NPS proposes systematic lump sum withdrawal plan for pensioners; invites suggestions till 19 October

The Pension Fund Regulatory and Development Authority (PFRDA) which oversees the National Pension Scheme (NPS) is seeking public feedback on a proposed plan for Systematic Lump sum Withdrawal (SLW).

Under the offered SLW plan, NPS is going to allow subscribers to make monthly, quarterly, half-yearly or annual withdrawals of the lump sum amount till 75 years of age. The procedure can be automated based on a one-time request. The deadline to provide suggestions is 19 October. If the proposal for SLW plan is accepted, NPS holders will be given more flexibility with respect to withdrawal of the lump sum.

What are the current rules?

As per the current rules, NPS subscribers can withdraw a maximum of 60 percent of their investments as lump sum and use the minimum of 40 percent as annuity when they reach the superannuation age or attain the age of 60 years.

The subscribers can only withdraw 20 percent as a lump sum and use the rest of the 80 percent to buy annuity in the case of premature exit. The subscribers do have a choice to defer lump sum withdrawal and annuity till 75 years.

Here are some of the key highlights of SLW proposal:

1. Upon request, SLW of any defined units or amount can be provided to the subscribers.
2. The facility will be available in both Tier I and Tier II NPS account holders.
3. Partial withdrawal will not be allowed after the setting up of Systematic Lump Sum Withdrawal.
4. For Tier II accounts, SLW can be availed at any point in time even before the subscriber reaches the age of 60 years.
5. The option of SLW at periodical intervals via automation would add flexibility and provide liquidity. Hence, it will optimise the benefits of retirement.
6. SLW will enable the subscribers with periodical withdrawal to manage their requirements and needs.
7. NPS holders can exit from NPS only post the completion of five years.

NPS was launched for government subscribers (except for Armed Forces) from 1 January, 2004. Subsequently, it was extended to state governments, all Indian citizens and corporate subscribers.

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