New Delhi: The government has made some changes to the rules related to the National Pension System (NPS). The new rules have been designed to make the system more flexible for the private sector and the general public. The Pension Fund Regulatory and Development Authority (PFRDA) has decided to remove the 5-year lock-in period for government and non-government members.
Along with this, a decision has been taken to increase the lump-sum withdrawal amount. The limit for continuing investment in NPS has also been increased. Until now, the biggest hurdle for those investing in NPS has been the lock-in period. According to the old rules, a 5-year lock-in was mandatory for non-government subscribers.
You could not withdraw money from the account for 5 years after opening it. This rule will still apply to government employees. This change by the government brings relief to those who were hesitant to invest in NPS due to the fear of their money being locked in for a long period.
More Cash Now Available
You will be happy to know that the biggest change in NPS is in the withdrawal ratio. This is also called the exit ratio in technical terms. Earlier, when a member retired or exited the scheme, they had to invest a minimum of 40 per cent of their total accumulated fund in purchasing an annuity.
An annuity is the amount received as a monthly pension. Subscribers could only withdraw 60 per cent of the money in a lump sum. After the new rules, if a member’s total corpus is more than Rs 12 lakh, then the 80:20 rule will apply.
They can withdraw 8 per cent of the total fund in a lump sum. Only per percentage of the amount will have to be used to purchase an annuity. This will put more cash in the hands of retiring individuals.
Investment Opportunity Up to What Age?
You can now find out up to what age you can invest. The PFRDA has also decided to extend the time limit for continuing investment. According to the new rules, subscribers can now continue their investments in the NPS until the age of 85.
Previously, in some cases, accounts were only allowed to remain active until the age of 70 or 75. This change means that if a person doesn’t need the money at age 60, they can leave their funds invested for another 25 years and benefit from compounding.