Central Idea

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new feature for systematic withdrawal from the National Pension Scheme (NPS).

National Pension Scheme (NPS): A Brief Overview

The National Pension Scheme (NPS) is a voluntary retirement savings scheme launched by the Government of India in 2004.
It is regulated and administered by the Pension Fund Regulatory and Development Authority (PFRDA).
The primary objective of the NPS is to provide a pension income to individuals upon their retirement.

Contributions: Subscribers make regular contributions to their NPS account during their working years. These contributions accumulate and grow over time.
Investment Options: The NPS offers two investment options: a) Auto Choice: where the funds are invested based on the subscriber’s age, and b) Active Choice: where the subscriber can select the asset classes (equity, corporate bonds, and government securities) and the fund manager.
Portable Account: The NPS account is portable, allowing subscribers to maintain their account even if they change jobs or locations.
Withdrawal Options: Upon retirement, subscribers have the flexibility to withdraw a portion of their accumulated corpus as a lump sum and use the remaining amount to purchase an annuity, which provides a regular pension income.
Tax Benefits: NPS offers tax benefits at different stages. Contributions made by subscribers are eligible for tax deductions under Section 80C, while withdrawals are subject to certain tax exemptions.
Regulated and Transparent: The NPS is regulated by the PFRDA, ensuring transparency and oversight of the scheme. It follows strict investment guidelines and has mechanisms in place to safeguard the interests of subscribers.
Wide Coverage: The NPS is available to all Indian citizens, including salaried employees, self-employed individuals, and non-resident Indians (NRIs).

Retirement Income: The NPS provides a retirement income to subscribers, ensuring financial security during their post-retirement years.
Long-term Wealth Creation: The investment component of the NPS allows subscribers to accumulate wealth over time, potentially generating higher returns and building a substantial retirement corpus.
Flexibility and Control: Subscribers have the flexibility to choose their investment options and actively manage their NPS accounts, providing a level of control over their retirement savings.
Tax Efficiency: The NPS offers tax benefits both on contributions and withdrawals, making it a tax-efficient retirement savings option.
Portability: The portability feature of the NPS allows subscribers to continue their account irrespective of job changes or relocations.
Regulated and Secure: The NPS is regulated by the PFRDA, ensuring a secure and transparent framework for retirement savings.

NPS subscribers will be allowed to withdraw 60% of their contributions systematically post-retirement.
The current system of one-time withdrawal will be replaced.
40% of the contributions must be in annuity.
Systematic withdrawals can be customized by the subscriber based on their needs.
Withdrawals can be made in lump sum or on a monthly, quarterly, half-yearly, or annual basis.
This feature is applicable to individuals aged 60-75.

Flexibility: Subscribers can customize their withdrawals based on their financial needs.
Regular Income: Systematic withdrawals provide a regular income stream post-retirement.
Enhanced Financial Planning: Allows for better financial planning and management.