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Moneylife » Personal Finance » Retirement » New Pension System: Will withdrawal issues be addressed?

New Pension System: Will withdrawal issues be addressed?

Moneylife Digital Team | 08/09/2011 06:20 PM | 


Money invested under NPS is locked in till the age of 60 under the NPS Tier-I account. Will this change now? The Standing Committee suggests some flexibility, but there is a positive and a negative side to it

The New Pension System (NPS) has not worked very well. While for central government employees, contribution to the scheme is mandatory, the voluntary part of the NPS has not taken off at all. One of the main deterrents is that Tier-I of the NPS does not offer a facility to subscribers to withdraw their funds till they reach 60. Also, the NPS does offer a voluntary Tier-II account where withdrawals can be made.

The Tier-I account is compulsory for government employees and the bulk of the money is kept here, but it is almost impossible for them to withdraw the money in case of emergency expenses for an unforeseen event. This is what deters non-government subscribers from investing in the NPS Tier-I account, where savings would be locked up for about 25-40 years, till retirement.

This issue was taken up by the Parliamentary Standing Committee on Finance which reviewed the Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011. In its report presented to the Lok Sabha last week, it mentioned that NPS is aimed at providing income security in old age and not to meet periodic or occasional fund requirements during the working life of a person. However, such emergencies cannot be ignored either.

Therefore, the Committee has suggested that in the case of Tier I account, an element of flexibility should be provided to enable subscribers to withdraw money to meet unforeseen, urgent expenses, like a critical illness. For instance, a subscriber can be allowed to take one repayable advance from the accounts after completion of 15 years of service, and permanently withdraw up to 50% of the contribution after completion of a minimum 25 years of service to meet exigencies that should be appropriately listed in the regulations.

This will have two implications. A withdrawal clause would immediately make NPS more attractive for non-government employees. But would it also introduce an element of arbitrariness? India is known for red-tape and corruption. And this could lead to subscribers being forced to run around to secure permission to withdraw from the fund, causing frustration that may compel them to resort to other means to get their claims passed.

The Committee should have suggested a minimum percentage of withdrawal from the fund after a particular period, as is the case for ULIPs, which allow partial withdrawals after 3-5 years. This would have been easier to understand and non-discretionary.

Currently, one can invest through a Tier-II account, from which withdrawals are permitted. But the procedure for this is cumbersome.(Read: The New Pension System needs a comprehensive online facility) The network of Points of Presence (POP) agencies, where a subscriber can make a request for withdrawal, is not very widespread. There is no online facility and the subscriber would have to travel long distances to visit a POP, causing a lot of inconvenience.

The Employees Provident Fund (EPF) unlike the NPS, allows withdrawals in case a member requires to buy a house, repay a loan, fund children's marriage, or pay for medical expenses.

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Sanjay Vishwakarma

Sanjay Vishwakarma 2 months ago

I am central government employee and I have 6 lacs rupees in nps fund and I am completed 6.5 yrs of service I want to withdraw partial amount from nps Tier1,How much amount I can withdraw and within how many days.

Reply me

Name -Sanjay Vishwakarma
Mobile no-9930708646

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manish 1 year ago

sir i need loan from ndcps for purchase home please guide me

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Sir, I am Central Govt.. employee of appt.2006 and comes in NPS. I need the some portion of my subscription amount. what is the procedure for drawing of amount from my NPS account. please.
Thanking you Sir,

CELL: 09666457058

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Shalini 3 years ago

I worked 2 years for a public sector bank and have resigned last month.
On checking my nps contribution and its withdrawal procedure I found this
Resignation: On resignation of the subscriber, 80% of the corpus has to be annuitized and the subscriber can withdraw remaining wealth!

Could anyone explain me this?

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Veeraf 3 years ago in reply to Shalini

lets say amount in NPS is 1 lac; you will have to deposit 80K into annuity and rest 20K you can get it from NPS.

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Shalini 3 years ago in reply to Veeraf

Thank you for your reply Mr. veeraf
I have a few more doubts
What nps site says is
What is Annuity?

Annuity in the context of NPS refers to the monthly sum that will be received by the subscriber from the Annuity Service Provider after he attains the age of 60.

does that mean i will receive my 80k after attaining age of 60?? in other words my money is blocked!!

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Veeraf 3 years ago in reply to Shalini

To some extend your assumption is correct - you will invest 80K - in an annuity scheme; the money will grow there and you will get it at your retirement age. REtirement age in central governement is 60 years; but in private sector you can retire at 40 years so when you take an Annuity Service then specify ur retirement age as 40 y and you will start to get pension from the age of 40 years. I hope my point is clear. Also you can confirm it with and Annuity Service provider's CSR.

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Shalini 3 years ago in reply to Veeraf

Thanks a tonn Mr.Veeraf!

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Reyaz Shaik

Reyaz Shaik 1 year ago in reply to Shalini

Yes. You are correct. 80% gets locked in Govt lockers. It will come out only when the subscriber dies(will be given to nominees) or when the subscriber becomes old. Govt puts the reason for this policy as a means to provide support at old age.
I think they will given money when people forget about it. I wonder if we should have some kind of a fundamental right (to manage affairs). It is a pity that such policies exist and they mandate it to us.

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mohal lal

mohal lal 4 years ago

sir i want to withdraw my money from NPA account.can i withdraw money after resign in oct 2012
i am a indian railway employ

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