NPS is flagship scheme of India under the retirement category. NPS has gained popularity but still due to technicality the scheme needs to be understood to get proper benefits. Here are the complete details of National Pension Scheme or NPS India.

This is a two-part post as I wanted to cover each & every detail of NPS like – Scheme Features, NPS withdrawal rules, Rules related to NRIs, Types of annuities & NPS Performance. Stay Tunned. For Part 1 Click Here.

Check Latest Returns as on 5 Sept 2023

What are the withdrawal rules for NPS?

NPS is made for retirement benefits, but the subscriber can exit from NPS and withdraw the accumulated pension wealth in the following manner:

For subscribers joining between 18-60 years

Upon attainment of the age of 60 years: At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension to the subscriber and the balance (60%) is paid as a lump-sum to the subscriber.

If the total corpus does not exceed Rs. 2 lacs, subscriber has the option to withdraw the total corpus in lump-sum.

Upon Death (irrespective of cause): The entire accumulated pension wealth (100%) would be paid to the nominee/legal heir of the subscriber and there would not be any purchase of annuity/monthly pension. The nominee, if so wishes, has the option to purchase an annuity.

Exit from NPS before attainment of age of 60 years (irrespective of cause): At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension to the subscriber and the balance (20%) is paid as a lump-sum to the subscriber. If the total corpus does not exceed Rs. 1 lac, then the subscriber has the option to withdraw the entire corpus in lump-sum. The subscriber can exit from NPS only after completion of a minimum of 10 years in NPS.

For subscribers joining between 60-65 years

(a) Normal exit (after completion of 3 years from the date of joining NPS). The subscriber will be required to annuitize at least 40% of the corpus for purchase of an annuity for receiving the monthly pension and the remaining corpus (60%) can be withdrawn in lump-sum. In case the accumulated corpus at the time of exit is equal or less than Rs. 2 lacs, the subscriber will have the option to withdraw the entire corpus in a lump sum.

(b) Premature Exit: Any exit before completion of 3 years will be treated as a premature exit. The subscriber will be required to annuitize at least 80% of the corpus for purchase of an annuity for receiving the monthly pension and the remaining corpus (20%) can be withdrawn in a lump sum. In case the accumulated corpus at the time of exit is equal or less than Rs. 1 lac, the subscriber will have the option to withdraw the entire corpus in lump-sum.

(c) Exit due to the death of the subscriber: The entire corpus shall be payable to the nominee/legal heir of the subscriber.

Who will provide me Annuity or Pension?

The subscribers would be able to purchase the annuities directly from the impaneled Annuity Service Providers as per their choice of annuity that is available in the market/with the ASPs.

Can I withdraw some part of money or completely before maturity or superannuation?

Yes. A subscriber on completion of 3 years in NPS is permitted to partially withdraw from his/her account subject to a maximum of 25% of the contributions made by the subscriber for the following purposes only:-

1. For higher education of his/her children,
2. For marriage of his/her children,

iii. For purchase or construction of a residential house or flat

1. For the treatment of specified illnesses.
2. Disability of more than 75%
3. Skill Development course

Partial withdrawal from NPS is permitted up to a maximum of 3 (three) times during the entire tenure.

Can I appoint nominees for the NPS Tier I Account?

Yes, you need to appoint a nominee at the time of opening of an NPS account in the prescribed section of the account opening form. You can appoint up to 3 nominees for NPS Tier I account. In such a case, the percentage of your saving that you wish to allocate to each nominee should be specified and the share percentage across all nominees should collectively aggregate to 100%. Nomination can be changed any time during the accumulation.

Will I get a simple pension or there are options?

Pension Choices under the National Pension Scheme

1. Pension (Annuity) payable for life at a uniform rate to the annuitant only.
2. Pension (Annuity) payable for 5,10,15 or 20 years certain and thereafter as long as you are alive.
3. Pension (Annuity) for life with return of purchase price on death of the annuitant (Policyholder).
4. Pension (Annuity) payable for life increasing at a simple rate of 3% p.a.
5. Pension (Annuity) for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
6. Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
7. Pension (Annuity) for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant and the return of the purchase price to the nominee.

What is the Expense Charged by these Fund Managers & NPS Trust?

NPS is the lowest cost product as none of the FMs can charge more than 0.10%. Other costs associated with NPS are:

How can I invest in NPS?

You can invest in 3 ways. Each has its own merit & demerit.

• Point of Presence: Many Banks (ICICI, HDFC, PNB, IOB, Etc) & Registrars (Karvy, Religare, etc) have been allowed to act as POP for NPS. Not all branches are aware of or keep forms of NPS. Better call the branch and then go.
• Online: You can invest in NPS through NSDL Website.
• Through a PFRDA Retirement Advisor: he is the one authorized by the PFRDA to advise & provides service to open NPS account. Search for one on PFRDA website here.

I have more questions?

Go ahead with your questions in the below comments section. TW2 Founder Madhupam Krishna is a PFRDA approved Retirement Advisor. You may drop an email at madhupam@thewealthwisher.com and I will help you solve your queries.