Banking

NPS Introduces Flexible Withdrawal Plan for Pension Account Holders

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Pension Fund Regulatory and Development Authority (PFRDA) is preparing to introduce a new systematic withdrawal plan that will grant pension account holders the flexibility to withdraw a lump sum amount according to their preference upon reaching the age of 60. Deepak Mohanty, Chairman of PFRDA, revealed in an interview with PTI that the plan is in an advanced stage and is expected to be launched by the end of the next quarter.

Presently, under the National Pension Scheme (NPS), individuals who turn 60 can withdraw up to 60% of their retirement corpus as a lump sum, while the remaining 40% must be utilized to purchase an annuity. However, the proposed systematic withdrawal plan will allow NPS subscribers to choose periodic withdrawals, such as monthly, quarterly, semi-annually, or annually, until the age of 75.

Mohanty explained that many people have expressed their desire to continue with the fund, especially when it yields significant returns. These individuals prefer to stay invested and withdraw money at regular intervals, but the current options do not cater to this preference. Therefore, PFRDA aims to introduce a product that fulfills this need.

PFRDA recently extended the entry age for NPS up to 70 and increased the exit age to 75, considering the increasing life expectancy. Mohanty mentioned that subscribers can defer annuity receipt based on their financial condition, allowing them to receive a higher annuity when they eventually opt for it. Those who can afford to wait can keep their funds for emergencies.

The proposed amendment to the PFRDA Act includes suggestions for an alternate pension product. Mohanty indicated that PFRDA has made these recommendations to the government. Additionally, he mentioned that the assets under management (AUM) in pension schemes, including NPS, Atal Pension Yojana (APY), and NPS Lite, are expected to surpass Rs 10 lakh crore in the first half of the current fiscal year due to regular contributions from subscribers.

The AUM, which currently stands at Rs 9.58 lakh crore, is subject to market performance and the returns generated by the fund. NPS constitutes the majority of the AUM with Rs 9.29 lakh crore, while the remaining Rs 28,538 crore belongs to APY. Mohanty revealed that the number of NPS subscribers exceeded 10 lakh last year and is anticipated to reach 13 lakh this year.

To promote growth on the private side, PFRDA is implementing various initiatives, including allowing agents to underwrite NPS and raising awareness among trade bodies to encourage corporates to adopt NPS. Additionally, digital initiatives such as e-NPS have been introduced to facilitate self-enrollment without intermediaries.

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