed rate of return, and interest is compounded monthly and transferred by government authorities. Generally, NPS interest rates are higher than those of fixed income instruments like Fixed Deposits (FDs),” said Amit Gupta

What will happen in case of unsuccessful transactions?

As per PFRDA’s recent circular, in case of unsuccessful transactions, the amount if not credited into subscribers’ account will remain with Trustee Bank till correct details are obtained. 

NPS withdrawal: What is the current rule?

Currently, National Pension Scheme (NPS) subscribers after turning 60 years withdraw up to 60 per cent of the retirement corpus as a lump sum while the remaining 40 per cent of the corpus mandatorily goes into buying an annuity.

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Updated: 31 Oct 2023, 02:05 PM IST