How NPS repays?

The Government of India has introduced New Pension System (NPS) in January 2004 which is mandatory for employees joining services w.e.f. January 2004.

NPS has been extended to all citizens as a voluntary st pension w.e.f. 1 May 2009.

However two different types of mechanisms have been introduced by PFRDA as far as pay out from New Pension Scheme

Pay out in NPS for Central Govt Employees :

At the time of retirement or at the age of 60 and when accumulation period ends an employee has the option to invest at least 40% accumulated wealth in purchasing an annuity plan from a life insurance company approved by IRDA and to take maximum 60% of as lump sum withdrawal.

Pay out in NPS for all citizens :

Voluntary NPS allows an investor, withdraw before age 60 at any point of time but has to invest at least 80% of accumulated wealth to purchase an annuity from a life insurance company approved by IRDA and 20% as lump sum withdrawal.

However, under voluntary NPS , when an investor exit at the age 60 from the system has to invest at least 40% of wealth in annuity and the remaining amount can be withdrawn as lump or as a phased withdrawal between the age 60 and 70 This Phased withdrawal is an additional facilities in voluntary NPS.