NPS subscribers alert: 10 withdrawal rule revisions you should be aware of

NPS subscribers alert: 9 withdrawal rule revisions you should be aware oThe Pension Fund Regulatory and Development Authority (PFRDA) has introduced new rules for National Pension System (NPS) withdrawals, bringing important changes for NPS subscribers. Here are the key points to understand these changes:

1. Systematic Lump Sum Withdrawal (SLW): PFRDA now offers the option of phased withdrawal of the lump sum through the Systematic Lump Sum Withdrawal (SLW) facility. This allows subscribers to decide when and how much they want to withdraw from their NPS balance, providing flexibility in meeting specific financial needs.

2. Withdrawal Options: NPS subscribers can withdraw up to 60 per cent of their pension corpus through SLW on a monthly, quarterly, half-yearly, or annual basis until the age of 75, as chosen during the normal exit process.

3. Penny Drop Verification: The PFRDA has made 'penny drop' verification mandatory for NPS fund withdrawals. This verification involves ensuring a successful match between the subscriber's name and their bank account for processing exit or withdrawal requests.

4. Instant Bank Account Verification: Starting from October 25, 2023, instant bank account verification is a mandatory requirement for advance withdrawals and exiting the NPS scheme. This change aims to expedite the transfer of NPS funds to subscribers' accounts during withdrawals or scheme exits.

5. Resolution Process: If the Central Record Keeping Agency (CRA) encounters issues with penny-drop verification, they will collaborate with the relevant nodal office or intermediary to rectify the subscriber's bank account information.

6. Notification of Verification Failures: Subscribers will be promptly informed of verification failures through mobile and email. They will receive guidance to contact the nodal officer or Point of Presence (POP) for resolution.

7. Restrictions for Verification Failures: In cases where penny drop verification fails, no requests for exit/withdrawal or modification of the subscriber's bank account details will be allowed.

8. Applicability: These provisions apply to NPS, Atal Pension Yojana (APY), and NPS Lite for all types of exits, withdrawals, and modifications in subscribers' bank account details.

9. NPS Withdrawal Limits: The withdrawal limits for NPS remain unchanged. Subscribers with a total deposit and interest of less than Rs 5 lakh can withdraw the entire amount in one go. If the amount exceeds this limit, 40 per cent must be used for regular payments over time (annuities), while the remaining 60 per cent can be withdrawn at once.

NPS Interest Rates

NPS offers varying interest rates between 9 per cent and 12 per cent, depending on the chosen scheme. Unlike fixed-income instruments such as Fixed Deposits (FDs), NPS investments do not provide a fixed rate of return, and interest is compounded monthly.

In case of unsuccessful transactions, the amount will be held by the Trustee Bank until correct details are obtained.

Notably, the current NPS withdrawal rules require subscribers who turn 60 to withdraw 60 per cent of their retirement corpus as a lump sum, with the remaining 40 per cent used to purchase an annuity. These new changes provide greater flexibility for subscribers in managing their withdrawals.