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  • National Pension Scheme Withdrawal Rules

    Retirement is a phase of life which most of us are unprepared for, a phase which changes the basic structure of our life cycle, pushing us towards a fresh, new start. Planning for retirement is essential in most cases, helping us mentally prepare ourselves for the future.The Government of India introduced the 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.

    Rules pertaining to National Pension Scheme withdrawals

    National Pension Scheme withdrawl Rules vary, with different rules framed for different categories.

    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 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 2,00,00/-, an individual can choose to withdraw the complete amount

    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

    Rules pertaining to death of government sector subscriber

    • In the event of a subscriber passing away before reaching retirement age, 80% of the amount in the account should be used to purchase annuity. The onus of this lies on the nominee/legal heir
    • In the event of the accumulated pension being less than Rs 2 lakh, a nominee can choose to withdraw the complete amount

    Rules for Corporate sector employees and 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

    Rules for Corporate sector employees and citizens who opt for 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

    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

    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 ant 2 withdrawals. This gap can be reduced only during medical emergencies
    • A subscriber can withdraw only 25% of his contributions towards this scheme
    • A subscriber should have been a member of this scheme for at least 10 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 withdrawl 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 and EPF Withdrawal

    There are multiple difference between the National Pension Scheme and the Employee’s Provident Fund. Each scheme has its own benefits and drawbacks. Given below is some of the key difference between the two 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 was 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 five years will you be allowed to make another partial withdrawal.

    Reasons for 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

    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.

    • Stroke
    • Multiple Sclerosis
    • Cancer
    • Kidney Failure (End Stage Renal Failure)
    • Heart Valve Surgery
    • Primary Pulmonary Arterial Hypertension
    • Aorta Graft Surgery
    • Major Organ Transplant
    • Coronary Artery Bypass Graft
    • Paralysis
    • Coma
    • 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:

    1. Upon attaining the retirement age, the subscriber must purchase annuity plans from the Government Authorised 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:
    2. 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.
    3. 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.

    FAQs

    1. 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 your 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 onto 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.
    2. How do I submit a claim to withdraw the corpus?
    3. 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 aggregator.

    4. What are the options available for annuities that provide monthly pension?
    5. 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.
    6. Are there any charges associated with delaying the NPS withdrawal?
    7. 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
    8. Can I request for a withdrawal from my NPS account online?
    9. Currently, there is no option available online to request for a withdrawal from the NPS account.

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