At the time of registering with the NPS scheme, investors have to choose a fund manager and also exercise their option regarding their choice of asset class.
The National Pension Scheme (NPS) is a social security initiative by the central government and is open to employees in the public, private and even unorganized sectors. NPS encourages people to invest in a pension account at regular intervals during the course of their employment. After retirement, customers can withdraw a certain part of the corpus. NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
The pension fund regulator said in a statement that the number of subscribers in various pension schemes increased by 24 percent to 4.63 crore at the end of September 2021. At the time of registering with the NPS scheme, investors have to choose a fund manager and also exercise their option regarding their choice of asset class. There have been some changes in the rules of this scheme. Let’s know what has changed the rules….
Entry age increased
Pension Fund Regulator PFRDA has changed the entry age limit for National Pension Scheme. Under the new rule, one can enroll in the pension scheme till the age of 70 years. Earlier this limit was up to 65 years. Now, any person between 18-70 years will be able to subscribe to NPS. With the new entry age rule, customers who have opted out of NPS can also re-open their accounts.
Change in age of exit
Now there is a lock-in period of 3 years for new customers joining NPS after 65 years. The maximum age to exit is 75. Subscribers can withdraw 60 per cent of the total amount as a tax-free lump sum and will have to use the remaining 40 per cent to buy annuity. However, if the corpus is less than Rs 5 lakh, the customer can withdraw the entire amount.
Changes in asset allocation rules
Making NPS more attractive to subscribers who join it after the age of 65 years, PFRDA has allowed them to allocate funds up to 50 per cent in equities. If the defaulter decides to invest under Auto Choice, he will be allowed to invest only up to 15 per cent in shares.
Premature exit
Exiting NPS before 3 years will be treated as premature exit. In this, the subscriber will have to use at least 80 percent of the fund for ‘annuity’. If the subscriber wants to withdraw from NPS prematurely and his corpus is less than Rs 2.5 lakh, he can withdraw the entire amount added in one go.
Postponement of NPS account till 75 years
NPS account holders have been allowed to defer their account till the age of 75
Extension of online exit process for government sector
PFRDA has recently expanded the online and paperless exit process for government sector customers. Earlier, only the non-government sector customers got the benefit of end-to-end facility of online exit process. As part of enhanced due diligence in the interest of the subscribers, online exit will be integrated with instant bank account verification as per extant guidelines.
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