Financial planning is crucial, especially as one ages. One popular scheme that all can prove beneficial for planning finances for the retirement is National Pension System (NPS). Not only it lets people to make regular contributions, subscribers also get an option to access their retirement funds through partial withdrawals.
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What is NPS?
NPS, a voluntary retirement savings scheme, enables subscribers to make defined contributions towards planned savings, ensuring a secure future in the form of pension benefits. Managed by the Pension Fund Regulatory and Development Authority (PFRDA), NPS offers both Tier-I and Tier-II accounts, according to the Department of Posts Ministry of Communications ( DoP).
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Tier-I and Tier-II Accounts
Tier-I accounts serve as retirement accounts with contributions eligible for tax benefits, while Tier-II accounts provide voluntary savings options without tax benefits. This tiered structure allows subscribers to tailor their savings approach to their financial goals.
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NPS Partial Withdrawal Rules
As per the NPS portal, the following are the conditions of Conditional Withdrawal
- Subscribers must have been enrolled in NPS for a minimum of three years
- Withdrawals are capped at 25% of individual contributions, less returns and employer contributions.
- Withdrawals can only occur thrice during the tenure of subscription
- Withdrawal is allowed only against the specified reasons, for example;
- Higher education of children
- Marriage of children
- For the purchase/construction of a residential house (in specified conditions)
- For treatment of Critical illnesses
Initiating Partial Withdrawals
Subscribers can initiate partial withdrawal requests online or through physical forms submitted to the Point of Presence – Service Provider (POP-SP). The POP-SP then authorizes the withdrawal request in the Central Recordkeeping Agency (CRA) system.
