NPS Exit & Withdrawal Rules Changed: All Key Updates You Need To Know

The Pension Fund Regulatory and Development Authority (PFRDA) has rolled out important updates to the exit and withdrawal rules under the National Pension System (NPS).

The PFRDA has notified amendments to the PFRDA (Exits and Withdrawals under the National Pension System) Regulations, 2015, To promote old-age income security and protect the interests of subscribers.

"The amendments are primarily aimed at the non-government sector (All Citizen Model and Corporate Sector), applicable uniformly to both Common Schemes and the Multiple Scheme Framework (MSF), while also rationalising certain provisions for the government sector," as per the press release issued by the Ministry of Finance on December 19.

If you're building your nest egg through NPS, these shifts could mean more cash in hand when you need it most.

Bigger Wins for Private and Corporate Sector Subscribers

The bulk of the flexibility boosts target voluntary NPS users in the corporate and All Citizen models. Here's what stands out:

Less Forced into Annuity, More Lump Sum Freedom: Previously, you had to park at least 40% of your total savings into an annuity (a plan that pays regular income for life). Now, that's down to just 20%. This lets you take home up to 80% as a one-time lump sum payment; a big jump from the old 60% cap.

Full Withdrawal for Smaller Savings Pots: If your total accumulated amount is Rs 8 lakh or below at normal retirement, you can pull out everything in one go, no annuity required. For early exits, the same full access applies if it's Rs 5 lakh or less.

No More Waiting Periods: The old 5-year minimum stay rule for early exits in the All Citizen model is gone. Plus, normal retirement access now kicks in after 15 years of contributions or at age 60, whichever comes first.

These changes make NPS feel less rigid for everyday savers who join on their own.

Updates Tailored for Government Employees

Government sector rules have been fine-tuned to offer some extra room without losing the focus on steady pension income:

• Higher Full Withdrawal Threshold: Now, if your total savings are Rs 5 lakh or less, whether at normal retirement, early exit, or in case of death, the entire amount can come out as lump sum.
• Mid-Range Options: For amounts between Rs 8 lakh and Rs 12 lakh, you can withdraw up to Rs 6 lakh outright, using the rest for an annuity or scheduled payouts.
• Early Exit Safeguards Remain: If leaving early due to resignation or dismissal and your pot exceeds Rs 5 lakh, at least 80% still needs to go toward an annuity.

These adjustments bring government rules a bit closer to private ones while keeping retirement security in mind.

Benefits Everyone in NPS Can Enjoy

Some of the best parts apply no matter if you're in government, corporate, or individual plans:

• Stay Invested Longer: The upper age limit for keeping money in NPS has jumped from 75 to 85 years. No need to notify anyone in advance, it continues automatically if you want.
• New Phased Payout Option: Introducing Systematic Unit Redemption (SUR), like a systematic withdrawal plan in mutual funds. You can spread your corpus over regular installments for at least 6 years.
• More Partial Withdrawals: Before turning 60, you're now allowed up to four partial pulls (up from three), with at least four years between each. After 60, you can do them every three years.
• Borrow Against Your Savings: You can now use your NPS holdings (limited to 25% of your own contributions) as security for loans from approved banks or institutions.
• Better Handling of Special Cases: Clearer guidelines for exiting if you give up Indian citizenship or for families when a subscriber is missing and legally presumed deceased.

According to the press release, "Clear and well-structured exit provisions are expected to encourage entry and sustain participation by balancing subscriber needs and pension objectives across different stages of their life cycle"

It added "the amendments reflect evolving subscriber needs and seeks to make the NPS more inclusive, responsive and subscriber-friendly, while safeguarding long-term retirement income security."

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