National Pension System: Check Current Withdrawal, Exit & Account Opening Rules

Subscribers of the National Pension System (NPS) may soon be able to withdraw their whole contributions. According to sources, the Pension Fund Regulatory and Development Authority (PFRDA) aims to establish a new alternative for retirees that would allow them to take their whole investment at once if their corpus is up to Rs 5 lakh. During the current phase of the coronavirus pandemic, the raised threshold of Rs 5 lakh will provide improved liquidity to a particular subset of subscribers. Beneficiaries can withdraw up to Rs 2 lakh from their NPS account presently whereas pensioners can withdraw 60% of their contributions after this limit has been exceeded. According to sources, the regulatory body would allow subscribers to maintain a portion of their pension funds for investment in annuities or by pension fund managers directly. As per the existing guidelines of NPS, check current withdrawal, exit, partial withdrawal and account opening rules below.

NPS current withdrawal rules

If the entire accumulated corpus is less than or equal to Rs. 2 lakh at the time of Superannuation/at the age of 60 years, a subscriber can claim a 100 per cent withdrawal. In the event of an early exit, if the total accrued corpus is less than or equal to Rs. 1 lakh, the subscriber has the option of withdrawing the whole amount. However, one can only exit the NPS once ten years have passed. In the event of a partial withdrawal, the subscriber must have been a member of the NPS for at least three years and the withdrawal amount should not exceed 25% of the contributions made. A maximum of three withdrawals is permitted throughout the subscription period. Investors can withdraw funds in part for their children's higher education, marriage, the purchase/construction of a residential home (under certain conditions), and the treatment of serious diseases. Subscribers can make a partial withdrawal request online. Subscribers can also submit a physical partial withdrawal form (601-PW) along with supporting documents to POP, which will allow a POP to launch an online application, on the other hand, POP must 'Authorize' the withdrawal application in the CRA system. Subscribers can also request an Online Withdrawal by logging into their NPS account. This request must be confirmed and approved by the concerned POP. If a Subscriber is unable to make an online Withdrawal request, he or she must submit a physical Withdrawal form to the POP, with the requisite documents. POP will proceed with the withdrawal request on behalf of the subscriber depending on the subscriber's preference.

NPS Current Exit Rules

An exit is regarded as the closing of a subscriber's pension account under the National Pension System. According to the PFRDA (Exits and Withdrawals under NPS) Regulations 2015, subscribers can exit NPS in the following circumstances:

Upon Superannuation: When a subscriber hits Superannuation/60 years of age, he or she must utilise at least 40% of the accrued pension fund to buy an annuity that will give a regular monthly income. The outstanding funds can be withdrawn out in one go. Subscribers can choose for a 100 per cent lump-sum withdrawal if their entire accrued pension corpus is less than or equal to Rs. 2 lakh.

Premature Exit: In the event of a premature withdrawal (before reaching the age of superannuation/60 years of age) from NPS, at least 80% of the Subscriber's accumulated pension corpus must be used to purchase an Annuity that would deliver a regular monthly annuity. The outstanding money can be withdrawn in one go. However, after ten years, one can exit from NPS. Subscribers who have a total corpus of less than or equal to Rs. 1 lakh can choose for a 100 per cent lump sum withdrawal.

Upon Death of Subscriber: The entire accrued pension corpus (100%) would be given to the subscriber's nominee/legal heir.

Options for exit from NPS

Subscribers have the option of staying invested in NPS for up to 70 years or exiting NPS. Subscribers of NPS have the following options to opt according to npscra.nsdl.co.in:

Continuation of NPS account: Subscribers can keep contributing to their NPS account once they reach the age of 60/superannuation until they reach the age of 70. This contribution made beyond the age of 60 is also eligible for tax deductions under NPS.

Deferment (Annuity as well as Lump sum amount): Subscribers can delay withdrawals and remain invested in NPS until they reach the age of 70. Subscribers can choose to delay only lump-sum withdrawals, only Annuity, or both lump sum and Annuity.

Start your Pension: Subscribers can exit NPS if they do not want to continue/defer their account. He or she can submit an exit request online and start earning pension according to NPS exit guidelines.

Note: If the Subscriber meets the age and corpus requirements for purchasing an annuity, the pension starts immediately, based on the annuity scheme chosen by the respective Annuity Service Provider (ASP).

NPS new account opening rule

The pension regulator has approved the seamless digital onboarding of new subscribers via Points of Presence (POPs) and Central Record Keeping Agencies (CRAs). CRAs will continue to create soft copies of NPS subscribers' applications for accounts created digitally in CRA platforms, including eNPS. According to the revised guidelines, NPS subscribers will no longer be required to submit a physical application form to their respective CRAs. Before the activation of a Permanent Retirement Account Number (PRAN), subscribers will have the alternative of e-Sign or OTP authentication. This regulation will apply to NPS accounts registered through POPs as well.