The Pension Fund Regulatory and Development Authority (PFRDA) has mandated ‘Penny Drop Verification’ for receiving National Pension System (NPS) withdrawal amounts or changing bank account details. It also introduced a Systematic Lump Sum Withdrawal (SLW) facility for phased withdrawal of NPS lumpsum amount.
Penny Drop Verification for NPS Withdrawal
The PFRDA has made penny drop verification mandatory for the withdrawal of NPS funds by subscribers. Penny drop verification aims to ensure the timely and smooth transfer of money.
The Central Recordkeeping Agency (CRA) checks the active status of a savings bank account and matches the name provided in the bank account number with the name mentioned in the Permanent Retirement Account Number (PRAN) or the submitted documents through the penny drop process.
The bank account validity is verified by making a test transaction by dropping a small amount into the subscribers’ bank account and matching the name based on the penny drop response. A subscriber’s bank account needs to pass the penny drop verification for processing any NPS withdrawal request or changing bank account details.
The PFRDA has clarified that if the penny drop verification does not succeed, the withdrawal or exit request from NPS or changes to the bank details provided for NPS will not be approved.
In such a case, the PFRDA will inform the subscribers about penny drop failures through mobile messages and emails and guide them on the steps to be taken to ensure their bank accounts pass the penny drop verification.
The CRAs would also work with the necessary offices to help a subscriber fix his/her bank account details through a defined process. They would take up the matter with the concerned intermediary or nodal office for modification in the bank account details of the subscriber.
The PFRDA has asked CRAs to complete functionality development for penny drop verification and the required system-level utilities within one month.
There were instances where the subscribers’ withdrawal amounts were not credited to their bank accounts. In such cases, the amounts that are to be credited will remain with the trustee bank till the correct details are obtained from the subscribers.
Penny drop verification will apply for all NPS, Atal Pension Yojana (APY), and NPS Lite withdrawals, exits and modifications in the subscribers’ bank account details.
Systematic Lump Sum Withdrawal (SLW) Facility in NPS
The PFRDA has proposed to provide an option to NPS subscribers to withdraw their lumpsum amount in a phased manner through the Systematic Lump Sum Withdrawal (SLW) facility. With the SLW facility, subscribers will be able to choose to withdraw a portion of their lump sum corpus periodically, either monthly, half-yearly, quarterly, or annually, till they reach 75 years.
Thus, NPS subscribers can withdraw up to 60% of their NPS corpus through the SLW on a monthly, half-yearly, quarterly or annual basis till 75 years, as per what they choose at the time of their normal exit.
Currently, NPS subscribers must withdraw their entire lump sum amount at once or annually. The SLW facility will allow them to defer annuity purchasing till they reach 75 years while enjoying regular cash flows in the form of a pension from their NPS corpus.
For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in
I am an Advocate by profession. I interpret laws and put them in simple words. I love to explore and try new things in life.
