The Pension Fund Regulatory and Development Authority (PFRDA) has been taking several steps to make the National Pension System (NPS) as investor-friendly as possible. No wonder, NPS is fast becoming one of the most popular retirement saving tools among the investing community.
Several new NPS rules have been notified recently and the most important among them is allowing the NPS subscriber to withdraw the entire corpus on maturity, subject to conditions. Currently, the person can withdraw up to 60 percent of the amount accumulated in the account, while the remaining 40 percent is used to purchase an annuity plan
Under the new rules, the subscriber can withdraw the corpus amount from the permanent retirement account without buying a pension plan only if the corpus is up to Rs 5 lakh. In such a case, the subscriber will have the option to withdraw the entire accumulated pension corpus without purchasing an annuity. The entire lump-sum accumulated on maturity may be withdrawn by the NPS subscriber and utilised as desired without having to buy pension compulsorily.
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PFRDA has also increased the maximum age of entry into the NPS from 65 to 70 and thereby extending the exit age limit to 75 years. For exisitng NPS subscribers, now there's an option to continue beyond age 60 as well and in such a case, the NPS account can be extended till age 70.
These recent developments by PFRDA make this scheme more attractive and allow Senior Citizens, retired officials above 65 years of age, to enrol under the scheme and plan their retirement, to get attractive tax benefits and to accumulate funds for annuity.
Also, now Enhanced Investment Period is available to accumulate higher corpus by staying invested for additional period in the scheme. On maturity, if you feel the need for an annuity is not there or if the market conditions are not conducive, you may defer the purchase of an annuity. The NPS subscribers may defer their annuity purchase for up to three years from the time they turn 60 years old or attain the age of superannuation.
And, just in case, you need some liquid cash from your NPS account, the limits have been relaxed. Previously, the PFRDA had set a limit of Rs 1 lakh on the premature lump-sum withdrawal but now the subscribers may withdraw up to Rs 2.5 lakh.
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If the accumulated pension wealth of the subscriber is more than Rs 2.5 lakh, but the age of the subscriber is less than the minimum age required for purchasing an annuity, such subscriber will continue to be subscribed to the NPS, until he or she attains the age of eligibility for purchase of any annuity. However, in such cases, if the accumulated pension wealth of the subscriber is equal to or less than Rs 2.5 lakh, such subscribers will have the option to withdraw the entire accumulated pension wealth without purchasing any annuity.
With these investor-friendly changes in National Pension System, the scheme becomes more lucrative for all citizens of India and open a window for the major chunk of the population who could have missed the opportunity to enrol due to the age barrier.