Kolkata: Regulated by PFRDA (Pension Fund Regulatory and Development Authority), NPS or the National Pension System was rolled out in January 2004 for all central government employees but for the armed forces. However, in May 2009, it was extended to all Indian citizens who are between 18 and 70. NRIs and OCIs can also subscribe to it. Like all other schemes, NPS too has provisions for its subscribers to withdraw money. Let’s have a look at when and by what amount can money be withdrawn from the NPS.
Exit after maturity
The basic idea of NPS is that subscribers should wait up to the age of 60 to withdraw a part of the corpus and leaving the rest with the scheme which will pay a monthly pension. According to recently amended rules, a subscriber can exit NPS after completeing 15 years of investment, though he/she might not have tunred 60. Therefore, it creates the ground for voluntary exit after a minimum of 15 years of investment in Tier I. This 15-year limit paves the way for greater flexibility for early retirement.
A subscriber can opt for normal exit after completing 15 years of subscription or after he/she turns a senior citizen. Thus if you are seeking for early retirement, NPS offers a route to suit that financial goal. The PFRDA thus injected a flexibility NPS did not have earlier.
Min 20% to be retained
However, the entire corpus cannot be withdrawn at one go. A subscriber has to retain a minimum of 20% of the accumulated pension wealth with NPS. This amount will be used to purchase an annuity, which in turn, will generate a monthly pension for the subscriber. The other extreme is a subscriber can also defer withdrawal and continue the account up to the age of 85.
Graded withdrawal rules on corpus size
NPS withdrawal rules also depend on the amount of money in the corpus. If the corpus is less than or Rs 8 lakh, the entire amount can be taken out at one go leaving nothing with the NPS. But if the amount is between Rs 8 lakh and up to Rs 12 lakh, a maximum of Rs 6 lakh can be withdrawn at one go and the remaining amount must be used for annuity. Another option is to take out the rest of the funds in phases over a minimum period of six years.
If the amount is in excess of Rs 12 lakh, a maximum of 80% can be taken out as a lump sum leaving the rest to buy annuity for regular pension.
Expiry of subscriber
All the above situations assume the subscriber is alive and withdraws the money himself/herself. However, if the subscriber passes away, the entire accumulated pension can be claimed by the nominee or legal heir of the deceased subscriber. The person claiming the money has a variety of options — take out the entire money as a lump sum, or opt for annuity purchase or use systematic withdrawal options.
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