New Pension System: Will withdrawal issues be addressed?


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.



Sanjay Vishwakarma

10 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
[email protected]


2 years ago

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


4 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?



In Reply to Shalini 4 years ago

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.


In Reply to Veeraf 4 years ago

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!!


In Reply to Shalini 4 years ago

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.

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


5 years ago

The functions of NPS and other retiral products are pretty much the same. Instead of lobbying for making this similar to LIPs, we should focus on correcting the ills.

My suggestions would be, merge Super Annuation, Employee Provident Fund, GPF, PPF etc., to NPS. This would not only make it popular, get so much of subscriber base but also provide such a huge corpus for the portfolio managers to make better investment choices.

POPs are quite bad, I have a NPS card through ICICI and they have no knowledge about NPS and the respect you get is below par.


Reyaz Shaik

In Reply to Chennaivaasi 2 years ago

It is funny that you are worried about the respect and the information you get in some POP even when the existing NPS has lots of flaws and irregularities in their methods. Exempting the people who work in Govt, I would like to congratulate all others who did not opt for this scheme as they are at ease to find their own investment as they see fit rather than getting money locked in this kind of weird system in which Crores of rupees have been locked without the consented will of the subscriber which sorts of make it immoral and unethical if not illegal.
I strongly suggest people not to think about NPS. I have more than 2lakh rupees stuck in NPS when I resigned from Govt early in my career. Now, I do not know in what kind of businesses they are using my money and who they are harming (monetory loss and loss of lives) with the Interest based businesses.

R Nandy

In Reply to Chennaivaasi 5 years ago

I think there should also be a regulation so that employees in the private sector are given the option of contributing either in EPF or NPS. Now contribution in EPF is more or less compulsory. Secondly,there should also be no IT deductions if someone transfers(through withdrawal ) from EPF to NPS.
Regarding ICICI, most of the staff are very young and unfortunately don't know much about banking other than routine transactions.I have found them courteous compared to PSU bank staff but are ignorant even of their own bank rules.


5 years ago

They do not have a plan to activate the NPS card in case the first checque has been delayed - not all POS knows the eact rules for the functioning.

Madhusudan Thakkar

5 years ago

NPS will never succeed without AGENTS.These type of schemes need to be properly explained to people.Like life insurance this is also SOLD.The success of HEALTH INSURANCE in recent times is ONLY because of Agents.All Life Insurance agents should be allowed to sell this scheme and



In Reply to Madhusudan Thakkar 3 years ago

Then NPS should also have Direct and Regular plans like Mutual Funds where people going for direct route will keep enjoying the low 0.25% expense ratio while the Regular plan can have expense ratio as high as 1% to cover for Agent commission.

I believe this is one of the best distribution models for any scheme where it leaves both the investor and agent happy and sources of ambiguity are minimized.

DLF may approach Compat next week against CCI order

The company is considering challenging the order on the basis of the CCI's classification of DLF as a 'dominant player' in the Gurgaon market, as well the competition watchdog's jurisdiction over the matter

New Delhi: Realty giant DLF may approach the Competition Appellate Tribunal (Compat) next week to challenge a Competition Commission of India (CCI) order to pay a Rs630 crore penalty for abuse of dominant market position, reports PTI.

The company is considering challenging the order on the basis of the CCI's classification of DLF as a 'dominant player' in the relevant market, as well the competition watchdog's jurisdiction over the matter.

In its order dated 16th August, the CCI found the company guilty of abusing its dominant market position and asked it to pay a penalty of Rs630 crore. After the CCI order, DLF had said that it would examine all options, including an appeal before Compat, to contest the penalty.

Sources said DLF is likely to challenge the order next week before Compat, wherein it would also question why the CCI did not serve a show cause notice before passing the order, as was the case with another recent order passed against the National Stock Exchange (NSE).

DLF was found to be market leader based on a third-party analysis of the overall country-wide turnover of companies present in the Gurgaon real estate market.

However, DLF is contending that market position should be determined on the basis of the number of housing units sold in the entire NCR region, after taking into account secondary market housing sales and not just the primary market or units sold directly by developers, sources said.

"There is enough competition in the Gurgaon market in each category of the residential segment. There is no entry ban for any developer and there is no cartelisation," a source said, while asserting that the company did not violate the competition regulations.

To buttress its case of not being a dominant player, DLF is also arguing that it was given only 6% of the total land development licences issued by the government in the Gurgaon region between 2002 and 2009, they added.

DLF had engaged leading property consultant Jones Lang LaSalle to conduct an analysis on its and other players' market share in the NCR region, wherein the company was found to have a market share of only 2.13% in 2007, and then 3.6% in 2008.

DLF's market share rose to 4.8% in 2009, but fell to just 0.4% in 2010-when it was not even among the top-50 developers of NCR region, the report said.

The CCI had passed the order against DLF on a complaint filed by Belaire Owners' Association, a group of buyers at the company's Belaire housing project in Gurgaon.

In May last year, the association complained to CCI that DLF had promised to complete the residential project in 2009, but the buyers were yet to get possession.

Besides, it alleged that DLF "imposed highly arbitrary, unfair and unreasonable conditions on the apartment allottees of the housing complex, which has serious adverse effects and ramifications on the rights of the allottees".

It also alleged that DLF had announced the project before getting necessary conditions and clearances.

However, the company claims to have already compensated the buyers for the delay in form of a higher penalty clause and provide certain additional amenities for the homes without any extra charge.

On the complaints related to the company increasing the number of floors to 29 from 19 originally proposed, the company is contending that the application forms provided for such changes in the project.

Days after its penalty order in the Belaire matter, CCI had also passed a 'cease and desist' order against DLF for the company's Park Palace housing project in Gurgaon.

In the second order, the company was asked to stop formulating and imposing unfair conditions in its agreements with home buyers, but the CCI did not impose any fine in this case.

After this order also, DLF had said it would be "filing an appeal with the Competition Appellate Tribunal shortly, as the company continues to believe that it has a strong case".


Nomura expects RBI to hike rates further at mid-September policy review

With inflation continuing to remain high, the apex bank is likely to continue with tightening measures despite weakening domestic and global demand that has hurt manufacturing activity

Notwithstanding the economic slowdown, the Reserve Bank of India (RBI) is likely to hike the repo rate by a further 25 basis points as inflation continues to remain elevated, according to Nomura Financial Advisory and Securities (India). However, the central bank may keep policy rates on hold thereafter, it said in a report published this week.

A dip in the Purchasing Managers Index to 52.6 in August this year, from 53.6 in the previous month, reflected lower domestic and new export orders. But core infrastructure sector output growth rose to 7.8% y-o-y in July, from 5.2% in June, indicating a slight pick-up in infrastructure investment activity.

With interest rates and inflation likely to remain up for some months more, Nomura suggested that consumption growth could moderate further, even as export orders are on the decline due to weakening global demand.

But it's not all bad news. There has been good rainfall this monsoon season which could have a positive effect on the festive season underway and this could lead to an improvement in domestic demand from the rural sector that could give an impetus to the economy as a whole.

Among the major sectors, cement, steel and electricity recorded double-digit growth, but natural gas and fertilisers continued to see negative year-on-year growth. The pickup in infrastructure sector output growth suggests that investment activity is improving and this should help ease supply-side inflation pressures over time.

According to K R Choksey, challenging macro-economic factors (interest rate hikes and rising fuel prices) continued to impact automobile manufacturing volumes. The major impact was seen in passenger car companies which have reported a y-o-y decline in volumes.

Commodity prices have started to show some stability but high cost of ownership is negatively affecting the demand sentiment, especially in the passenger car segment.

Overall, data released over the past few days indicates that the economy is slowing further, as both domestic and external demand is weakening, even though investment seems to be picking up.

The export orders component of the manufacturing PMI fell further to 45 in August 2011, from an already low level of 49.2 in July 2011. The trade deficit widened to $11.1bn in July from $7.7bn in June, as import growth accelerated to 51.5% y-o-y in July from 42.2%. Non-oil imports also continued to rise in July 2011, which further suggests strong momentum in infrastructure investment activity.

On the price front, CPI (Consumer Price Index) inflation eased marginally to 8.4% y-o-y in July 2011 from 8.6% in June 2011, above Nomura (brokerage house) expectations of 7.7%. Meanwhile, the input price index of the manufacturing PMI rose to 65.6 in August from 64.3 in July 2011, suggesting that input cost pressures remain strong, although the output price index eased slightly to 55.6 from 56.0. These price-related PMI prints suggest that core WPI (wholesale price index) inflation is likely to stay elevated.

The slowdown is not limited to manufacturing, but it has also affected real GDP growth. The moderation in GDP growth has been largely due to weaker final consumption, resulting from elevated prices, high interest rates and lower government spending. The government is likely to reduce spending on subsidies to meet its fiscal deficit target.

Real GDP growth eased to 7.7% y-o-y in the second quarter of 2011 from 7.8% in the first quarter of the year 2011, largely in line with its expectations, Nomura said. It is expected that growth will remain below 8% in the next few quarters because of high interest rates and elevated prices, leaving the GDP growth forecast for the financial year 2011-12 unchanged at 7.7% y-o-y.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)