The Pension Fund Regulatory and Development Authority (PFRDA) proposed to provide the option of phased withdrawal of the lump sum through Systematic Lump Sum Withdrawal (SLW) facility.
According to the proposed rule, subscribers can withdraw up to 60% of their pension corpus through the SLW on a monthly, quarterly, half-yearly, or annual basis for a period of up to 75 years of age, as chosen at the time of their usual retirement. PFRDA made this announcement via a circular on October 27, 2023.
What is the proposed rule
According to PFRDA circular, “In accordance with Regulation 3 and Regulation 4 of PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015 and amendments therein, it is proposed to provide the option of phased withdrawal of the lump sum through Systematic Lump Sum Withdrawal (SLW) facility. The subscribers are allowed to withdraw up to 60% of their pension corpus, through the SLW on a periodical basis viz. monthly, quarterly, half-yearly or annually for a period till 75 years of age as per the choice at the time of their normal exit.”
What is the existing rule
According to the PFRDA circular issued on October 27, 2023, “As per the existing exit guidelines, the subscribers post 60 years/superannuation can defer availing of annuity & withdrawing the lump sum on any combination till 75 years of age. The lump sum amount can be withdrawn in a single tranche or it can be withdrawn on an annual basis. If withdrawn annually, the Subscriber has to initiate the withdrawal request each time and authorized.”
What is Systematic Lumpsum Withdrawal (SLW)?
Protean CRA has introduced the Systematic Lumpsum Withdrawal (SLW) facility for NPS Subscribers. With SLW facility, on exit, on account of Superannuation, lumpsum corpus can be withdrawn in a phased manner. Subscriber has an option to withdraw desired amount systematically at regular periodic intervals. This is similar to Systematic Withdrawal Plan under Mutual Funds.Benefits of SLW
1. Generates regular cash flows
2. Along with Annuity, the regular cash flows through SLW will lead to increase in the monthly income of the Subscriber.
3. Tool for Wealth creation. Returns shall continue to accumulate on the remainder Corpus.
4. Tax Benefits can be availed on all SLW Withdrawals.
Will there be an option to choose between Systematic Lumpsum Withdrawal and annuity purchase rule?
NPS subscribers will have the option to choose a systematic lump sum withdrawal option for the 60 per cent lump sum component. The remaining 40 per cent will be used to purchase an annuity. The annuity purchase rule will remain as it is, the PFRDA chairman had told ET Wealth online earlier.