No annuity rider for NPS exits upto 5 Lakhs

No annuity rider for NPS exits upto 5 Lakhs

Subject : National Organisations /Governance

Context : Pension regulator PFRDA has allowed National Pension System (NPS) subscribers to withdraw the full contributions at one go without purchasing an annuity if the pension corpus is equal to or less than Rs 5 lakh.

Concept :

• The PFRDA made these changes under the PFRDA Amendment Act published in the Gazette of India.
• At present, beneficiaries can withdraw up to Rs 2 lakh from their NPS account. Beyond this limit, the pensioners can withdraw 60% of the contributions.
• At least 40% of the contributions has to be mandatorily parked in government-approved annuities, according to the current rule.

Pension Fund and Regulatory Development Authority (PFRDA)

• PFRDA is a statutory body established by an Act of Parliament to promote old age income security by establishing, developing and regulating pension funds, to protect the interests of subscribers to schemes of pension funds and for matters connected there with or incidental thereto.
• PFRDA performs the function of appointing various intermediate agencies like Pension Fund Managers, Central Record Keeping Agency (CRA) etc.
• It develops, promotes and regulates the pension industry under National Pension System and also administers the Atal Pension Yojana.

National Pension System

• The Central Government has introduced the National Pension System (NPS) with effect from January 01, 2004 (except for armed forces).
• NPS is being implemented and regulated by Pension Fund Regulatory and Development Authority in the country.
• National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS.
• NPS is structured into two tiers:
• Tier-I account: This is the non-withdrawable permanent retirement account into which the accumulations are deposited and invested as per the option of the subscriber.
• Tier-II account: This is a voluntary withdrawable account which is allowed only when there is an active Tier I account in the name of the subscriber. The withdrawals are permitted from this account as per the needs of the subscriber as and when claimed.
• NPS was made available to all Citizens of India from May 01, 2009. Any individual citizen of India (both resident and Non-resident) in the age group of 18-65 years (as on the date of submission of NPS application) can join NPS.
• However, OCI (Overseas Citizens of India) and PIO (Person of Indian Origin) card holders and Hindu Undivided Family (HUFs) are not eligible for opening of NPS account.