NPS Systematic Lump Sum Withdrawal (SLW) Plan: National Pension System (NPS) subscribers will be soon able to withdraw through SLW process
National Pension System (NPS) subscribers will be soon able to withdraw through a “Systematic Lump Sum Withdrawal (SLW) process on a monthly, quarterly, half-yearly or annual basis till they reach 75 years of age.
The subscribers will be able to opt for SLW as per their choice of the period (monthly, quarterly, half-yearly or annually) at the time of their exit after retirement or superannuation or upon reaching 60 years of age, according to PFRDA.
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“In accordance with Regulations 3 (a) (ii) and 4 of PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 and amendments therein and to ease the process of lump sum withdrawal, now the subscribers are allowed to withdraw through a ‘Systematic Lump sum Withdrawal (SLW)’ process on a periodical basis viz. monthly, quarterly, half-yearly or annually for a period till 75 years as per the choice of the Subscriber at the time of their exit postretirement/ superannuation or upon reaching 60 years as the case may be,” the Pension Fund Regulatory And Development Authority (PFRDA) said in a circular dated February 8, 2023.
When can you opt for SLW?
As per the circular, the SLW facility will be available for both Tier-I and Tier-II NPS accounts. Further, this SLW will be allowed only in case of normal exit and not in case of premature exit. Exit due to the death of an NPS subscriber will also not have the SLW option.
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When will SLW start?
The SLW facility is expected to be available soon. The PFRDA has asked CRAs to build the required functionality to facilitate SLW, post which the process would be automated based on a one-time request that can be captured at the time of Exit in case of Tier-I and at any time in case of Tier-II.
Previous NPS Withdrawal Rule
Before the introduction of the SLW facility, subscribers were allowed to defer availing of annuity and withdrawing the lump sum of any combination till 75 years after attaining 60 years of age or superannuation. The lump sum withdrawal was allowed only in a single tranche or on an annual basis. If withdrawn annually, the subscriber had to initiate the withdrawal request each time and the request had to be authorized as the case may be.
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How will SLW work: Process flow
The PFRDA’s circular provides a detailed process flow for SLW from Tier-1 and Tier-2 accounts, which you can check on the NPS Trust Website. Following are the key points of the process flow that you should know:
– At the time of exit, subscribers will provide a percentage towards lump sum and annuity by selecting Annuity Service Provider (ASP) for receiving an annuity.
– SLW will be applicable only for the lump sum portion. Subscribers can either opt for annuity immediately or defer annuity till 75 years.
– If the subscriber opts for immediate withdrawal of lump sum then the existing process of withdrawal will remain the same. If Subscriber opts for SLW, the subscriber will be guided through the e-mandate creation process.
– SLW will be provided in the Subscriber login with eSign or dual factor OTP authentication as a separate functionality.
– The facility to ‘Modify’ and ‘Cancel & Redeem’ SLW will be provided in the login only. In case of modification, the subscriber will be able to modify the mandate, already created.
– In case of cancellation, the SLW will get cancelled and redemption will be processed for all available units and withdrawal proceeds will be transferred to the account.
For creating an SLW mandate, the subscriber will have to select the following:
- Frequency – Monthly, Quarterly, Half Yearly and Annual
- Amount/ Units
- Start Date
End Date – will be derived based on total corpus, amount, frequency and start date and shown to subscribers.
In case Subscriber keeps the ‘End Date’ blank, SLW will be triggered at a predefined frequency till the corpus is available/ Tier is active or till 75 years of age.
After attaining 75 years, units available will be redeemed and the balance will be transferred to the subscriber’s bank account. - The SLW will start at least after 30 days of the creation of the mandate in the system. On decided frequency, SLW requests will be considered in PayIn.
During SLW in Tier 1, the following will not be allowed:
- Contribution (as Exit request is already authorized)
- Conditional Withdrawal
However, the subscriber can opt for Scheme Preference/PFM Change during SLW. It will be applicable only for the lump sum portion. The annuity portion, if not already withdrawn, will remain as per the existing scheme choice only and no changes will be applicable to the corpus therein.
