The Pension Fund Regulatory and Development Authority (PFRDA) would permit automated withdrawals from the fund of NPS subscribers periodically. This would be as part of a proposed modification to the National Pension System (NPS) withdrawal regulations.
In its circular dated October 27, 2023, the PFRDA stated, “It is proposed to provide the option of phased withdrawal of the lump sum through Systematic Lump Sum Withdrawal (SLW) facility, following Regulations 3 and 4 of PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 and amendments therein.”
When it comes to their regular departure, NPS members may choose to take up to 60% of their pension funds through the SLW on a monthly, quarterly, half-yearly, or annual basis until they become 75 years old.
What is a Systematic Withdrawal Plan?
The SLW facility is quite similar to the Systematic Withdrawal Plan (SWP) under Mutual Funds. NPS users can systematically withdraw the required amount at regular intervals by using the SLW feature.
Kurian Jose, CEO, of Tata Pension Management said, “Upon reaching 60 and up to 75, subscribers must allocate at least 40% of their corpus to purchase an annuity. The annuity provides periodic payments based on its terms. The remaining corpus can be withdrawn as a lump sum or systematically through the SLW method. SLW allows retirees to receive periodic cash flows, enhancing their post-retirement income and covering regular expenses. This withdrawal method can be chosen once, and payments will follow the subscriber’s preference,”
NPS: Who benefits from the SLW option?
An appealing choice for retirees looking for a steady income stream in their later years is SLW. After acquiring the annuity, a subscriber may seek it when they retire and apply to the lump sum NPS corpus.
How does NPS work?
Pension Fund Regulatory and Development Authority (PFRDA) regulates the NPS program, which is funded by the Indian government. To increase his retirement funds, an NPS member makes investments in the capital market (stock, corporate bonds, government securities, and alternative assets) based on his or her risk tolerance.
The PFRDA said in its October 25 circular that the pension regulator has mandated “penny drop” verification for NPS subscribers. This is to withdraw cash to guarantee the timely transfer of funds.
