Pension regulator also revises upwards premature withdrawal limit to Rs 2.5 lakhs
New Delhi: The Pension Fund Regulatory and Development Authority (PFRDA) has allowed subscribers to withdraw the entire accumulated pension wealth without purchasing annuity if the pension corpus is less than Rs 5 lakh. “…where the accumulated pension wealth in the Permanent Retirement Account of the subscriber is equal to or less than a sum of Rs 5 lakh, or a limit as specified by the Authority, the subscriber shall have the option to withdraw the entire accumulated pension wealth without purchasing an annuity and upon such exercise of this option, the right of such subscriber to receive any pension or other amount under the National Pension System or from the government or employer, shall extinguish,” it said.
The PFRDA made these changes under the PFRDA Amendment Act published in the Gazette of India.
At present, beneficiaries can withdraw up to Rs 2 lakh from their NPS account. Beyond this limit, the pensioners can withdraw 60% of the contributions. At least 40% of the contributions has to be mandatorily parked in government-approved annuities, according to the current rule.
The PFRDA also allows NPS subscribers to defer annuity purchase for three years as the amendment says, “…. subscriber shall have the option to defer the purchase of an annuity for a maximum period of three years, from the date of attainment of sixty years of age or the age of superannuation, as the case may be, provided the subscriber intimates his or her intention to do so in writing in the specified form at least fifteen days before the attainment of the age of sixty years or the age of superannuation, as the case may be, to the National Pension System Trust or any intermediary or other entity authorized by the authority for this purpose.”
The government-run investment scheme offers the subscribers the option to set the preferred allocation to different asset classes. There are two kinds of NPS accounts — Tier 1 and Tier 2. While the Tier 1 NPS account is strictly a pension account, the Tier 2 account is an investment account. At present, the returns of annuities average around 5.5%. With inflation and income tax on pension accumulation, the return for subscribers from annuities are often on the lower side.
