National Pension System (NPS) is one of the widely accepted pension schemes in India. It is one of the best retirement plans that offer subscribers the opportunity to choose where their contributions are invested. However, the Pension Fund Regulatory and Development Authority (PFRDA) recently brought about several changes in NPS, and here are the most important ones:
1) Relaxation in the entry age
Until recently, subscribers could not enter the NPS system if they were aged 65 years or above. Now, the entry age has been increased to 70 years. Furthermore, the new exit age is 75 years, which was 65 years until now. The relaxation in the entry and exit age limits will allow individuals to build a larger retirement corpus.
2) Increase in the limit on premature withdrawal
Previously, the PFRDA had set a limit of Rs 1 lakh on the premature lump-sum withdrawal. After the recent changes notified by the pension regulator in the gazette, subscribers may withdraw up to Rs 2.5 lakh.
3) Withdrawal of the entire corpus accumulated
To make NPS more lucrative and liquid, the PFRDA has made provisions to allow subscribers to withdraw their total contributions in one shot if their corpus accumulated is less than Rs 5 lakh. In such cases, subscribers do not have to purchase an annuity from the amount they withdraw.
4) Deferment of annuity
The NPS subscribers may defer their annuity purchase for up to three years from the time they turn 60 years old or attain the age of superannuation. However, subscribers will have to inform their decision to defer their annuity purchase to the NPS trust or other authorised entities. They have to submit the prescriber form at least 15 days before their NPS account matures. If the subscriber dies before purchasing the annuity, the entire corpus will be paid to the nominee or legal heir.
5) Account extension
Suppose the subscriber’s corpus is over Rs 2.5 lakh or a threshold set by the PFRDA, and the subscriber does not meet the minimum age criteria to purchase an annuity. In that case, they continue being subscribed to NPS until they meet the requirements. If the corpus accumulated is less than or equal to Rs 25 lakh, the subscriber can withdraw the entire without having to purchase an annuity.
The recent changes in the NPS system show that the PFRDA has taken steps towards making the scheme more flexible and subscriber-friendly. The retirement scheme now offers higher liquidity as it allows individuals to withdraw their entire corpus on meeting certain conditions.
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