NATIONAL PENSION SYSTEM

Subject: Economy

Context:

Concept:

Started as the New Pension Scheme for government employees in 2004 under a new regulator called the Pension Fund Regulatory and Development Authority (PFRDA), the National Pension System (NPS) has been open for individuals from all walks of life to participate.
The law regulating the NPS allows members to withdraw just 60% of their accumulated savings at the time of retirement. With the remaining 40%, it is mandatory to buy an annuity product that provides a fixed monthly income to retirees till their demise.
Members who accumulate up to ₹2 lakh in their NPS account at the time of retirement are exempted from the mandatory annuitization, and can withdraw the full amount.

What overhaul is the PFRDA planning?

Last week, PFRDA chairman said this limit will soon be revised to ₹5 lakh.
Separately, the regulator has decided that the annuity purchase stipulation for 40% of members’ retirement corpus should be dropped altogether. Legislative amendments to this effect are being worked out for Parliament’s approval.