It would be completely wrong to view the National Pension System (NPS) solely as a meager post-retirement pension. The Pension Fund Regulatory and Development Authority (PFRDA) has made significant changes to the rules for non-government subscribers, making the scheme more flexible and attractive than ever before. Under the new rules, investors can now withdraw 80% to 100% of their corpus in a lump sum. While previously it was mandatory to invest 40% of their funds in an annuity, the new guidelines have provided significant relief to middle-class investors.
New NPS Structure
Under the old rules, if your NPS fund exceeded ₹5 lakh at age 60, you could only withdraw a maximum of 60% in cash, and the remaining 40% was required to purchase a pension plan. However, the PFRDA has now completely changed this limit, giving investors significant power. The minimum annuity limit has been reduced from 40% to 20%. This means you will now have more cash at hand, allowing you to invest as you see fit.
100% exemption for funds up to ₹8 lakh
If you are a non-government subscriber and your total NPS fund at retirement is ₹8 lakh or less, you have a strong option. You can withdraw 80% of your funds to start a 20% pension, or you can withdraw the entire 100% of your funds at once and deposit them into your bank account without any pension plan. This is good news for small investors looking for a large lump sum after retirement.
SUR Option for ₹8 Lakh – ₹12 Lakh
For investors with funds between ₹8 lakh and ₹12 lakh, PFRDA has opened a unique and flexible option called Systematic Unit Redemption (SUR). This allows you to withdraw ₹6 lakh in cash and receive the remaining amount in installments (through SUR) over the next six years. Additionally, you can choose to withdraw 80% in cash and receive an annuity of 20%. This option is ideal for those who want a safe and stable flow of their savings.
Rules for Late Starters
These days, many people start investing even after the age of 60. The rules for such non-government subscribers are also very strict. If you are 60 or older and have joined NPS, you can withdraw the entire amount without annuity if you have a corpus of up to ₹12 lakh. However, if your corpus exceeds ₹12 lakh, you will have to follow the standard formula of 80% cash and 20% annuity.
