National Pension System (NPS): Withdrawal Rules Explained

Tier-1 account allows the subscriber to make a withdrawal under certain conditions

Popular long-term investment plan for retirement – the National Pension System (NPS) allows premature withdrawal or even exit under certain conditions. While, a Tier-1 account allows the subscriber to make a premature withdrawal or even exit under certain conditions, a Tier II account offers greater flexibility in terms of withdrawal, as it enables the subscriber to withdraw funds any time without any restrictions.

Under the NPS, an exit is defined as closure of individual pension account of the subscriber. NPS also allows partial withdrawal from the mandatory Tier-I account under certain conditions, according to the National Securities Depository Limited (NSDL) – the central record keeping agency for the National Pension System. Here’s all you need to know about the exit/withdrawal rules of the NPS:

Exit/withdrawal rule of NPS:

  • For withdrawal before attaining 60 years of age, at least 80 per cent of the accumulated pension wealth of the subscriber has to be utilized for purchase of an annuity, providing the monthly pension to the subscriber and the balance is paid as a lump sum to the subscriber, according to NSDL.
  • If the total accumulated corpus in the NPS account is less than Rs 2 lakh, the subscriber can opt for a 100 per cent lump sum withdrawal, upon attaining 60 years of age. In other cases, at least 40 per cent of the accumulated corpus needs to be utilized for the purchase of an annuity scheme, providing a monthly pension to the subscriber. In this case, the remainder is paid as lump sum to the subscriber.
  • In case of death of the subscriber, the nominee gets the option to receive 100 per cent of the NPS corpus in lump sum. The nominee can also choose to continue with the NPS account, by subscribing to NPS individually after following due KYC (know your customer) procedure, according to NSDL website.

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