Source: IE
Subject: Economy
Context: The Pension Fund Regulatory and Development Authority has notified the NPS Exit & Withdrawal (Amendment) Regulations, 2025, increasing lump sum withdrawal to 80% for non-government subscribers and allowing exit deferment up to 85 years, significantly enhancing flexibility and liquidity in NPS.
About PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025:
What it is?
- A set of amended regulations governing withdrawal, exit, deferment, annuity requirements, loans, and death-related settlements under the National Pension System (NPS).
Key features:
- Higher lump sum withdrawal:
- Non-government subscribers: Up to 80% lump sum, mandatory annuity reduced to 20% (earlier 40%).
- Government subscribers: Existing 60:40 (lump sum : annuity) continues.
- Enhanced exit deferment:
- Subscribers can defer lump sum withdrawal or annuity purchase up to age 85 (earlier 75).
- Corpus-based flexibility (non-govt):
- Accumulated Pension Wealth ≤ ₹8 lakh: 100% lump sum allowed.
- ₹8–12 lakh: Options of ₹6 lakh lump sum or 80:20 split.
- ₹12 lakh: Up to 80% lump sum, 20% annuity mandatory.
- Voluntary exit norms:
- Accumulated Pension Wealth ≤ ₹5 lakh: 100% lump sum permitted; otherwise 20:80 applies.
- Death cases:
- 100% lump sum or 100% annuity allowed for non-govt subscribers irrespective of corpus.
- Loans against NPS:
- Permits loans from regulated institutions up to 25% of own contributions.
- Partial withdrawals clarified:
- House construction allowed as one-time withdrawal.
- Medical withdrawals broadened to any medical treatment/hospitalisation of self/family.
- No fixed 5-year lock-in:
- Exits governed by eligibility and annuity rules, improving liquidity.
- Missing subscriber provision:
- 20% interim relief to nominees; balance settled after legal presumption of death (as per Bharatiya Sakshya Adhiniyam, 2023).
About National Pension System (NPS):
- What it is?
- A market-linked, defined contribution pension scheme aimed at providing retirement income through systematic savings.
- Launched in: 2004 (initially for government employees; later expanded)
- Regulatory authority:
-
- Regulated and administered by Pension Fund Regulatory and Development Authority under the PFRDA Act, 2013.
- Key features:
-
- Voluntary, portable, flexible retirement savings scheme.
- Eligible subscribers:
- Central & State Government employees (as opted), corporate employees, and all citizens (18–70 years) including NRIs.
- Account structure:
- Tier I: Mandatory retirement account (restricted withdrawals).
- Tier II: Voluntary savings account (free withdrawals; requires active Tier I).
- Tax efficiency:
- Contributions eligible for tax benefits; Seva Nidhi / withdrawals subject to prevailing tax rules.
