The pension regulator PFRDA has let subscribers to the National Pension System (NPS) with up to 5 lakhs in NPS savings to take the entire balance upon retirement without committing to an annuity investment.
Previously, this facility (without annuity driver) was available only for withdrawal of NPS corpus or savings up to Rs. 2 lakh upon retirement.
Simultaneously, the Pension Fund Regulatory and Development Authority (PFRDA) upped the lump sum early withdrawal limit for NPS to 2.5 lakh from 1 lakh previously, according to PFRDA Chairman Supratim Bandyopadhyay.
Before reaching the age of 60, an NPS subscriber can now retire early and receive a lump amount of 2.5 lakh.
PFRDA has also increased the maximum age of eligibility for the NPS benefit from 65 to 70 years. Additionally, the retirement age has been increased from 70 to 75 years. Indians between the ages of 18 and 65 will be allowed to open an NPS account prior to this change.
PFRDA’s decision to totally withdraw the NPS corpus of up to 5 lakhs upon retirement is in response to the system’s low annuity rates.
At the moment, regulatory regulations require that retirees invest at least 40% of their pension money in annuities. The regulator increased the maximum to 5 lakh now that annuities — which tend to mirror systemic interest rate swings – have bottomed out with dropping interest rates.
The PFRDA chairman emphasised that the option of full withdrawal is available only for corpus of up to 5 lakh, and that if the corpus is greater than that amount, say 5.01 lakh, the NPS subscriber must acquire annuities worth 2 lakh (40 percent).
“This is the new annuity rule, and if your corpus exceeds 5 lakh, you must take an annuity and adhere to the guideline,” he explained.
The primary reason for lifting the maximum to 5 lakhs is that the annuity’s absolute return is “too low,” which was the impetus for the increase. Even under the Atal Pension Yojana, he explained, the minimum guaranteed pension is one lakh rupees.
When asked how many NPS subscribers may gain from the recent regulation change, Bandyopadhyay responded, “a substantial number,” particularly those who choose to maintain their money with PFRDA rather than remove it.
“We examined why several individuals did not choose for annuities and allowed the NPS corpus to remain with PFRDA. We discovered that many of them are aware that the annuity they will receive will be insufficient to support their needs. As a result, they decided to keep the money with PFRDA, where it can be seen,” he explained.
In May, India’s pension assets under management (AUM) surpassed 6 lakh crore. PFRDA is now targeting an AUM of 7.5 lakh crore by March 2022.
News: reported as per Media
Smrutirekha Bhoi