The Pension Fund Regulatory and Development Authority (PFRDA) has mandated that certain documents be uploaded by subscribers as of April 1, 2023 in order to speed up and simplify annuity payments after exiting the National Pension System (NPS).
The process of purchasing an annuity has been streamlined by the Pension Fund Regulatory Development Authority (PFRDA) in regulatory cooperation with IRDAI. Annuity Service Providers (ASPs) will use the NPS withdrawal form provided at the time of exit by the Subscribers at nodal officers / POPs for issuing an annuity.
"In the interest of Subscribers and to benefit them with the timely payment of annuity income, the upload of the documents shall be mandatory with effect from 1st April 2023," the pension body said in a circular dated February 22, 2023.
In order to service NPS Subscribers and provide them with a steady stream of periodic income in their old age, ASPs are life insurance companies governed by IRDAI and appointed by PFRDA.
The common proposal for exiting NPS and purchasing annuities from an ASP enables parallel processing of the lump sum component and annuities, which considerably reduces the time required by ASPs to issue annuity policies and allows for quicker subscriber servicing and prompt annuity issuance.
The pension organisation stated in a circular dated February 22, 2023, the upload of the documents shall be mandatory with effect from 1st April 2023 in the interest of Subscribers and to benefit them with the prompt distribution of annuity income.
A. NPS Exit/ Withdrawal Form
B. Proof of Identity and Address as specified in the Withdrawal form
C. Bank account Proof
D. Copy of PRAN card
According to the PFRDA circular, the following are the stages for processing an exit request by an NPS subscriber (government or non-government).
Steps for processing of exit request by subscriber online
Step 1: Subscriber will initiate online exit request by logging into CRA system.
Step 2: The subscriber is presented with the pertinent notifications regarding e-Sign/OTP authentication, Nodal Office/POP authorization, etc. at the moment the request is initiated.
Step 3: Details like address, bank information, nominee information, etc. are automatically filled out during request initiation from the NPS account.
Step 4: Subscriber will select fund allocation percentage for lump sum/annuity, annuity details, etc.
Step 5: Bank Account will be verified through online Bank Account Verification (Penny drop facility).
Step 6: Subscriber needs to mandatorily upload KYC Documents (Identity & Address Proof), copy of PRAN card/ePRAN and Bank Proof at the time of submitting exit request.
Step 7: Scanned documents should be appropriate i.e. scanned images should be legible.
Step 8: Subscriber authorizes the request by using any one of the two following options to make the process paperless:
OTP Authentication – Distinct OTPs will be sent on Mobile Number and email ID of the Subscribers.
e-Sign – Subscribers will e-Sign the request using Aadhaar.
NPS exit rule
At the time of maturity, an NPS subscriber must currently use at least 40% of the entire accrued corpus to buy an annuity plan. A lump sum withdrawal of the remaining 60% of the NPS corpus is allowed. The subscriber would have the option of a full lump sum withdrawal at maturity if the entire corpus is less than or equal to Rs 5 lakh. In order to purchase a pension plan (annuity) from a life insurance firm for an early retirement before the age of 60, an NPS subscriber must use 80% of the total NPS corpus.
FAQs
An NPS account holder can withdraw up to 25% of his contributions, according to the master circular released by the Pension Fund Regulatory and Development Authority (PFRDA) on January 12, 2024. Withdrawal cannot be made from the portion of the corpus contributed by the employer.
Can I withdraw all money from NPS after retirement? ›
NPS subscribers can withdraw a maximum of 60% of the accumulated corpus in the Tier 1 account as a lump sum at the time of retirement. The remaining 40% has to be mandatorily used to purchase an annuity that provides a regular pension income.
How do I withdraw from NPS partial withdrawal? ›
How to Process an NPS partial withdrawal Request
- Filling a withdrawal form with declaration of withdrawal purpose.
- Submitting the withdrawal request to the NPS recordkeeping agency via their Nodal Office.
- In case of critical illness, family members can submit withdrawal request on subscriber's behalf.
2. How can a Subscriber change his scheme preference?
- Go to your NPS account log-in.
- Click on sub menu " Scheme preference Change" under main menu "Transaction"
- Select Tier type and change the Scheme preference as you intended to do.
Subscriber can opt for withdrawal of lump-sum amount in a phased manner (up to 10 instalments) over the period from 60 years (or any other retirement age as prescribed by the employer) to 75 years. However, Subscriber has to buy Annuity prior to Phased Withdrawal.
How much can I withdraw from NPS after 10 years? ›
For investors who have stayed invested for 10 years or longer, an amount up to Rs. 2.5 lakh can be withdrawn as a lump sum. If the amount withdrawn from NPS Tier 1 account exceeds Rs. 2.5 lakh, 80% has to be invested mandatorily invested in annuities, the remaining corpus can be withdrawn as a lump sum.
How much we can withdraw from NPS after maturity? ›
The NPS Tier 1 account matures after the subscriber attains the age of 60 years, although you can delay withdrawal of these investments till the age of 70. Under existing NPS withdrawal rules for withdrawal after maturity, you can withdraw up to 60% of your corpus tax free.
Can I exit from NPS after 5 years? ›
Subscribers from non-government sectors who began their NPS journey prior to the age of 60, can opt for premature exit after participating for at least 5 years in the National Pension System. On the other hand, Government employed subscribers are allowed to opt for premature exit from NPS at any time.
What is Tier 1 and Tier 2 in NPS? ›
There are two types of NPS accounts - Tier I and Tier II. While NPS Tier I is well-suited for retirement planning, Tier II NPS accounts act as a voluntary savings account. Tier I NPS investment is a long-term one and the amount cannot be withdrawn until retirement.
What documents are required for NPS Tier 1 withdrawal? ›
KYC documents (address and photo-id proof) 'Cancelled Cheque' (having Subscriber's Name, Bank Account Number and IFS Code) or 'Bank Certificate' on Bank Letterhead having Subscriber's name, Bank Account Number and IFS Code required to be submitted as bank proof.
Withdrawal
An individual can withdraw Employee Pension Scheme depending on two factors- age and years of work experience. Once you reach the age of 50, you will be able to withdraw your EPS. However, the money you receive will be at a lower interest rate.
How do I check my NPS balance? ›
Through SMS
Alternatively, checking your NPS account balance can be as simple as sending an SMS from your registered mobile number. To do this, just give a missed call to 9212993399 from the mobile number linked to your NPS account.
Which is better auto or active in NPS? ›
Which is better: active choice or auto choice in NPS? If you are a new NPS subscriber or have a low-risk appetite and want to guarantee that your portfolio aligns with your risk tolerance as you grow older, the auto-choice NPS investment option may be the best NPS investment option for you.
What is the gap between NPS withdrawal? ›
Also, an investor can withdraw a maximum of 25% of the corpus contribution in an NPS tier 1 account. During the entire tenure of investment, an investor can apply for partial NPS premature withdrawal a maximum of 3 times, with a gap of 5 years at least between each withdrawal. All partial withdrawals are tax-free.
How do I upload unequal NPS contributions? ›
The Authoriser is required to login to the NPSCAN system (www.npscan-cra.com) with User ID and I-PIN. On successful login, the Authoriser shall click the sub-menu 'Request Authorization for Unequal Contribution' under the main menu 'Contribution Details' as shown in Figure 5 below to authorise the request.
What are the changes in NPS 2024? ›
NPS new login rule
Effective April 1, 2024, the PFRDA will introduce an enhanced security system, requiring all password-based users accessing the Central Recordkeeping Agency (CRA) system of the NPS to undergo a two-factor Aadhaar authentication.
What is the minimum time to exit from NPS? ›
Subscriber exits after completion of three years in NPS, at least 40% of the accumulated pension wealth of the Subscriber needs to be utilized for purchase of an Annuity providing for a regular pension to the Subscriber and the balance pension wealth is paid as lump sum to the Subscriber.
Can I exit from NPS before 60 years? ›
The NPS offers three different types of exit options: premature exit/voluntary retirement, which allows subscribers to exit before age 60/superannuation, normal exit, which allows subscribers to exit at the age of 60 years or beyond /superannuation and exit upon unexpected death, which allows subscribers to exit before ...
What is the lock in period for NPS withdrawal? ›
Tax-free partial withdrawals in NPS are allowed after a 3-year lock-in period up to a maximum of 25% of the total amount invested in individual capacity. Please note: Individual subscribers will only be allowed a maximum of three withdrawals during the entire tenure of subscription.
