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PFRDA Mulls Withdrawal of up to Rs. 5 lakh on Retirement for NPS Users2 min read

April 23, 2021 2 min read

PFRDA Mulls Withdrawal of up to Rs. 5 lakh on Retirement for NPS Users2 min read

Reading Time: 2 minutes

Pension Fund Regulatory & Development Authority Chairman, Supratim Bandyopadhyay reportedly said that the National Pension System (NPS) subscribers would now be required to convert 40% of their accumulated retirement corpus into an annuity, given the interest rate scenario and increasing inflation.

The regulator is mulling to issue fresh rules which will allow NPS investors who are saving up to Rs. 5 lakh in the NPS to take the whole amount at retirement, up from Rs. 2 lakh at present.

The rationale behind this is that a corpus of over Rs. 5 lakh and mandatory purchase of annuity can offer a minimum pension of Rs 1,000 per month.

Currently, the NPS subscribers having a corpus of over Rs. 2 lakh at the time of retirement or attaining the age of 60 years need to buy an annuity, offered by insurance companies, on a mandatory basis. They have to pay 40% of the corpus to buy an annuity and the balance of 60% can be taken out as a lump sum.

This means that as per the current rules if an investor has a corpus of Rs. 2 lakh or less at the time of retirement, it is not mandatory for that person to purchase an annuity as the amount comes out to be very less to be offered as a monthly pension.

As per the media reports, PFRDA would also soon announce that investors be given an option of parking 40% of the corpus that is mandatory to purchase an annuity at the time of retirement with a pension fund manager to get better benefits.

The regulator is also contemplating increasing the maximum age limit of entry into National Pension System (NPS) from the current 65 years to 70 years.

The Pension fund regulator is also reportedly evaluating whether NPS subscribers who join after the age of 60 years can continue their NPS accounts till the age of 75. However, for others, the age of maturity will remain 70 years.

Takeaways For NPS Investors

1.Soon NPS investors can withdraw up to Rs. 5 lakh at retirement, up from Rs. 2 lakh at present.

2.NPS subscribers can now retain 40% of their corpus in NPS and withdraw it over 15 years.

3.PFRDA mandate to invest 40% of the corpus in annuity plans is to be reviewed.

4.Increase in age limit of entry in NPS from 65 years to 70 years.

 

Disclaimer – This content is purely for information and investor awareness purpose only and in no way an advice or recommendation