NPS Fund can be completely withdrawn without an annuity
Pension regulator PFRDA has allowed NPS subscribers with an accumulated pension wealth equal to or less than a sum of Rs 5 lakh, to withdraw the entire accumulated pension wealth without purchasing an annuity. It also stated that upon such exercise of this option, the right of such subscriber to receive any pension or other amount under the National Pension System or from the government or employer, shall extinguish, The PFRDA made these changes under the PFRDA Amendment Act published in the Gazette of India.
Currently, NPS subscribers can withdraw up to Rs 2 lakh from their NPS account. Beyond this limit, the pensioners can withdraw 60% of the contributions. At least 40% of the contributions have to be mandatorily parked in government-approved annuities. The new regulations allow for increased investments and better returns, given that annuities are known to deliver returns on the lower end of the scale, with the current range being merely around 5-5.5%.
The regulator also allows NPS subscribers to ‘defer annuity purchase for a maximum period of 3 years, from the date of attainment of 60 years of age or the age of superannuation, as the case may be, provided the subscriber intimates his or her intention to do so in writing in the specified form at least 15 days before the attainment of the age of 60 years or the age of superannuation, as the case may be, to the National Pension System Trust or any intermediary or other entity authorized by the authority for this purpose.
Meanwhile, PFRDA has also permitted Points of Purchase (POPs) to process the exit/withdrawal applications of NPS subscribers based on soft copies. However, they will have to ensure that the regulations on processing exits are complied with. The NPS withdrawal relaxation is permitted till 30th June 2021 at which time the ‘online paperless exit process’ based on OTP/ e-sign is expected to be rolled out by CRA for the benefit of NPS subscribers.