INDIA – PFRDA allows subscribers lump sum withdrawal on exit

Pension fund regulator PFRDA has allowed investors in the New Pension Scheme (NPS) to withdraw lump sum amount at the time of their exit, as opposed to the current practice of ‘phased withdrawals’ every year.

The replacement of ‘phased withdrawal’ with ‘deferred withdrawal’ was taken after PFRDA received feedback from various stakeholders, the pension fund regulator said.

Stakeholders informed PFRDA that subscribers would be given a specific option to defer or time the entire lump sum withdrawal (maximum 60 percent) at the time of exit from NPS.

This would be a better option than forcing subscribers to choose a certain percentage each and every year while opting for the ‘phased withdrawal’ option, including the year in which they are exiting the system.

Under the deferred withdrawal facility, the subscribers at the time of exit from NPS can exercise the option to defer withdrawal of eligible lump sum withdrawal and stay invested in the NPS, according to PFRDA.

However, no fresh contributions will be accepted and no partial withdrawals will be allowed during such a period of deferment. The subscriber can withdraw the deferred lump sum amount at any time before attaining the age of 70 years by giving a withdrawal application or a notice.

If no such notice is provided, the accumulated pension wealth would be automatically monetised and credited to his or her bank account upon attaining the age of 70 years.