National Pension System - New Partial Withdrawal and Exit Rules

Many of us stayed away from NPS only because of liquidity issue. However, a few days back PFRDA came up with regulation called "Pension Fund Regulatory and Development Authority (Exits and Withdrawals Under the National Pension System) Regulations 2015".  Let us see what options are available now under this scheme.

Let us first discuss about an exit from National Pension System (NPS).

For exit purpose, PFRDA specified NPS subscribers into three categories. They are as below.

• Government sector subscribers.
• All citizens, including corporate sector
• NPS- Lite and Swavalamban subscribers

Below I try to explain only about first two categories of subscribers.

i) Exit options for Government sector subscribers after attaining the retirement age (As per service rules)–

1) Once the subscriber attains the age of retirement, then he has to buy a pension product from 40% of such accumulated corpus. He can withdraw a rest of the 60% from such corpus. In case subscriber don't want to opt the default pension option, then he has below-mentioned options-

a) In case subscriber don't want to withdraw the 60% of accumulated corpus, then he can postpone this withdrawal. However, he can withdraw this 60% of corpus only after attaining the age of 70 yrs of age. Also, he must inform this decision 15 days before he is attaining the retirement age.

You can inform this to the National Pension System Trust or an intermediary or entity authorized by the Authority.

b) You can defer your decision of buying a pension product even after attaining the age of retirement. You can postpone such decision up to 3 years. Again, you have to inform this decision 15 days before he is attaining the retirement age.

You can inform this to the National Pension System Trust or an intermediary or entity authorized by the Authority.

Points to remember while going for this option.

• If subscriber's death occurs during this deferred period, then a spouse must buy the pension product.

c) You have options to defer the withdrawal of 60% or buying a retirement product. However, you have to bear the cost of the maintenance of Permanent Retirement Account, including the charges payable to the central record keeping agency, pension fund, Trustee Bank or any other intermediary, as may be applicable from time to time.

d) In case the accumulated amount is less than or equal to Rs.2 lakh, then he can withdraw the whole such accumulated amount without purchasing the pension product. Once you withdraw this amount then you no longer be the member of NPS and you are not eligible for pension also.

ii) Exit options for Government sector subscribers before attaining the retirement age–

If you exit before reaching the retirement age then you have to buy a pension product for the minimum of 80% of such accumulated corpus. The balance of the accumulated pension wealth (20%), after such utilization, shall be paid to the subscriber in a lump sum.

• In case during this early exit, the accumulated corpus is more than Rs.1,00,000 but not eligible to buy any retirement product, then he can continue to contribute until his age is eligible for buying a retirement product.
• In case during the early exit, the accumulated corpus is less than or equal to Rs.1, 00,000, then he can withdraw whole corpus at once. Once you receive such full accumulated amount then you no longer be a member of this scheme and you can't expect any pension further.

iii) Exit options for Government sector subscribers who dies before attaining the retirement age–

If subscriber dies before attaining the retirement age, then 80% of such accumulated corpus be utilized for buying a retirement product and the rest of the 20% will be payable as a lump sum to a spouse or nominee.

• In case the accumulated corpus is less than or equal to Rs.2, 00,000 then his spouse (or nominee) can withdraw all the amount at once without any mandatory.

vi) Exit options from National Pension System (NPS) by citizens, including corporate sector subscribers after 60 years of age–

1) Once the subscriber attains the age of 60 years of age, then he has to buy a pension product by utilizing the minimum of 40% of such retirement corpus. The rest of 60% of such retirement corpus are payable to him. Apart from this default option, a subscriber can opt these below-mentioned options too.

a) In case subscriber don't want to withdraw the 60% of accumulated corpus, then he can postpone this withdrawal. However, he can withdraw this 60% of corpus only after attaining the age of 70 yrs of age. Also, he must inform this decision 15 days before he is attaining the retirement age.

You can inform this to the National Pension System Trust or an intermediary or entity authorized by the Authority.

b) You can defer your decision of buying a pension product even after attaining the age of 60 yrs. You can postpone such decision up to 3 years. Again, you have to inform this decision 15 days before he is attaining the retirement age.

You can inform this to the National Pension System Trust or an intermediary or entity authorized by the Authority.

c) You have options to defer the withdrawal of 60% or buying a retirement product. However, you have to bear the cost of the maintenance of Permanent Retirement Account, including the charges payable to the central record keeping agency, pension fund, Trustee Bank or any other intermediary, as may be applicable from time to time.

d) In case the accumulated amount is less than or equal to Rs.2 lakh, then he can withdraw the whole such accumulated amount without purchasing the pension product.

v) Exit options from National Pension System (NPS) by citizens, including corporate sector subscribers before 60 years of age-

You are allowed to exit from NPS before 60 years of age only in case you subscribed to the national pension system for at least a minimum period of ten years. At least 80% accumulated pension must be converted to buy pension plan. The rest of 20% will be payable to a subscriber as a lump sum.

In case accumulated pension amount is more than Rs.1, 00,000 but, the age of the subscriber is not eligible to buy any pension plan, then he can continue subscribe to NPS until he attains the eligible age.

In case accumulated pension amount is less than or equal to Rs.1, 00,000 then he can withdraw the whole amount at once without buying the pension product.

vi) Exit options from National Pension System (NPS) by citizens, including corporate sector subscribers if dies before 60 years of age-

In case the subscriber dies before attaining the age of 60 years then the whole accumulated corpus be payable to his nominee. In case nomination not done, then the amount will be payable to the family members on the basis of the legal heir certificate issued by the Revenue authorities of the State concerned or the succession certificate issued by a court of competent jurisdiction.

National Pension System (NSP) Withdrawal conditions

As of now subscribers need to contribute till 60 years of age without any option of a partial withdrawal. However, from now onward they added some withdrawal options with some conditions.

• The subscriber must be in the National Pension System for at least 10 years.
• The subscriber permitted to withdraw accumulations not exceeding 25% of the contributions made by him and standing to his credit in his individual pension account, as on the date of the application for withdrawal.
• The subscriber allowed to withdraw only a maximum of 3 times during entire tenure of subscription.
• The gap between one withdrawal to another must not be less than 5 years. However, this condition will not apply in case of "treatment for specified illnesses or in case of withdrawal arising out of exit from National Pension System due to the death of the subscriber.
• You must submit this withdrawal request in the specified form along with necessary documents to the central record keeping agency or the National Pension System Trust, as may be specified, for processing of such withdrawal claim.
• If subscriber suffering from diseases, then a family member can submit the application.
• For Tier II account, one can withdraw either partial or full amount available in this without any condition. In case of exit from NPS, even if you have not provided the withdrawal application for this Tier II,  the accumulated wealth in such account shall be transferred to the bank account provided by the subscriber, while submitting his application for exit from the National Pension System.

For what purpose the subscriber allowed to withdraw money from the National Pension System (NPS)?

1. The higher education of his or her children, including a legally adopted child.
2. The marriage of his or her children, including a legally adopted child.
3. For the purchase or construction of a residential house or flat in his or her own name or in a joint name with his or her legally wedded spouse. No withdrawal allowed in case the subscriber already owns a residential house or flat, other than ancestral property either individually or in the joint name.
4. If the subscriber, his legally wedded spouse, children, including a legally adopted child or dependent parents suffer from any specified illness, which shall comprise of hospitalization and treatment in respect of the following diseases:

• Cancer;
• Kidney Failure (End Stage Renal Failure);
• Primary Pulmonary Arterial Hypertension;
• Multiple Sclerosis;
• Major Organ Transplant;
• Coronary Artery Bypass Graft;
• Aorta Graft Surgery;
• Heart Valve Surgery;
• Stroke;
• Myocardial Infarction;
• Coma;
• Total blindness;
• Paralysis;
• Accident of serious/ life threatening nature.
• Any other critical illness of a life-threatening nature as stipulated in the circulars, guidelines or notifications issued by the Authority from time to time.

I still feel liquidity is a hindrance to invest in NPS. Becuase even though they provided the partial withdrawal rules, they all came up with certain rules and restrictions.