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NPS withdrawal rules

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NPS withdrawal rules
October 30, 2018
 

NPS or National Pension Scheme is a government-backed pension scheme that was launched in 2004 for employees in government sector. It was later broadened to include employees of all sectors, including unorganized sector in 2009. Started under the Pension Fund Regulatory and Development Authority (PFRDA) to take the citizens under the affordable social security scheme, NPS is a low cost and tax efficient scheme and both the employees as well as employers contribute to it. The minimum contribution by an employee towards NPS is Rs. 6000, with no capping on the upper level. NPS offers flexibility in selection of a Fund Manager, who will manage the benefactor's funds. Also, the option to switch fund manager from one to another is available. Being a market-linked investment scheme, NPS provides the option to the investor to choose stocks, government bonds and, other securities as they please. eNPS an online platform also introduced by NPS Trust for enabling individuals to open and manage pension account.

Stability of retirement income and saving on tax makes it an attractive investment opportunity. Recently, the rules for NPS withdrawal were updated and these rules are listed as under:

Account holders can make a withdrawal from NPS after 3 years and should not exceed 25% of the contributions done by the account holder.

Under NPS, tier-I and II accounts are opened and no withdrawal from tier I is allowed until the account holder crosses the age limit of 60 years. However, in specified cases, partial withdrawal can be made.

Tier II NPS account is just like a savings account where the policy holder can deposit savings and can withdraw money.

The withdrawal of 25% can be done only from the employee's own contribution and not from the employer's contribution.

As per PFRDA guidelines, the account holder can withdraw partially for children's (including lawfully adopted children) higher education.

Partial withdrawal for the marriage expenses of children is also allowed.

The invested amount can also be withdrawn for construction or purchase of flat or house. However, the constructed or purchased residential property must be in the account holder's name or in the name of legally wedded spouse.

Withdrawal for the treatment of a specific disease or condition can be done and it covers hospitalization also. The persons for whom this withdrawal is allowed include the account holder, the spouse, children and dependent parents. Treatment for diseases like cancer, heart attack, stroke, paralysis, kidney failure etc. is covered by this regulation.

If the account holder is suffering from the diseases listed in point no. 8, the request/application for withdrawal can be made by the family members of the account holder.

For any withdrawal of funds in NPS, the application must be sent to National Pension Scheme trust through the nodal agency. A maximum of three withdrawals during the duration of subscription is allowed.

Similar to NPS there is another product PPF. It is completely backed by government that helps generate guaranteed returns along with tax savings. You can take an informed decision by understanding the comparison of NPS vs PPF.

HDFC Life offers various retirement plans to ensure your financial health after retirement and for guaranteed regular income so that you continue to live a comfortable life, even in the absence of a monthly salary. For details, click on the mentioned link: https://www.hdfclife.com/retirement-and-pension-plans

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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