Retiring With NPS? Now Withdraw 80% and Invest Till Age 85!
PFRDA raises NPS withdrawal limit for private employees to 80%. Stay invested till 85 and plan retirement with more flexibility and cash access.
image for illustrative purpose
The Pension Fund Regulatory and Development Authority (PFRDA) has made a new decision that gives more power to private sector employees to take away a greater amount of their retirement savings earlier rather than later through the revised rules. The authority has raised the limit on withdrawals for non-government customers that can now be done at 80% of the total money accumulated at one's account. The maximum withdrawal was earlier limited to 60%.
The Changes and Their Impact on Private NPS Subscribers.
1. More Cash at Retirement
A person whose retirement fund is over Rs12 lakhs can now take 80% in cash while the other 20% will have to be turned into an annuity. The previous limit was only 60% withdrawal and the rest of the corpus going into an annuity.
Illustration: If a subscriber's total fund amounts to Rs15 lakhs, he can now take Rs12 lakhs in cash and the remaining Rs3 lakhs will be for annuity purchase. This modification offers retirees more flexibility and quicker access to funds.
2. Total Withdrawal for Low Savings
If a subscriber has only Rs8 lakhs or less and is either 60 years old or has contributed for 15 years, he/she can withdraw the complete amount without purchasing annuity. Those whose savings are between Rs8 lakhs and Rs12 lakhs can withdraw up to Rs6 lakhs in cash while the rest will be allocated for annuity.
3. Choice to Keep Investment Till 85
Before there was an upper age limit for NPS investments. Now, subscribers can keep on investing and adding to their corpus till they are 85, unless they opt to leave earlier. This opens up new ways of retirement income and tax planning.
4. Provisions for Death or Missing Subscribers
If a person participating in the plan dies before receiving the payout or purchasing the annuity, the full amount goes to the person designated as the beneficiary or to the legal heir. In the event of a missing subscriber who is considered dead, 20% of the fund is immediately given as interim relief whilst the rest is paid out upon legal verification under the Bharatiya Sakshya Adhiniyam, 2023.
5. Government Employees Unaffected
The new withdrawal rules will only apply to private-sector subscribers. Government employees under NPS will continue with the existing structure of 60% lump-sum withdrawal and 40% annuity.
This announcement from PFRDA is a big change in the retirement planning options for private employees as it allows them to have greater control over their funds and the possibility of extending their investments for long-term growth.
