3 minute guide to the new NPS withdrawal norms

PFRDA revised exit norms for subscribers in NPS. The pension fund regulator has given relaxation to non-government NPS subscribers from annuitizing their corpus in case of unfortunate death.

Here are the new withdrawal norms under different scenarios.    

Subscribers who join NPS between 18-60 years of age

Premature exit (Exit before superannuation i.e. 60 years of age) 

100% lump sum withdrawal is permissible where the accumulated corpus is less than or equal to Rs. 2.5 lakh. In other cases, subscribers will have to purchase annuity of at least 80% of the entire amount. The balance 20% is payable as lump sum.

Remember that a person from non-government sector must be a subscriber for 10 years to execute pre-mature exit.

Normal exit (Exit at 60 years or beyond)

Subscribers can withdraw the entire corpus where the accumulated amount is equal to or less than Rs. 5 lakh.

For amount greater than Rs.5 lakh, subscribers will have to deploy 40% of their corpus towards annuity purchase and the balance can be withdrawn as lump sum.

Exit due to the unfortunate demise of subscriber

In the case of non-government subscribers, entire accumulated pension wealth is payable to nominee/legal heir.

These norms differ when it comes to government subscribers. The entire amount is payable to legal heir/nominee where the corpus is less than or equal to Rs. 5 lakh. If the corpus exceeds Rs. 5 lakh, dependants should purchase default annuity for at least 80% of the total amount. The balance 20% is paid as lump sum to nominee/legal heir.

In absence of dependents (spouse, mother, father) 20% of the corpus is to be paid to nominee/legal heir and the balance 80% is payable to surviving children/legal heir through annuitization.

Summary

Subscribers who join NPS between 60-70 years of age

Premature exist (Exit before completion of 3 years) 

The entire amount is payable as lump sum if the corpus is less than or equal to Rs. 2.5 lakh. In other cases, non-government subscribers must use at least 80% of the corpus for purchasing annuity. The balance 20% is payable as lump sum.

Normal exit (Exit after completion of 3 years)

Non-government subscribers are allowed lump sum withdrawal if the corpus is less than or equal to Rs. 5 lakh. In other cases, at least 40% of the total amount must be utilised towards annuity. The balance 60% is payable as lump sum.

Exit due to the unfortunate demise of subscriber

The entire corpus is payable to nominee\legal heir.

Summary