The Pension Fund Regulatory and Development Authority (PFRDA) which oversees the National Pension Scheme (NPS) invited public feedback on a proposed Systematic Lump sum Withdrawal (SLW) plan. Under the proposed SLW plan, NPS will allow subscribers to make monthly, quarterly, half-yearly or annual withdrawals of the lump sum amount till the age of 75 years. Further, the process can be automated based on one-time request that can be captured online/offline.
The deadline to give suggestions is October 19.
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If SLW plan is accepted, NPS holders will gave more flexibility with respect to withdrawal of the lump sum withdrawals.
Under the present system, NPS subscribers can withdraw only up to 60% of their investments as lump sum and mandatorily use the remaining 40% to buy a government-approved annuity plan. This is the normal route of withdrawal i.e upon superannuation, which means that pensioner has attained the age of 60.
In case of pre-mature exit (exit before attaining the age of superannuation/attaining 60 years of age) from NPS, only 20% can be withdrawn as lump sum while 80% of the accumulated pension corpus has to be used to purchase an Annuity pension plan. NPS holders can exit from NPS only after the completion of 5 years. If the total corpus is less than or equal to Rs 2.5 lakh, subscriber can opt for 100% lump sum withdrawal.
Highlights of the proposal
According to PFRDA, SLW of any defined units or amounts can be provided to subscribers upon request. The facility can be provided in both Tier I & Tier II accounts of NPS. As a result of this subscribers will be able to withdraw monthly, quarterly, half-yearly or annual withdrawals.
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Also, after the SLW kicks in there will be no further contributions to Tier I account and the amount in Tier I account will be earmarked for annuity and lump sum as per withdrawal conditions. No partial withdrawals will be allowed once the SLW is set.
For Tier II accounts, SLW can be availed at any point in time even before the subscriber attains the age of 60. This is mainly because of the fact that one can make withdrawals from Tier-II anytime and this facility when introduced would act like a monthly income for the subscriber or his family members.
Benefits of SLW
The choice of SLW at periodical intervals through automation would add flexibility, provide liquidity and hence optimise the retirement benefits.
According to PFRDA, SLW will enable and empower the subscribers with periodical withdrawal to manage his needs and requirement. Also, it will allow the subscribers to participate and reap market linked investment gains for the amount not withdrawn which continue to lie in PRAN and remain invested as per the choice of investment.
