If you’re planning to invest in the National Pension System (NPS), there’s good news for you. On October 1st, pension fund management companies will launch a plan for subscribers that allows 100% equity investment. All investors, except government employees, will be eligible to invest in this plan. The Pension Fund Regulatory and Development Authority (PFRDA) has announced this new scheme, called the Multiple Scheme Framework (MSF).

Customised schemes will be available for subscribers

This scheme will offer NPS subscribers customized retirement solutions. The PFRDA has issued a circular in this regard. It states, “MSF has been designed under a new architecture, in which subscribers will be identified by their Permanent Account Number (PAN) at all Central Record-Keeping Agencies (CRAs).” Under the new framework, pension fund managers will be able to design schemes that are tailored to the needs of the subscribers.

The scheme will have two variants – low risk and high risk.

This scheme will have two variants—moderate and high-risk. The high-risk scheme will allow 100% equity investment. Currently, the equity investment limit is 75%. Pension funds will also be able to offer low-risk plans if they wish. The PFRDA circular states, “Risk profiling of subscribers will be based on social and economic criteria.” All schemes will come with a risk-o-meter. This will help subscribers understand the risks associated with each scheme.

The minimum vesting period will be 15 years

These schemes will be required to use the term “NPS.” The objective of each scheme will also be stated. The minimum vesting period for investments in this scheme will be 15 years. Subscribers will receive the full amount upon reaching 60 years of age or upon retirement. The PFRDA has stated that the total charge will be capped at 30% of the annual AUM.

MSF launched on the occasion of NPS Day

Experts say that the MSF will provide subscribers with more choice and control over their retirement savings. This will open up opportunities for innovation for pension funds and increase competition among them. The MSF will be launched on October 1, which also happens to be NPS Day.

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The bill which was introduced earlier this year was withdrawn by the government. Now this bill will go to Rajya Sabha. Its purpose is to simplify the tax rules, reduce disputes and modernize the process. In this, many tax reliefs have been given to pensioners, investors of National Pension System (NPS) and Unified Pension Scheme (UPS).

Full tax exemption on commuted pension

Commuted pension means that the employee takes a part of his pension first as a lump sum amount. Now if this amount comes from an approved superannuation fund or a recognized pension scheme, then that amount is completely tax exempt.

This rule applies to both government and private sector employees, provided their pension plan is government-recognized. This means that you will not have to pay any income tax on the amount received as commuted pension at the time of retirement.

However, this exemption applies only to the lump sum amount received during commutation. The rest of the monthly pension is taxable under normal tax rules. This facility helps employees save tax and is financially helpful after retirement.

New rules are clear on UPS and NPS

The commuted pension portion received in the Unified Pension Scheme (UPS) will be completely tax free. Whereas, the old rules will apply in NPS i.e. on closing or exiting the scheme, 60% of the total deposit amount can be withdrawn tax free.

Retirement Benefit Account

There is a provision for Retirement Benefit Account in the new bill. These accounts will run approved funds and withdrawal from them will be tax free if the prescribed conditions are fulfilled at the time of retirement. Its purpose is to promote retirement savings in a proper manner.

Discount on family pension continues

The exemption that was already available on family pension will continue. In this, one-third of the pension or ₹ 15,000, whichever is less, will be deducted from the taxable income. This facility will be applicable on the pension received by the spouse or dependents of the deceased employee.

Rules for partial withdrawal fixed

The tax rules for partial withdrawal from pension schemes before retirement have now been clarified, which will reduce disputes and increase transparency.

According to the Finance Ministry, the purpose of these changes is to implement uniform tax rules on different pension sources, clarify the law and ensure financial security after retirement.

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PFRDA has allowed subscribers investing in NPS to make their investments through Unified Payment Interface (UPI) QR code. In a statement from PFRDA, it was said that the purpose of this step is to simplify the investment process. With this, the system will be made easier and better for investors opening NPS accounts.

Investment can be done through UPI QR code

NPS has long been a reliable savings tool for people who want to secure their future. It said that this initiative of PFRDA empowers NPS subscribers to take control of their retirement savings and benefit from a systematic investment plan. Under the new system, customers will be able to use UPI QR code to transfer their contribution.

Currently, subscribers are given the option to invest directly through their bank account using D-Remit. D-Remit ID consists of 15 digits, which has to be added as beneficiary in Internet Banking while transferring voluntary contribution from the savings bank account of the customer. According to the circular issued by PFRDA, ‘De-remit option is used by investors. Till now, about 10 lakh different D-Remit IDs have been created.

NPS subscribers can invest in NPS account through de-remit based quick response (QR) code. Customers can invest using any UPI-enabled application by scanning the QR code. The QR code will be different for every customer, which you can save offline to make payment. As per PFRDA circular, QR codes are different for Tier I and Tier II.

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NPS can invest in different assets

NPS subscribers can invest in different asset classes under this investment, which include- Equity (E), Government Bond (G), Corporate Bond (C) and Alternate Asset Class (A).

What are the new rules?

Till now NPS subscribers did not have the facility to choose multiple fund managers. Once the subscriber chose a pension fund manager, the money invested in different asset classes of NPS was managed by that fund manager. That is, one fund manager used to manage each asset, but now subscribers can choose different fund managers for each asset class.

These conditions have to be remembered

PFRDA has also put some conditions along with the new facility. Such as-

1. To use this facility, subscribers will have to opt for active choice for asset allocation and not auto mode.
2. This facility will not be available in alternate asset classes, only in equity, government security and corporate bond assets.
3. This facility will be available only in the existing All Citizen Model (Tier-I), NPS corporate model (Tier-I) and Tier-II (All subscribers) categories. That is, government employees having Tier-1 NPS account cannot avail this facility, they will get the benefit only if they have Tier-2 account.
4. New investors joining the scheme will be able to avail the facility of choosing multiple pension fund managers only after three months of registration.

How will it be beneficial?

For example, suppose you have chosen HDFC Pension Fund as the fund manager for your NPS investment and you invest in equity and bonds, then the same fund will be managing both your funds. But now you will be able to choose a different fund manager for equities and a different fund manager for bonds. The benefit of this will be that you will be able to choose a better fund manager according to your assets.

Facility to withdraw money in installments is available

PFRDA (Pension Fund Regulatory and Development Authority) had recently issued a circular, in which it was said that the subscribers will get the systematic lump sum withdrawal facility in a phased manner. Now subscribers can choose to withdraw 60 per cent of their pension corpus monthly, quarterly, half-yearly or annually till the age of 75 years.

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The Pension Fund Regulatory and Development Authority (PFRDA) has given great relief to crores of subscribers of the National Pension System. PFRDA has issued a notification on July 27, 2023, issuing a clarification on the rules for exiting the pension scheme. According to this notification, NPS subscribers can now select any annuity plan as soon as they exit the pension fund. This choice will be according to the need of the subscriber. In such a situation, they will not be charged any kind of fee for this work.

Rules for exiting pension have been simplified

PFRDA has tried to make it easier for the beneficiaries of the National Pension System to exit the scheme. If a subscriber wants to exit this scheme after retirement, he can easily take an exit from it. In order to give maximum information about the exit rules of NPS, PFRDA has ordered the nodal officers of Government, POPs and National Pension System Trust to help NPS customers choose the scheme according to their needs. With this, the beneficiaries will not have to face any kind of problem in future.

Will not have to pay the charge

Apart from simplifying the exit rules of NPS, PFRDA has also informed that the subscribers will not have to pay any additional charges for opting for any type of annuity service. Along with this, PFRDA has also made it clear that Bina Company can only charge premium from NPS subscribers as NPS subscribers already deposit the fee as tax to the government. In such a situation, there should be no pressure on them to charge any kind of fee for other services. Along with this, it will be the responsibility of the Compliance Officer to complete all the tasks related to the Annuity Service Provider. Significantly, PFRDA is trying to make the subscribers more empowered by providing maximum facilities to the subscribers.

What is the exit rule from NPS?

As per PFRDA rules, NPS subscribers can use 40% of their entire corpus to buy annuity at the time of maturity. On the other hand, the remaining 60 percent can be withdrawn in one go, but if this corpus is less than Rs 5 lakh, then you can withdraw the entire amount at the time of maturity. On the other hand, if you want to buy a pension plan before 60 years, then you are required to use at least 80% of the NPS corpus.

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Pension Fund Regulatory and Development Authority (PFRDA) chairman Deepak Mohanty said that National Pension System (NPS) subscribers are expected to get the option of Systematic Lumpsum Withdrawal (SLW) by the end of this quarter. Systematic lumpsum withdrawal feature will allow NPS subscribers to opt for periodic withdrawals on monthly, quarterly, half-yearly or yearly basis till the age of 75 years.

Current rules for NPS withdrawal

At present, an NPS subscriber can withdraw up to 60 per cent of the retirement corpus as a lump sum when he turns 60. The remaining 40 percent of the corpus essentially goes into buying an annuity. NPS subscribers also have the option to defer the lump sum withdrawal till the age of 75 years.

NPS investors also get the option of phased withdrawals annually while postponing the lump sum withdrawal. Under this, the NPS subscriber can make partial withdrawals on an annual basis, but he has to submit an application every year.

NPS subscribers can opt for period pension

Pension fund regulator is now going to give NPS subscribers the option of withdrawal on monthly, quarterly, half-yearly or yearly basis till the age of 75 years instead of not allowing NPS subscribers to withdraw 60 per cent of the corpus Is. Despite this withdrawal option, the remaining NPS corpus will continue to be invested and returns will continue to accrue till the corpus is fully withdrawn.

Systematic withdrawal facility for Tier-I and Tier-II accounts also

Deepak Mohanty, chairman of the Pension Fund Regulatory, told that when NPS subscribers retire at the age of 60, they can take 60 percent in one go. Apart from this, he can choose the Systematic Lumpsum Withdrawal option for the next 15 years. On choosing the Systematic option, the NPS subscriber will continue to receive monthly, quarterly or half-yearly amounts till the age of 75 years. He said that this facility will be provided for both Tier-I and Tier-II accounts. For Tier II accounts, the Systematic Lump Sum Withdrawal option can be initiated before the subscriber turns 60 years old.

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The Pension Fund Regulatory and Development Authority (PFRDA) regulates the NPS. In such a situation, PFRDA makes all the rules related to it. It is worth noting that PFRDA always advises NPS subscribers to add Nominee, but many times people do not add nominee and they die. In such a situation, it is a common question that if a NPS subscriber has not added a nominee and has died, can the name of the nominee be changed after the subscriber’s death? Let’s know about this-

Can the nominee be changed after death?

On this matter, PFRDA has issued a circular on October 22 informing that only the subscriber has the right to choose the nominee. If any person tries to change the nominee details after the death of an NPS account holder by logging into the account using his/her details, then all the changes made in such a situation will be invalid. Along with this, the process of claim will be started according to the details given by the subscribers. In such a situation, the changes made in the NPS account are valid only when the person is alive.

How to claim if there is no nominee

If an NPS subscriber dies without adding a nominee, then in such a situation only his legal heir can get the claim. For this, the people of his family will have to show the Succession Certificate. This certificate will have to be submitted to the Revenue Department. After this the department will complete the verification process. After this, the entire money deposited in NPS will be given to the legal heir.  

This document is required for NPS claim-

• Death Certificate of NPS Subscriber
• Aadhaar Card of NPS Subscriber
• Aadhaar Card of Nominee or Successor
• succession certificate

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These online applications sent by the subscribers were directly processed through the CRA system followed by instant bank account verification through penny drop. During the Corona Pandemic (Covid 19) during the lockdown in different parts of the country, the customers were greatly benefited from this facility.

But now after the easing of the Corona epidemic, PFRDA has issued a new order regarding this, according to which customers of all government sector customers (Centre, State and Central Autonomous Body) can now submit their application for partial withdrawal (NPS Partial Withdrawal). Will have to be submitted only after the nodal officer.

In a circular dated December 23, 2022, PFRDA said, “After abolishing the rules related to the corona pandemic and with the relaxation of the lockdown rules, it has been decided that all public sector customers (Central, State and Central Autonomous body) will have to submit a request for partial withdrawal from NPS to their respective nodal office.”

What are the partial withdrawal rules in NPS?

• Invest in NPS for at least 3 years
• 25% Withdrawals from the Subscriber’s Total Contribution
• Withdrawals possible a total of 3 times during the subscription period
• Partial withdrawal is possible for some important reasons

For what things partial withdrawal from NPS can be done (NPS Withdrawal Rule)

• for higher education of children
• for marriage of children
• home buying and renovation
• for the treatment of critical illness

Get the benefit of additional tax exemption on NPS

Investing in NPS gives the benefit of extra tax exemption of Rs 50,000 (NPS Benefits) under National Pension System 80CCD (1B). You can withdraw up to 60% of the corpus deposited on maturity. The remaining amount is kept for pension or annuity. This National Pension System Trust is supported by the Government of India and operated by the Pension Fund Regulator i.e. PFRDA under the Government of India, so it is absolutely safe to invest in it.

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