National Pension System (NPS) Exit Rules Explained
National Pension System (NPS) is a government-sponsored retirement planning instrument. Regulated by the Pension Fund Regulatory and Development Authority (PFRDA), NPS enables the subscriber to set his or her own choice for fund allocation to different asset classes, such as government securities, equity market instruments, corporate debt and alternative investment funds. Originally launched for the government employees in 2004 and extended to the general public in 2009, NPS allows premature withdrawal and exit from an account under certain conditions, according to pension regulator PFRDA's website - pfrda.org.in. (Also read: How National Pension System works | All you need to know about NPS premature withdrawal)
Here's all you need to know about exit rules applicable to an National Pension System account (All Citizens Model):
Upon attaining 60 years of age
In case the total accumulated corpus in the NPS account is less than Rs 2 lakh, the subscriber may opt for a 100 per cent lump sum withdrawal, according to the PFRDA website. This means the subscriber can withdraw the entire sum if the amount accumulated is less than Rs 2 lakh.
In other cases, at least 40 per cent of the accumulated corpus needs to be utilized for purchase of an annuity scheme, providing a monthly pension to the subscriber. In this case, the remainder is paid as lump sum to the subscriber, according to the regulator.
Before attaining 60 years of age
The subscriber is required to have completed 10 years in NPS to be eligible for an exit before attaining the age of 60, according to PFRDA. In other words, an exit from the NPS account is allowed only if the account is held for at least 10 years. In this case, at least 80 per cent of the accumulated corpus needs to be used for purchase of an annuity scheme providing a monthly pension to the subscriber, and the remainder paid as a lump sum, according to the regulator.
(Also read: All you need to know about Atal pension scheme)
A 100 per cent lump sum withdrawal from the NPS account is allowed in this case only if the total corpus is less than Rs 1 lakh, according to the PFRDA. This means that the whole amount can be withdrawn by the NPS subscriber before turning 60 only if the corpus is less than Rs 1 lakh.
Death of subscriber
In case of death of the subscriber, the nominee gets the option to receive 100 per cent of the NPS corpus in lump sum, according to the PFRDA. The nominee can also choose to continue with the NPS account, by subscribing to NPS individually after following due KYC (know your customer) procedure, according to the regulator's website.
