NPS Now More Flexible: Loan Facility, Higher Age Limit, and Easier Withdrawals

New Delhi: The Pension Fund Regulatory and Development Authority (PFRDA) has introduced significant changes to the National Pension System (NPS) to make it more attractive and flexible for subscribers. The maximum age for staying invested in NPS has been increased from 75 to 85 years, and a loan facility against NPS accounts has also been introduced. Here’s a detailed look at the new rules.

Stay Invested Until 85
Subscribers can now continue in the NPS scheme up to the age of 85, allowing them to grow their retirement corpus for a longer period.

Lower Annuity Requirement
Previously, retirees with a corpus exceeding ₹5 lakh had to use at least 40% of their funds to buy an annuity. The new rules reduce this limit to just 20%, giving subscribers more flexibility and immediate cash access.

Full Withdrawal Option for Smaller Funds
If the total corpus is ₹8 lakh or less, subscribers can now withdraw the entire amount in one go. Government employees may still choose to invest 40% in an annuity, while private-sector employees need to allocate a minimum of 20% to annuity if they do not withdraw the full amount.

Systematic Unit Redemption (SUR)
A new withdrawal option, Systematic Unit Redemption (SUR), similar to a Mutual Fund Systematic Withdrawal Plan (SWP), has been introduced. This applies to subscribers with a corpus between ₹8 lakh and ₹12 lakh. They can withdraw up to ₹6 lakh in a lump sum, while the remaining balance can be withdrawn in installments over a minimum period of six years.

Options for 8–12 Lakh Corpus

• Government employees:

1. Withdraw ₹6 lakh upfront and take the rest through SUR installments over six years.
2. Withdraw ₹6 lakh and use the remaining for annuity purchase.
3. Withdraw 60% tax-free and invest at least 40% in an annuity.

• Private employees:
  They can withdraw 80% in cash and invest only 20% in annuity, following the first two options.

More Frequent Pre-Retirement Withdrawals
Subscribers can now withdraw money up to four times before reaching 60 years or retirement, up from three times earlier, with a minimum gap of four years between withdrawals.

Post-60 Withdrawal Rules
After 60 years or retirement, subscribers can continue withdrawals, with a minimum three-year gap between two withdrawals. Maximum 25% of the subscriber’s own contributions can be withdrawn under this option.

Special Provisions

• Non-residents: Subscribers who renounce Indian citizenship can withdraw their entire corpus in one go.
• Missing or deceased subscriber: Nominees or legal heirs will receive 20% of the total corpus immediately as interim relief, with the remaining 80% invested and payable upon legal declaration of death.

Account Identity Changes
The term “Permanent Retirement Account” has been replaced with “Individual Pension Account.”

Loan Facility Introduced
Subscribers can now pledge their NPS account to avail of loans from banks, making the scheme more liquid and user-friendly.