Exit from NPS Rules: The pension regulator has ordered the government, POPs and nodal officers of the National Pension System Trust to help NPS members choose pension plans according to their needs.
Pension fund regulator PFRDA has eased rules for exit from National Pension Scheme (NPS). Under this, NPS members will be able to choose annuity¹/´pension plan and insurance company as per their need and choice at the time of withdrawal from the scheme. No extra fee will be charged from them for this.
PFRDA has recently issued a circular in this regard. The pension regulator has ordered the government, POPs and nodal officers of the National Pension System Trust to help NPS members choose pension plans according to their needs. With this, the beneficiaries will not have to face any kind of trouble further. The regulator has said that the annuity or pension plan selection should be based on the requirements and individual needs of the NPS members.
No additional charges: PFRDA has also clarified that the insurance company providing annuity or pension plan can charge only premium from NPS members and no other additional charges. NPS members are already paying taxes to the government, so they will not be charged any fees for other services.
This will be beneficial: Life insurance companies provide different annuity / pension plans based on the investment period and performance, which also have different annual interest rates and returns. Investors will be able to choose more profitable schemes for higher pension. Also, on the basis of market risk, they will be free to choose the pension plan.
What are the rules
If retired: After retirement at the age of 60 years, only 60% of the amount can be withdrawn from NPS in lump sum. It is tax free. The remaining 40 percent amount has to be invested in an annuity/pension plan, from which pension is received. These plans are provided by life insurance companies. However, if the total annuity corpus after retirement is less than or equal to five lakh rupees, the member can withdraw the entire amount.
In case of premature withdrawal
If an NPS member wants premature withdrawal before the age of 60 years, then he has to invest 80% of the total corpus in buying an annuity/pension plan. Only 20 percent of the amount can be withdrawn in lump sum. There is no compulsion to buy an annuity plan if the corpus at the time of premature withdrawal is equal to or less than Rs 2.5 lakh. Members can withdraw the full amount.
What is annuity / pension plan
After retirement, pension/annuity plans have to be bought from life insurance companies, which give pension to the customers on a monthly, quarterly, half-yearly or yearly basis, depending on their investment amount. The rate of interest is fixed, which is fixed at the time of investment.
