New Pension Scheme allows Lump Sum Withdrawal on Exit
Pension fund regulator PFRDA has allowed investors in the New Pension Scheme (NPS) to opt for ‘deferred withdrawal’ of their money at the time of exit, as against the current practice of ‘phased withdrawal’.
The replacement of ‘phased withdrawal’ with ‘deferred withdrawal’ was taken after PFRDA received feedback from various stakeholders, the pension fund regulator said.
Stakeholders informed PFRDA that subscribers be given a specific option to defer or time the entire lump sum withdrawal (maximum 60%) at the time of exit from NPS.
This would be a better option than forcing subscribers to choose a certain percentage each and every year while opting for the ‘Phased withdrawal’ option, including the year in which they are exiting the system.
Under the Deferred withdrawal facility, the subscribers at the time of exit from NPS can exercise the option to defer withdrawal of eligible lump sum withdrawal and stay invested in the NPS, according to PFRDA.
However, no fresh contributions will be accepted and also no partial withdrawals will be allowed during such a period of deferment.
The subscriber can withdraw the deferred lump sum amount at any time before attaining the age of 70 years by giving a withdrawal application or notice.
If no such notice is given, the accumulated pension wealth would be automatically monetised and credited to his/ her bank account upon attaining the age of 70 years.
As on March 2, NPS manages a corpus of over Rs 28,400 crore of 44.93 lakh subscribers. Around 2 lakh subscribers are from the private sector while 27 lakh are from central/state governments. Around 15.79 lakh subscribers are served by NPS-Lite, which is designed to ensure ultra-low administrative and transactional costs.
NPS is an initiative of Pension Fund Regulatory and Development Authority (PFRDA), the apex body established by the government to regulate and develop the pension sector. NPS has been extended to all citizens of India with effect from May 1, 2009.