Curated By: Business Desk
Last Updated: October 31, 2023, 20:24 IST
Subscribers can withdraw up to 60% of their NPS maturity amount via Systematic Lumpsum Withdrawal (SLW).
The Systematic Lump sum Withdrawal plan in NPS investments allows the investors to withdraw up to 60% of the corpus fund in instalments until they turn 75.
The Pension Fund Regulatory and Development Authority (PFRDA) has recently proposed the introduction of Systematic Lump sum Withdrawal (LSW) facility, allowing subscribers to receive periodic payouts instead of withdrawing the amount at one go from their investments in the National Pension System (NPS). As per the revised rules, subscribers can withdraw up to 60% of their NPS maturity amount via Systematic Lumpsum Withdrawal (SLW), in instalments until they reach the age of 75 years.
The subscribers can opt for monthly, quarterly, half-yearly and yearly payouts. On opting for annual payouts the NPS subscriber will have to submit the withdrawal request each time and authorise it.
PFRDA has asked the NPS authorities to inform all the investors nearing the age of 60 years or willing to exit the scheme about the new SLW facility. The Central Record Keeping Agencies (CRAs), responsible for managing KYC related processes for NPS investments, have been urged by PFRDA to update the subscribers about the new initiative.
On October 27, 2023, a circular issued by PFRDA laid out the details of this new lump sum withdrawal option. So far, the investors were allowed to withdraw 60% of their NPS corpus fund as a lump sum on maturity.
Advantages of SLW
SLW has several advantages as it generates consistent cash flows, brings in additional income when combined with annuity, provides a means to creating wealth, and also offers tax benefits for all such withdrawals. The NPS subscribers will also be free to select the lump sum with systematic withdrawal for approximately 60% of their corpus fund while 40% will be used to purchase annuity options. The annuity purchase rule will remain unchanged, according to PFRDA.
The National Pension System (NPS) is a voluntary retirement scheme wherein one makes monthly contributions to their NPS Tier I or Tier II accounts to secure their non-working years. The amount contributed also earns interest on a monthly basis. The NPS interest rate generally ranges between 9% and 12%, which is calculated on a compounding basis that eventually leads to building a significant corpus.