The Government of India introduced the National Pension Scheme(NPS) to provide a secure future to citizens post their retirement. It is often observed that enrolling for a scheme is often simpler and easier compared to exiting a scheme. This, however, is not the case with the National Pension Scheme as it has multiple withdrawal options. Following simple basic rules ensure that withdrawing amount from your National Pension Scheme account is as easy as the post retirement life you plan to lead.For more information, Check out related articles NPS Interest Rate, NPS Investment, NPS Contribution & NPS Tax Benefits
Rules Pertaining to NPS Withdrawals
National Pension Scheme withdrawal Rules vary with different rules framed for different categories for Government sectors.
1. Rules for Government sector subscribers on retirement
- An individual should invest a minimum of 40% of the amount in annuity, with an option to withdraw the balance in a lumpsum. You can Use NPS calculator to get an estimate of your scheme amount.
- The lump sum withdrawal can be postponed till a subscriber attains the age of 70 years
- In the event of the accumulated pension being less than Rs.2 lakh, an individual can choose to withdraw the complete amount
2. Rules for Government sector subscribers who take voluntary retirement
- A minimum of 80% of the amount should be invested in annuity
- In the event of the accumulated pension being less than Rs 1 lakh, an individual can choose to withdraw the complete amount
3. Rules pertaining to death of Government sector subscriber
- In the event of a subscriber passing away before reaching retirement age, the complete amount is given to the nominee/legal heir.
4. Rules for corporate sector employees & citizens on retirement
- An individual should invest a minimum of 40% of the amount in annuity, with an option to withdraw the balance in lumpsum
- The lump sum withdrawal can be postponed till a subscriber attains the age of 70 years
- In the event of the accumulated pension being less than Rs 2 lakh, an individual can choose to withdraw the complete amount
5. Rules for corporate sector employees & citizens on voluntary exit
- An individual should have maintained an account for at least 10 years
- 80% of the amount should be used to purchase annuity
- In the event of the accumulated pension being less than Rs. 1 lakh, an individual can choose to withdraw the complete amount
6. Rules pertaining to death of corporate sector subscriber
- In the event of death of a subscriber, the nominee can choose to withdraw the accumulated amount as a lump sum, henceforth taking the NPS death benefits
NPS Partial Withdrawal Rules
- A subscriber can withdraw only 3 times during the tenure of his/her subscription
- A subscriber should maintain a minimum gap of 5 years between any 2 withdrawals. This gap can be reduced only during medical emergencies
- A subscriber can withdraw only upto 25% of his contributions towards this scheme
- A subscriber should have been a member of this scheme for at least 3 years in order to be eligible for partial withdrawal
- Partial withdrawal is allowed only in certain exceptional cases, like education of his/her children, marriage expenses, house construction or medical emergencies
These NPS withdrawal rules have been designed to simplify the working of this scheme, helping a subscriber plan for his/her retirement.
NPS Premature Withdrawal Rules – Tier I & II
NPS Tier I - Before the year 2011, there was a lock-in period till the age of 60 years. After the committee reviewed the Pension Fund Regulatory and Development Authority bill, they concluded that subscribers should be allowed to make premature withdrawals after completing 15 years of service in the form of repayable advances. After serving at least 25 years of service, then they can withdraw up to 50% of their contribution to NPS. Withdrawals will be allowed in the event of emergencies, critical illnesses and other life events that require financial aid.
NPS Tier II - For those who invest in a Tier-II account, the withdrawals permitted are unlimited. Therefore, the NPS Account becomes like any savings bank account. However, withdrawing money can be a tedious process when it comes to NPS as the Points of Presence through which withdrawal requests can be made are few in number. There is also no online portal making the whole process longer.
Difference between NPS & EPF Withdrawal
There are multiple difference between the National Pension Scheme and the Employee’s Provident Fund(EPF). Each scheme has its own benefits and drawbacks. Given below are some of the key difference between the NPS & EPF schemes when it comes to withdrawal options:
|NPS Withdrawal||EPF Withdrawal|
|Previously, the lock-in period was till the age of 60||Previously, the retirement age was minimum 55 years|
|After completing 15 years, withdrawals are allowed||To withdraw 100% of the corpus, you must be at least 58 years. Any withdrawals made before attaining the age of 58 years will not include the employer’s contribution and interest|
|Withdrawals can be made in the form of repayable advances||Withdrawals made need not be repaid|
|After serving at least 25 years of service, then they can withdraw up to 50% of their contribution to NPS||One year before retirement, you can withdraw up to 90% of the corpus, if you have attained the age of 57 years|
|Withdrawals will be allowed in the event of emergencies, critical illnesses and other life events that require financial aid||Withdrawals can be made for medical emergencies, to plan retirement, for housing and other such reasons|
Current NPS Partial Withdrawal Rules
NPS Partial Withdrawal Rules were amended. Given below are the current rules that apply to NPS Partial Withdrawals along with other important information.
Amount Allowed for Partial Withdrawal
Earlier partial withdrawals from NPS were not allowed, but with modifications made to the rules, contributors can now withdraw up to 25% of their savings. The partial withdrawal can only be made on the principal amount. Interest earned on the account cannot be withdrawn. Therefore, one can withdraw 25% of the amount contributed to the NPS account and not the total account balance.
Time Period for Partial Withdrawal
Furthermore, a withdrawal can be made only after completing 10 years. 3 withdrawals can be made with a 5-year gap between each partial withdrawal.
For example, if you deposit Rs.5,000 every month for a period of 10 years. After 10 years, you can make partial withdrawals of up to 25% of Rs. 6 lakhs, which is equal to Rs. 1.5 lakhs. Only after another 5 years will you be allowed to make another partial withdrawal.
Reasons for NPS Partial Withdrawal
Partial withdrawals can be made for the following specified emergencies:
- Child’s higher education
- Child’s marriage
- Treatment of Critical Illness of self, spouse, children or dependent parents
- Purchase or construction of first house (not applicable if the subscriber is already a sole or joint owner of a residential house or flat, not including ancestral property)
- Fatal Accidents
NPS Exceptions for 5-year Gap Rule
In cases of critical illnesses, the 5-year gap rule will not apply. There are 13 critical illnesses, accidents and life-threatening ailments which are accepted.
- Multiple Sclerosis
- Kidney Failure (End Stage Renal Failure)
- Heart Valve Surgery
- Primary Pulmonary Arterial Hypertension
- Aorta Graft Surgery
- Major Organ Transplant
- Coronary Artery Bypass Graft
- Total blindness
- Myocardial Infarction
- Accident of serious or life-threatening nature
- Any critical illness that is life-threatening as stipulated in the guidelines, circulars or notifications issued from time to time by the Authority
NPS Exit Rules
The prior stipulation for exit from NPS was 60 years. But this rule was modified and now NPS subscribers are allowed to exit at the age of retirement designated by their employers. Some employers prefer 58 years for the retirement age of their employees. The National Pension Scheme provides the following options for subscribers to exit:
- Upon attaining the retirement age, the subscriber must purchase annuity plans from the Government Authorized agencies for at least 40% of the accumulated amount. The remainder of 60% can be withdrawn under two options: lump sum or installments. If the subscriber does not wish to avail this option, the following alternatives are available:
- Extend the time to purchase annuity plans for 3 years from the date of attaining the age of 60 years. This option is ideal for those subscribers who have a major share of their contribution invested in equities. In case the market performance is low at the time of retirement, the subscriber can delay the withdrawal of the corpus. To choose this option, the subscriber must submit the request in writing 15 days prior to retirement to the concerned authority. In the event that the subscriber dies between the deferment period, then the onus falls on the spouse to buy the annuity.
- Another option available is to postpone 60% of the withdrawal till the age of 70 years. Fresh contributions can be made during this period. Upon attaining the age of 70, the amount can be withdrawn in a lump sum or in installments. To choose this option, the subscriber must submit the request in writing 15 days prior to retirement to the concerned authority.
If the subscriber opts for deferment, the cost of maintenance of Permanent Retirement Account and charges of the central recordkeeping agency, trustee bank, pension fund, and any other fees applicable from time to time.
- To whom do I address my grievances about my NPS account?
- You can contact the Central Recording Agency (CRA) call center on the toll-free number - 1800 222 080. This will connect you to the Call Centre/Interactive Voice Response System (IVR) You can register your grievance using your T-PIN. Dedicated customer care representative are available to guide you.
- Subscribers can also submit physical grievance forms in the prescribed format to the Point of Presences (POP) or Point of Presences Service Providers who will then forward it to CRA Central Grievance Management System (CGMS). Subscribers can also directly send form to CRA.
- Subscribers can also log on to www.npscra.nsdl.co.in and register their grievance with the use of the I-pin allotted at the time of opening a Permanent Retirement Account.
To submit a claim to withdraw the corpus, you need to submit the specified application along with all required documentation. This applies to all citizen model sectors including NPS Lite - Swavalamban and corporate subscribers. The application must be submitted to the nearest PFRDA, POP, POP-SP or NPS Lite Aggregators.
Depending on the Annuity Service Provider, the options available may vary. Listed below are the general annuities available to subscribers of NPS:
- Annual pension at a uniform rate payable for life to the annuitant only.
- Annual pension payable for 5, 10, 15 or 20 years certain and thereafter for as long as you live.
- Annual pension payable for life which increases at a simple interest rate of 3% p.a.
- Annual pension for life with return of purchase price upon the death of the annuitant.
- Annual pension for life also providing for 50% of the annuity payable to spouse during his/her lifetime upon death of the annuitant.
- Annual pension for life also providing for 100% of the annuity payable to spouse during his/her lifetime upon death of the annuitant.
- Annual pension for life also providing for 100% of the annuity payable to spouse during his/her lifetime upon death of the annuitant. This option also has the benefit of return of purchase price upon death of the spouse. If the spouse predeceases the annuitant, then the payment of the annuity will stop after the death of the annuitant and purchase price will be refunded to the nominee.
Yes, if you choose to defer your withdrawal post retirement, the following charges may be applicable:
- Cost of maintenance of Permanent Retirement account
- Charges of the central recordkeeping agency
- Charges of the trustee bank
- Charges of the pension fund
- Any other fees applicable from time to time
Currently, there is no option available online to request for a withdrawal from the NPS account.
The closure of the NPS account of the individual can be defined as ‘Exit’.
The withdrawal forms can be found on the NPS website under the ‘Forms’ section. The different types of withdrawal forms available are:
Exit ID is a Claim ID that is generated by the CRA for any subscriber or superannuating subscriber who is attaining 60 years of age. The Claim ID is generated when the subscriber attains 60 years of age or 6 months before the superannuation date. The Claim ID that is generated is sent to the subscriber by SMS, letter, and email.
Given below is the list of documents that must be submitted:
- Original PRAN card
- Relevant KYC documents
- If eligible for complete withdrawal, the ‘Request Cum Undertaking’ form must be submitted.
- Cancelled cheque with the account holder’s name, account number, and IFSC code. A copy of the bank’s passbook can be submitted if it has the account holder’s photograph, IFSC code, and the name is mentioned on it. The copy should be self-attested by the account holder.
- The advanced stamped receipt must be submitted. The receipt must be filled and cross-signed by the account holder on the Revenue Stamp
Once the above-mentioned documents are submitted, POP will sanction the request for withdrawal.
An annuity can be defined as the monthly amount that is received by the NPS account holder from the Annuity Service Provider (ASP).
The payment of pension will start instantly in case of a pre-mature exit. However, the account holder must fulfil the corpus and age criteria for buying Annuity.
Given below are the different types of Annuity Schemes available:
- Annuity for life
- An annuity that is paid for life and is then paid to the spouse if the annuitant passes away.
- An annuity is paid for life and if the subscriber passes away, the purchase price is returned.
- An annuity will be paid to the spouse if the subscriber passes away, and if the spouse passes away, the purchase price is given back to the nominee.
Once the Tier-I account is closed, the Tier-II account will also be closed.
Yes, the subscriber will be able to continue the Tier-II account if the Tier-I account is continued.
- To check the status of an NPS withdrawal request, the subscriber should visit the official website of CRA (www.cra-nsdl.com) and click on 'Limited Access View' pre-login option on the home page.
- Another method is to log in to the NPS account and click on 'Withdrawal Request Status View' under the menu 'Exit Withdrawal Request'.
As per Budget 2017, up to 25% of the subscriber's contribution withdrawn before retirement or superannuation is exempt from tax.
NPS Other Pages
- HDFC National Pension Scheme
- ICICI Bank National Pension System
- NPS Features and Guidelines
- NPS Withdrawal Forms
- New Pension Scheme
- POP and CRA Charges under NPS
- Axis Bank National Pension System
- Bank of Baroda National Pension System
- Bank of Maharashtra New Pension Scheme
- Central bank of India New Pension Scheme
- South Indian Bank New Pension Scheme
- Canara Bank New Pension System
- Corporation Bank New Pension Scheme
- Federal Bank New Pension Scheme
- IDBI New Pension Scheme