More Flexibility in Pension Schemes

Team Money Today        Print Edition: April 2013

The National Pension System (NPS) has turned more flexible for investors.

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced deferred withdrawal for the NPS under which a subscriber can get the lump-sum withdrawal allowed under the scheme any time between the age of 60 and 70.

Till now, an NPS subscriber had to mandatorily use at least 40 per cent of the fund for purchasing annuity and withdraw the rest as a lump sum on turning 60. The deferred withdrawal facility will allow subscribers to remain invested in the NPS and defer the lump-sum withdrawal for ten more years.

However, no new contributions can be made during the deferred investment period. Partial withdrawals are also not allowed. If a subscriber does not request for withdrawal even after turning 70, the money in the NPS account will be automatically credited to his bank account.

The deferred withdrawal facility will replace the existing phased-withdrawal system under which the lump-sum amount can be withdrawn in a phased manner, with a minimum of 10 per cent of the lump-sum amount every year till turning 70.

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