Home Business National Pension System: How will the new NPS rule benefit subscribers?

National Pension System: How will the new NPS rule benefit subscribers?


National Pension System: As part of a proposed change in the National Pension System (NPS) withdrawal rules, the Pension Fund Regulatory and Development Authority (PFRDA) will allow automatic withdrawals periodically from the NPS subscribers corpus fund. “Following Regulation 3 and Regulation 4 of PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 and amendments therein, it is proposed to provide the option of phased withdrawal of the lump sum through Systematic Lump Sum Withdrawal (SLW) facility,” the PFRDA said in its circular dated 27 October 2023.

NPS subscribers are allowed to withdraw up to 60% of their pension corpus, through the SLW on a monthly, quarterly, half-yearly, or annual basis for a period till 75 years of age as per the choice at the time of their normal exit.

What is SLW? 

The SLW facility is similar to the Systematic Withdrawal Plan (SWP) under Mutual Funds. With the SLW facility, NPS subscribers can withdraw the desired amount systematically at regular periodic intervals.

“Upon reaching 60 and up to 75, subscribers must allocate at least 40% of their corpus to purchase an annuity. The annuity provides periodic payments based on its terms. The remaining corpus can be withdrawn as a lump sum or systematically through the SLW method. SLW allows retirees to receive periodic cash flows, enhancing their post-retirement income and covering regular expenses. This withdrawal method can be chosen once, and payments will follow the subscriber’s preference,” said Kurian Jose, CEO, of Tata Pension Management. 

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NPS: Who benefits from the SLW option?

As per Kurian Jose, SLW is an attractive option for retirees seeking a consistent income stream during their retirement years. It can be requested when a subscriber retires and applies to the lump sum NPS corpus after purchasing the annuity.

How does NPS work?

NPS is a Govt of India-sponsored program, which is regulated by PFRDA. An NPS subscriber invests in the capital market (equity, govt securities, corporate bonds, and alternative assets) as per their respective risk appetite to build up his retirement corpus.

Meanwhile, to ensure the timely transfer of money, the pension regulator has made ‘penny drop’ verification mandatory for the withdrawal of funds by NPS subscribers, PFRDA informed in its October 25 circular.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 03 Nov 2023, 07:23 AM IST

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