In a bid to provide relief to thousand of pensioners amid the second wave of coronavirus pandemic, the regulatory body may soon allow the retired people to withdraw their entire lifetime contributions.
Pension Fund Regulatory and Development Authority (PFRDA) mulls to introduce a new option for pensioners. National Pension System (NPS) subscribers will soon be permitted to withdraw their entire money at one go if pension corpus is up to Rs 5 lakh, news agency IANS reported.
At present, beneficiaries can withdraw up to Rs 2 lakh from their NPS account. Beyond this limit, the pensioners can withdraw 60% of the contributions. At least 40% of the contributions has to be mandatorily parked in government approved annuities, according to the current rule.
The increased threshold of Rs 5 lakh will offer better liquidity to a certain segment subscribers, IANS mentioned. Under the new system, the NPS holders can park their money where they get the better return.
However, the regulatory body will provide the option of retaining a portion of subscribers pension money for investment in annuities or for investment by pension fund managers itself, according to reports.
At present, the returns of annuities average around 5.5%. With inflation and income tax on pension accumulation, the return for subscribers from annuities are often on the lower side. This change in the rule may provide NPS subscribers wider option to increase returns on their lifetime contributions.
NPS Account Opening for New Subscribers
The pension regulator has recently permitted Points of Presence (POPs) and Central Record Keeping Agencies (CRAs) to on board new subscribers through the paper-less digital process. The NPS accounts opened digitally in CRA platform including eNPS, the soft copies of NPS subscribers’ applications will continue to be generated by CRAs. However, the NPS subscribers will no longer have to submit the physical application form to the respective CRAs, according to the new instructions. Subscribers will have options for authentication either through e-Sign or through OTP before the creation of Permanent Retirement Account Number (PRAN).
“Since the Subscribers are provided with the options for e-Sign or OTP, the NPS Subscribers will no longer have the option of submitting the physical application to the respective CRAs,” PFRDA said in January.
This rule will also be applicable for NPS accounts opened through POPs. “For NPS accounts opened through POP, whether through digital, physical or net-banking mode, the soft copies of NPS applications shall be generated by CRAs, capturing all information about the subscribers as may be specified by PFRDA, which shall be furnished electronically by POPs to CRAs. CRAs shall also share the soft copies of the application with subscribers for their information,” the pension fund regulator mentioned in the circular.