Pension regulator PFRDA proposes to ease the process of lumpsum withdrawal of National Pension System (NPS) accumulations at retirement through introduction of a systematic lump sum withdrawal (SLW) facility at periodic intervals through automation.

The plan to allow choice of SLW at periodical intervals through automation is expected to add flexibility, provide liquidity and hence optimize the retirement benefits for NPS subscribers.

This proposal —forming part of an Exposure draft now issued by the regulator—would pave the way for millions of NPS subscribers to be paid lump sum amounts systematically on a periodical basis —monthly, quarterly, half-yearly or annually for a period till 75 years as per the choice of the subscriber.

Further, the process can be automated based on an one-time request that can be captured online/offline, the PFRDA has said in its exposure draft. The last date for sending the comments, suggestions and feedback on the Exposure Draft is October 19.

Currently, as per existing withdrawal guidelines, NPS subscribers post 60 years/ superannuation can defer availing annuity and withdrawing the lump sum on any contribution till 75 years. The lump sum amount can be withdrawn as single tranche or it can be withdrawal on annual basis. If withdrawn annually, the Subscriber has to initiate the withdrawal request each time and the request has to be authorised.

BENEFITS OF SLW

Allowing subscribers the option of lumpsum withdrawals at periodic intervals would empower them to better manage their needs and requirement.

It would allow the Subscribers to participate and reap market linked investment gains for the amount not withdrawn which continue to lie in PRAN and remain invested as per the choice of investment.

This new SLW facility would also reduce the risk of reinvestment associated with one-time lumpsum withdrawal even though the option would continue, according to PFRDA.

NO PARTIAL WITHDRAWAL

As per the exposure draft, the SLW facility can be provided in both Tier I  and Tier II. However, post capturing SLW request, there won’t be any further contribution in Tier I and the amount in Tier I would be ear marked for Annuity and lump sum as per exit regulations. Partial withdrawal won’t be allowed post setting up of SLW, PFRDA has said.

For Tier-II account, the SLW can be availed at any point of time i.e. even before attaining the age of 60 years. This is mainly because of the fact that one can make withdrawals from Tier-II anytime and this facility when introduced would act like a monthly income for the subscriber or his family members, according to pension regulator.

India’s pension assets (NPS and Atal Pension Yojana combined) have touched ₹8-lakh crore recently and is expected to grow at robust pace of 27-30 per cent despite global headwinds such as Ukraine war and impact of increased interest rates in the system to tackle high inflation. 

Pension Fund Regulatory and Development Authority (PFRDA) expects pension assets under management will grow to about ₹ 30 lakh crore by 2030.

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