The Pension Fund Regulatory and Development Authority (PFRDA) has introduced new withdrawal rules for the National Pension System (NPS), which will come into effect on February 1, 2024. Under these new provisions, NPS subscribers will be able to withdraw a maximum of 25 per cent of their individual pension account contributions, excluding the employer’s contribution. This move aims to provide more flexibility and accessibility for NPS subscribers to access their funds for specific purposes.
According to the updated rules, partial withdrawals will be allowed three times during the subscription period, and subscribers must have been part of the scheme for a minimum of three years to qualify. The eligible purposes for partial withdrawals include educational expenses for the subscriber’s children, marriage, house construction, medical emergencies, skill development, or establishing a venture. Specific circumstances, such as higher education expenses, marriage, residential property purchase or construction, medical expenses for specified illnesses, disability-related expenses, skill development, and establishment of a venture, qualify for partial withdrawals.
Key conditions for partial withdrawals include a minimum three-year NPS membership, a withdrawal limit of 25 per cent of the subscriber’s total contributions, and only incremental contributions for subsequent withdrawals. To apply for withdrawal, subscribers must submit their request to the Central Recordkeeping Agency (CRA) through the government nodal office or point of presence. The request should include a self-declaration explaining the purpose of withdrawal. In case of illness, a family member can submit the withdrawal request on behalf of the subscriber. Upon receiving the request, the Point of Presence or Government Nodal Office will verify and process the withdrawal.
The new NPS withdrawal rules have been met with mixed reactions. While some people welcome the increased flexibility and access to their funds for specific purposes, others are concerned about the potential impact on the long-term sustainability of the NPS. Critics argue that allowing more withdrawals could deplete the retirement savings of individuals, especially if the funds are not used for genuine and essential purposes. However, supporters believe that the new rules provide much-needed financial flexibility and security for subscribers facing unforeseen circumstances. Overall, the introduction of the new NPS withdrawal rules has sparked a debate on the balance between accessibility and the long-term financial health of the pension system.