The government has made changes in the rules for those withdrawing money under the National Pension System (NPS).
According to an ET report, the Pension Fund Regulatory and Development Authority (PFRDA) has proposed to provide the option of face-wise withdrawal of lump sum amount through the Systematic Lumpsum Withdrawal (SLW) facility. But you will get SLW facility only on the withdrawable lump sum maturity amount. According to the rules, after retirement or after the age of 60 years, you can withdraw 60 percent of the maturity amount from NPS in lump sum, while the remaining 40 percent amount has to be used to purchase an annuity plan.
PFRDA announced this through a circular on October 27, 2023. According to the proposed rule, through SLW you can withdraw up to 60% of your pension fund on monthly, quarterly, half-yearly or annually basis up to the age of 75 years. There has been no change in the rules regarding annuity.
What are the existing rules
As per the current rules, NPS subscribers can defer both lump sum withdrawal and annuity or any one component after retirement till the age of 75 years. Whereas 60 per cent of the maturity amount can be withdrawn either in lump sum or in multiple installments on an annual basis. But if withdrawal is done on annual basis then you will have to apply for it every year.
What is SLW?
This is similar to a systematic withdrawal plan like a mutual fund. Central record keeping agency CRA has started this facility for NPS subscribers. In this facility, the amount can be withdrawn systematically after retirement. Those who have taken an NPS plan have the option to withdraw a fixed amount systematically at regular intervals after retirement.
NPS subscribers will have the option to choose the systematic withdrawal option for 60 per cent of the lump sum. The remaining 40 percent amount will be used for annuity purchase. According to the Chairman of PFRDA, the annuity purchase rule will remain as it is.
Benefits of SLW
1. Benefit of cash flow at regular intervals.
2. Regular cash flow will increase monthly income.
3. Means of wealth creation. Returns will continue to be credited on the remaining deposited amount.
4. Tax benefits can be availed on all SLW withdrawals
