Pension Fund Regulatory and Development Authority (PFRDA) has overhauled the National Pension System (NPS) with big updates to the exit and withdrawal rules. The new provisions, which are due to be implemented by the end of 2025, represent a sea change in the retiree’s journey, and especially the smaller retiree who has been cash-strapped through his retirement life. The most important change is the total abolition of mandatory annuities for retirement planning and the overall granting of the full fund by both government and private subscribers under certain conditions.
Normal Retirement and Superannuation
The criterion for a “small corpus” has been drastically increased, enabling the full withdrawal and it is a major rescue step for the retirees as they can now easily manage their cash flows. The scenario is such that if non-government and government subscribers who have reached 60 years of age or the age of superannuation, their total accumulated corpus is ₹8 lakhs, then they are now allowed to withdraw the whole amount at once. This is a huge rise from the previous limit of ₹5 lakhs which has rendered annuity purchase completely optional for these people.
Premature Exit and Voluntary Retirement
In case you opt for an early exit from the NPS before you turn 60, the rules would still be very strict but full withdrawal will be allowed for very small accounts. A 100% lump sum withdrawal is permitted if the total accumulated wealth across all categories is ₹2.5 lakh or less. However, if your corpus exceeds this ₹2.5 lakh limit at the time of premature exit, you are allowed to take only 20% out as a lump sum, while 80% of the money will have to be invested to buy an annuity.
Provisions in the Event of Death
The PFRDA has guaranteed that the procedure will be simple for families in the sad case of a subscriber’s death. The nominee or the legal heir will receive the complete accumulated pension wealth as a lump sum, irrespective of the total amount in the account. While the nominee has the option to take the full amount instantly, he/she can also select to use a part of these funds to purchase an annuity if the monthly pension is more preferable than the single payment.
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