New Delhi: Pension Fund Regulatory and Development Authority or PFRDA Senior citizens (who joined the National Pension System or NPS at the age of more than 60 years) are allowed to withdraw the entire accumulated pension wealth without purchasing annuity, if the pension corpus is less than ₹5 lakhs during normal withdrawal, i.e. after completion of three years.
The PFRDA circular issued on September 22 states that the exit/withdrawal norms of subscribers are defined by the PFRDA (Exit and Withdrawal under NPS) Regulations, 2015 and its amendments. As per the regulatory mandate, certain predefined conditions meet the criteria of exit such as premature exit, normal exit and exit due to unfortunate death of the customer.
Subscribers joining NPS above 60 years of age should understand that withdrawal before three years will be treated as ‘premature exit’ and withdrawal beyond three years will be treated as ‘normal exit’. For premature withdrawal, the permissible limit for lump sum amount is ₹2.5 lakh more ₹5 lakh under normal exit without the need for annuity. As per the circular of PFRDA, in case of unfortunate death of those customers, the entire amount will be paid to the nominee/legal heirs.
Hence, a subscriber investing in NPS between the age of 60 to 70 years must know the following criteria, details for lump sum payment of corpus.
Premature exit: When a subscriber exits NPS before completing three years, it is a premature exit. In such a case, if the fund is equal to or less than ₹2.5 lakhs, full lump sum amount is payable. However, suppose the corpus is greater than ₹2.5 lakhs, then at least 80% of the accumulated pension wealth is to be used to buy an annuity providing monthly pension to the subscriber. The balance amount of 20% is payable to the customer as a lump sum.
normal exit: When a subscriber exits NPS after three years, it is a normal exit. In such a case, if the fund is equal to or less than ₹5 lakh, full lump sum amount is payable. However, suppose the corpus is greater than ₹5 lakhs. In that case, at least 40% of the accumulated pension wealth is to be used to buy an annuity providing monthly pension to the subscriber. The balance amount of 60% is payable to the customer as a lump sum.
Unfortunate Death of Customer: The PFRDA circular states that if the subscriber dies, the entire accumulated pension amount of the subscriber is paid to the nominee or legal heirs.
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