The Pension Fund Regulatory and Development Authority (PFRDA) has introduced new National Pension System (NPS) withdrawal rule changes, providing subscribers with greater flexibility in managing their retirement funds. In addition, the PFRDA has made ‘penny drop’ verification mandatory for NPS fund withdrawals.
Systematic Lump Sum Withdrawal (SLW)
Phased Withdrawal Option:
- PFRDA has introduced the Systematic Lump Sum Withdrawal (SLW) facility, allowing NPS subscribers to withdraw their lump sum retirement corpus in a phased manner.
- This empowers subscribers to choose how much and when they want to access their balance, offering an alternative to committing to a full annuity for their entire post-retirement period.
- NPS subscribers can withdraw up to 60% of their pension corpus through SLW on a monthly, quarterly, half-yearly, or annual basis.
- This flexibility extends until the age of 75, providing subscribers with choices to suit their financial needs in retirement.
‘Penny Drop’ Verification 3. Mandatory Verification
- The PFRDA has made ‘penny drop’ verification mandatory for all NPS fund withdrawals. This verification process ensures the accurate and secure transfer of funds to subscribers’ bank accounts during withdrawals and scheme exits.
- Successful ‘penny drop’ verification, including name matching, is a prerequisite for processing exit/withdrawal requests and modifying subscribers’ bank account details.
- In cases where the Central Record Keeping Agency (CRA) fails in ‘penny-drop’ verification, they will collaborate with relevant nodal offices or intermediaries to rectify the subscriber’s bank account information.
- Subscribers will be promptly notified of verification failures through mobile and email, with guidance on how to contact the nodal officer or Point of Presence (POP) for resolution.
No Requests on Failure:
- It’s important to note that no requests for exit/withdrawal or modification of bank account details will be accepted if the CRA’s ‘penny drop’ verification is unsuccessful.
Applicability : Universal Application
- These provisions apply across all variants of the National Pension System (NPS), including Atal Pension Yojana (APY) and NPS Lite, for all types of exits/withdrawals and modifications in subscribers’ bank account details.
NPS Withdrawal Limits
- The withdrawal limits for NPS remain unchanged. Subscribers with a total deposit and interest of less than ₹5 lakh can withdraw the entire amount at once.
- For those exceeding this limit, 40% of the surplus must be used for regular payments over time in the form of annuities, while the remaining 60% can be withdrawn in a lump sum.
NPS Interest Rates
- NPS interest rates are not fixed but range between 9% and 12%, depending on the chosen scheme.
- Interest is compounded monthly and transferred by government authorities. Generally, NPS interest rates tend to be more favorable than those of fixed income instruments like Fixed Deposits (FDs).
- According to the recent PFRDA circular, if a transaction is unsuccessful, the amount will remain with the Trustee Bank until correct details are obtained for proper crediting into subscribers’ accounts.
Current NPS Withdrawal Rule
- Presently, NPS subscribers, upon reaching the age of 60, can withdraw up to 60% of their retirement corpus as a lump sum, while the remaining 40% is directed towards purchasing an annuity.