As per the new pre-mature withdrawal rule of the Pension Fund Regulatory and Development Authority (PFRDA), you will get only 20% of your accumulated wealth under NPS as a lump sum, while the remaining amount is to be used to buy an annuity.
Want to exit the National Pension System (NPS) prematurely? As per the new premature exit rules of the Pension Fund Regulatory and Development Authority (PFRDA), you will get only 20% of your accumulated assets under NPS as a lump sum, while the remaining amount is to be used to buy an annuity.
This 80:20 pre-exit rule will be applicable to both government and non-government sector customers joining NPS between the age group of 18-60 years. However, in case of non-government sector, the individual should be a subscriber for 10 years. Under the PFRDA (Exits and Withdrawals) (Amendment) Regulations, 2021 dated 14 June 2021, the provisions relating to lump sum withdrawal were amended for the benefit of customers.
As per PFRDA circular dated 21 September 2021, if the corpus is equal to or less than Rs 2.5 lakh, the entire amount will be paid to the subscriber as a lump sum. Normal exit from NPS is allowed at the age of 60 years or more.
Hence, pre-mature exit rules will be applicable for anyone planning to exit before the age of 60. In normal exit, if the fund is less than or equal to Rs 5 lakh, the entire amount can be withdrawn as a lump sum. If the corpus is more than Rs 5 lakh, then at least 40 per cent of the accumulated pension amount of the subscriber has to be used for the purchase of annuity.
In case of death of the subscriber, in case of unfortunate death of the subscriber, the subscriber’s credited pension amount will be given to the nominee or legal heir of the non-government subscriber. In case of a government subscriber, a lump sum amount is given to the nominee/legal heirs if the fund is less than or equal to Rs.5 lakh. If the corpus exceeds Rs 5 lakh, then at least 80 per cent of the accumulated pension wealth of the subscriber will be used by the dependents to purchase the “default” annuity key. The remaining 20 per cent will be paid as a lump sum.
As per PFRDA, the “Default Annuity Scheme” for government sector customers provides for the annuity for the life of the subscriber and spouse with a provision for refund of the purchase price of the annuity. On the death of such annuity holders, the annuity can be reissued to the family members. After coverage of family members, the purchase price will be refunded to the surviving children of the subscriber and in the absence of children, to the legal heirs of the subscriber, as applicable.
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