What is the systematic lump sum withdrawal rule of NPS ?

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In the new rules of NPS, the subscriber will be given the facility to withdraw 60 percent lump sum amount under the Systematic Lump-Sum Withdrawal (SLW) facility.

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Subscribers will be able to withdraw this money monthly, quarterly, half yearly or annually. This withdrawal will continue till the subscriber turns 75 years old. In NPS, when the subscriber turns 60, 60 percent of the amount deposited in the fund is allowed to be withdrawn in lump sum. It is mandatory to buy annuity with the remaining money

Recently, Pension Fund Regulatory and Development has taken a big decision. It has been decided that the subscriber will be given the facility to withdraw 60 percent lump sum amount under the Systematic Lump-Sum Withdrawal ( SLW ) facility. Subscribers will be able to withdraw this money monthly, quarterly, half yearly or annually. This withdrawal will continue till the subscriber turns 75 years old.

In NPS, when the subscriber turns 60, 60 percent of the amount deposited in the fund is allowed to be withdrawn in lump sum. It is mandatory to buy annuity with the remaining money. The rule of buying annuity will remain the same as before. However, this move by PFRDA does not mean that the regulator has accepted the demand for systematic withdrawal of the entire money deposited in the NPS fund on completion of 60 years of age.

The rule of purchasing annuity with 40 percent fund will remain

40 percent of the money deposited in NPS will still have to be used to buy annuity. With this the subscriber will get pension. The recent decision of PFRDA will be applicable only on 60 percent amount deposited in NPS. NPS subscribers can still withdraw the lump sum amount gradually. But, this process is not yet automated.

If the subscriber wishes, he can defer withdrawal of full or partial lump sum amount till the age of 75 years or can opt for annual withdrawal. If you want to withdraw this money gradually, then you will have to submit a request for it every year. Then it will have to be authorized.

With the introduction of the new feature, the facility of automated systematic withdrawal will be available. This facility will be similar to that offered by mutual fund houses. This facility is beneficial for those who have investments in stocks through Scheme E of NPS. Vidya Bala, co-founder of investment advisory firm PrimeInvestor.in, said that the advantage of systematic withdrawal is that if your NPS portfolio is invested in shares, it will remain in its place. This will continue to benefit from the rise in equity markets. This will increase the total income through NPS.

Helpful in earning higher returns

He said that if the subscriber’s portfolio is invested in equities then there are benefits of systematic withdrawal feature. This can give higher returns to the subscriber. It would not be wise to withdraw the lump sum and invest it in guaranteed fixed income instruments. The returns on fixed deposits and bonds have not been high in the last two decades.

Therefore, the systematic withdrawal feature of NPS will give you a chance to earn better returns in the long run. Nirav Karkera, research head of financial advisory firm Fisdom, believes that if the NPS subscriber is conservative i.e. he does not want to take risk then lump sum withdrawal would be more appropriate.

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