The National Pension System (NPS) will soon have a new feature of Systematic Withdrawal Plans, said PFRDA Chairman Deepak Mohanty, reported Business Line.
This new feature will give an option to NPS subscribers to choose the facility of systematic withdrawal post-retirement of subscribers at monthly, quarterly, half yearly and annual rests, Mohanty told BL.
This flexibility is essentially targeted at non-government sector subscribers — corporate and all citizens model categories — the growth driver for NPS assets last fiscal. The upcoming feature is also significant, given the perceived low annuity returns in the Indian financial system.
In FY23, as many as million new subscribers came to the NPS fold from the non-government sector.
“In this fiscal (2023-24), we expect this to increase to 13 lakh new subscribers,” Mohanty added.
He said the rollout of this systematic withdrawal feature will happen this year. Indications are that it would be a reality in third quarter this calendar year.
PFRDA is looking to allow systematic withdrawal in terms of either units or in the form of periodic lumpsum amount, depending on the subscriber’s choice.
At present, under NPS, a subscriber has to, on retirement, invest at least 40 per cent of the accumulated corpus in annuities. The remaining 60 percent can be withdrawn for any of his end use purposes, including investments in other assets.
Now, the PFRDA is planning to give the subscriber flexibility to leave the residual amount (other than 40 per cent that goes for annuities) within the NPS system, and avail pension at monthly, quarterly, semi-annual or annual rests till the age of 75, Mohanty explained.
“So, from 60 years [on retirement] till 75 years you as NPS subscriber can remain within NPS system and avail monthly, quarterly, semi-annual or yearly systematic withdrawal. Either you can take your 60 per cent at one go when you retire at 60 years or stretch it over next 15 years till you turn 75 years. You get higher return and redeem as you go,” said Mohanty.
He also said that PFRDA Board has already given its nod for introducing this flexibility to NPS subscribers.