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How you can withdraw money from NPS

Satya Sontanam BL Research Bureau | Updated on May 29, 2021

Partial withdrawal from NPS can be done to treat critical illnesses, including Covid-19

While it is strongly advisable not to break the investments made for your golden years, it is important to be aware of the exit rules for your investments. The National Pension System (NPS) is emerging as a popular retirement savings scheme. You can withdraw your NPS investments both prematurely and after maturity, with different rules applicable for the types of withdrawals.

Here, we look at the applicable withdrawal and exit rules along with the processes to be followed.

On maturity

As per NPS norms, one can withdraw the lump sum from the scheme at the age of superannuation or attaining the age of 60 years.

At least 40 per cent of the pension proceeds needs to be utilised for the purchase of an annuity product and the balance is paid as lump sum to the subscriber. The mandatory requirement to purchase annuity is with a view to provide for monthly pension after retirement. Do note, however, that if the total accumulated pension corpus is less than or equal to ₹2 lakh, the NPS subscriber can opt for 100 per cent lump sum withdrawal without annuity purchase.

A claim ID is mandatory for making a withdrawal request. The claim ID is automatically generated six months prior to the date of superannuation or 60 years of age and is intimated to the subscriber via e-mail, letter and SMS. Intimation of claim ID enables the subscriber to make any changes (such as date of birth, address, PAN, bank and nomination details) in his/her NPS account before initiating the withdrawal request. This is important because no changes can be made to the personal details after the withdrawal request is submitted.

Using the claim ID, one can fill the physical withdrawal form and submit the same along with KYC documents at the PoP (point of presence) office. You have to enter necessary details, including choice of annuity service provider (ASP) and annuity scheme that will provide the pension.

One can fill and submit the withdrawal form online as well on the registered CRA’s (central record-keeping agency) website (say,www.cra-nsdl.com) by logging in using your PRAN details. Your form will be verified and then the withdrawal request will be authorised. If your PoP does not automate the verification of your bank details online, you may have to visit your PoP to submit the required documents.

After this process, the money will be credited within four to five working days to your registered bank account.

Premature withdrawal

In case you want to withdraw from the NPS account before attaining 60 years, there are two ways to do it. Pre-mature exit is allowed after completing 10 years in NPS. In the case of premature withdrawals, at least 80 per cent of the accumulated pension corpus of the subscriber has to be utilised for purchase of an annuity that would provide a regular monthly pension. The remaining funds can be withdrawn as lump sum. However, if the total accumulated corpus is less than or equal to ₹1 lakh, the subscriber can avail the option of complete withdrawal without annuity purchase .

For the claim ID, the subscriber can visit the PoP or generate it online. Once the claim ID is generated, using it, the subscriber can fill the withdrawal form (physical form/online). The rest of the process is like withdrawal on maturity.

It is important to note that your NPS Tier II account will also close once you request closure of Tier I account on exit from NPS. Units under Tier II account will be redeemed and the amount will be transferred to your given bank account.

Partial withdrawal

As discussed above, you can also withdraw from NPS before 60 years through partial withdrawal. This can be done, provided, the subscriber has completed three years from the date of joining the system.

The partial withdrawal option comes with conditions. It is allowed only for specified reasons, such as children’s higher education or wedding, purchase/construction of a residential house and treatment of critical illnesses (including Covid-19). That’s not all. The withdrawal amount cannot exceed 25 per cent of the contributions (without accrued income earned thereon) made by the subscriber. Conditional withdrawals can happen a maximum of three times during the entire tenure of NPS subscription.

Partial withdrawals from NPS can be done entirely online, the subscriber just needs to log in to NPS account. The subscriber has to make a self-declaration that the withdrawn amount will be utilised for the purpose of declared reasons specified by pension regulator

On death of subscriber

In the event of death of subscriber, the entire accumulated pension corpus (100 per cent) will be paid to the subscriber’s nominee/legal heir. In this case, generation of claim ID is not required. The PoP, on intimation, will directly raise the withdrawal request for a death case.

Apart from key KYC documents, withdrawal form from all nominees, and the death certificate, should also be submitted to the PoP to claim the investment proceeds of the deceased investor.

(This is a free article from the BusinessLine premium Portfolio segment. For more such content, please subscribe to The Hindu BusinessLine online.)

Published on May 29, 2021

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