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Calcutta, March 14: The Pension Fund Regulatory and Development Authority (PFRDA) has allowed subscribers to the New Pension System (NPS) to opt for “deferred withdrawal” of their money at the time of exit, against the current practice of “phased withdrawal”. The decision was taken after the regulator received feedback from various stakeholders.
Under NPS, once subscribers turn 60, it is mandatory for them to invest 40 per cent of their pension fund in annuity plans of insurance companies. The remaining amount can be withdrawn in lumpsum or in a phased manner over the next 10 years.
Following the changes, the regulator has dropped the option of withdrawals in a phased manner. Instead, withdrawals will be permitted only once over the next 10 years.
However, no fresh contributions will be accepted and no partial withdrawals will be allowed during the period of deferment. Subscribers can withdraw anytime before turning 70 by submitting an application. If no such notice is given, the accumulated pension will be automatically credited to their bank accounts after the age of 70.
According to experts, the move will offer subscribers the flexibility to stay invested in the fund and earn higher returns because of exposure to the capital market rather than having to gradually lower the size of the fund by withdrawing a certain portion every year.
“NPS has an equity option. So, the annual returns are more than similar funds such as EPF. So, by staying invested for a longer period, an individual has the option to earn more,” said Arun Kejriwal of Kejriwal Research and Investment Services.
Under NPS, an individual can get an equity exposure of up to 50 per cent of the investment.
As on March 2 this year, NPS managed a corpus of over Rs 28,400 crore of 44.93 lakh subscribers. Around 2 lakh subscribers are from the private sector, while 27 lakh are from the central and state governments.
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