Pension Fund Regulatory and Development Authority (PFRDA) has allowed senior citizens (who joined National Pension System or NPS at over 60 years of age) to withdraw the entire accumulated pension wealth without purchasing annuity if the pension corpus is less than equal to ₹5 lakh during the normal exit, that is, after completion of 3 years.
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It said that the exit / withdrawal norms of the subscribers are defined by PFRDA (Exits and Withdrawals under NPS) Regulations, 2015 and its amendments. As per the regulatory mandate, certain predefined conditions fulfil the norms of exit viz premature exit, normal exit, and exit due to the unfortunate death of the subscriber.
Subscribers who joined NPS beyond 60 years of age should understand that the exit before three years will be treated as ‘premature exit’ and those withdrawals beyond three years is the ‘normal exit’.
For premature exit, the permissible limit for a lump sum is ₹2.5 lakh and ₹5 lakh under normal exit without the need for annuitization. In case of the unfortunate death of those subscribers, the entire corpus will be paid to the nominee /legal heirs, as per the PFRDA circular.
Hence, a subscriber who invested in NPS between 60 and 70 years of age should know the following norms, details for lump sum payment of corpus.
Premature exit: When a subscriber exits NPS before completing 3 years, it is a premature exit. In such a case, if the corpus is equal to or below ₹2.5 lakh, the entire lump sum amount is payable. However, suppose the corpus is higher than ₹2.5 lakh, then at least 80% of the accumulated pension wealth has to be utilized to purchase an annuity providing monthly pension to the subscriber. The balance of 20% is payable as a lump sum to the subscriber.
Normal exit: When a subscriber exits NPS after 3 years, it is a normal exit. In such a case, if the corpus is equal to or below ₹5 lakh, the entire lump sum amount is payable. However, suppose the corpus is higher than ₹5 lakh. In that case, at least 40% of the accumulated pension wealth has to be utilized to purchase an annuity providing for monthly pension to the subscriber. The balance of 60% is payable as a lump sum to the subscriber.
The unfortunate death of subscriber: If the subscriber dies, then the entire accumulated pension wealth of the subscriber is paid to the nominee or legal heirs, said the PFRDA circular.