The National Pension System (NPS), a government-backed retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA), is undergoing a potential change in its withdrawal limits. The current Systematic Lump Sum Withdrawal (SLW) allows members to withdraw 60% of the maturity amount upon retirement or at the age of 60 on a monthly, quarterly, half-yearly, or yearly basis. Recent reports suggest that the PFRDA is considering a significant modification to this withdrawal limit.
Read More: Rupee falls 2 paise to all-time low of 83.36 against US dollar in early trade
Under the proposed amendment, the PFRDA is contemplating offering a 100% fund withdrawal facility to NPS subscribers utilizing the SLW option. This change would exempt members from the mandatory purchase of an annuity or pension plan until the age of 75. As a result, subscribers would have the flexibility to retain the entire amount in their NPS account, with the option to withdraw funds at regular intervals. This marks a departure from the existing rule, which allows for a maximum withdrawal of 60% of the funds.
The rationale behind this proposed modification lies in the expectation that allowing a 100% fund withdrawal facility would encourage members to keep their funds in the NPS for an extended duration. This, in turn, could lead to potentially higher returns in the future and contribute to increased fund deposits within the NPS accounts.
Dr. Deepak Mohanty, the Chairman of PFRDA, highlighted the potential benefits of the proposed changes during a recent meeting. He stated, “If this happens, the members will have more convenience to withdraw money and use it as per their needs.” The move is aimed at providing greater flexibility and control to NPS subscribers over their retirement savings.
To avail themselves of the SLW with a 100% fund withdrawal facility, members would need to apply online or offline. The application process would involve specifying the start and end dates of the withdrawal facility, as well as indicating the intervals at which the funds would be withdrawn. If implemented, this change could significantly enhance the appeal and convenience of the NPS, making it a more flexible and member-friendly retirement savings option.
