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NPS – National Pension System FAQ on Exit and Withdrawal from NPS

NPS for Central Government Employees – Latest Frequently Asked Questions compilation by NPS Trust on Exit and Withdrawal from NPS

New Pension Scheme (NPS) – Frequently Asked Questions

Partial Withdrawal From NPS – Guidelines For NPS Subscribers And Nodal Office

Frequently Asked Question (FAQs) applicable for Central Government Sector
(CG) and Central Autonomous Bodies (CABs)

Date: 14.12.2018

DISCLAIMER: For detailed provisions and regulations, please refer PFRDA (Exit and Withdrawal under National Pension System) Regulations 2015 and subsequent amendments under it.

Question

 

Answer
1. What is an exit?

 

An exit is defined as closure of individual pension account of the subscriber under National Pension System.
2. When can I exit from NPS? A subscriber can exit from NPS at any point but complete withdrawal is subject to certain conditions.
3. Whether pre-mature exit and voluntary retirement are same or not?

 

Yes, under NPS both are same.  Pre-mature exit is defined under NPS as exit before the superannuation/retirement age. Under NPS, Voluntary retirement is treated as pre-mature exit.

However, eligibility & terms of Voluntary retirement are defined/ governed by service rules and regulations of the respective organization.

4. What shall be my benefits, if I opt for pre-mature exit from NPS?

 

a).Pre-mature exit or Voluntary  retirement-

Minimum Annuitisation- 80% of accumulated wealth.

Maximum Lump sum Withdrawal- 20% of accumulated wealth.

If the accumulated pension wealth of the subscriber is equal to or less than one lakh rupees or a limit to be specified by the Authority, such subscriber shall have the option to withdraw the entire accumulated pension wealth without purchasing any annuity.

b).   In Case of disability/incapacitation   of subscriber

Minimum Annuitisation- 40% of accumulated wealth.

Maximum   Lump   sum   Withdrawal –  60%  of Accumulated wealth.

Authority has also notified regulations under PFRDA(exit and withdrawal under  NPS) (third amendment) 2018, for facilitating normal exit from NPS to the subscribers with disability and incapacitation during the accumulation  phase, if employer certifies that the subscriber has been discharged from the services of the concerned office on account of invalidation or disability.

5. What shall be my benefits, if I retire / superannuate from NPS? Retirement I Superannuation –

Minimum Annuitisation-   40% of accumulated wealth.

Maximum Lump sum Withdrawal- 60% of accumulated wealth.

The Subscriber may choose to purchase an annuity for an amount greater than 40 percent also.

If the accumulated pension wealth of the subscriber is equal to or less than two lakh rupees, or a limit to be specified by the Authority, such subscriber shall have the option to withdraw the entire accumulated pension wealth without purchasing any annuity.

6.  What are the provisions to settle the cases in the unfortunate death of the NPS subscriber during the service?

 

1. As per Office Memorandum No. 38/41/06/P&PW      (A) dated. 05.05.2009, the central government subscribers covered under NPS are eligible for family pension in case of death 1 disability during the service.

2. If the family member opts for family pension, as per regulations all the accumulated wealth shall be transferred to the bank account of the nodal office for further settlement as per government directives.

3. However –  our exit regulations say (not applicable as mentioned above)

i. In case of Death:

Minimum Annuitisation- 80% of accumulated wealth.

Maximum   Lump   sum   Withdrawal-  20%   of accumulated wealth.

4. If the accumulated pension wealth of the subscriber is equal to or less than two lakh rupees, or a limit to be specified by the Authority, such nominees/legal heirs shall have the option to withdraw the entire accumulated pension wealth without purchasing any annuity.

7.  What are the provisions to settle the cases in the unfortunate death of the NPS subscriber during the service and no nomination has been provided in the account?

 

Where no valid nomination exists in accordance with these regulations, at the time of exit of such subscriber on account of death, the nomination, if any existing in the records of such subscriber with his or her employer for the purpose of receiving other admissible terminal benefits shall be treated as nomination exercised for the purposes of receiving benefits under the National Pension System. The employer shall send a confirmation of such nomination in its records, to the National Pension System Trust or the central record keeping agency, while forwarding the claim for processing.

 

8. Can I defer my lump sum in No. case of pre-mature exit from the system? No
9. Can I defer my lump sum in case of retirement / superannuation? If yes, what are the provisions and requirements to avail this facility? Yes.

The lump sum can be deferred till the age of 70 years which   can   be   withdrawn   at   any   time   superannuation and 70 years of age or every year till age of 70 years.  The  subscriber  has  to  give  in  writing (intimation to the employer) in the specified form at least fifteen  days  before the attainment  of   age of superannuation and same should be authorized by the associated Nodal office in the CRA system. If deferment is availed by the subscriber, subscriber has to bear the maintenance charges like CRA, PFM etc.

10. Can I defer my annuity at the time of retirement/superannuation? If yes, what are the provisions? Yes.

Annuity purchase can also be deferred for maximum period of 3 years. The subscriber has to give in writing (intimation to the employer) at least fifteen days before the attainment of  age  of  superannuation  and  same should be authorized by the associated Nodal office in the  CRA system.

If the death of the subscriber occurs before such due date of purchase of an annuity after the deferment, the annuity shall mandatorily be purchased by the spouse.

11. Can I defer both lump sum and annuity at the time of retirement/superannuation? Yes.

 

12. Can I keep on contributing in my Tier-1 account even after retirement / superannuation?

 

Yes. The Subscriber shall have the option to do so by giving in writing and up to which age he would like to contribute to his individual pension account but no exceeding seventy years of age.

In such scenario, subscriber has to shift his/her PRAN to any POP or e-NPS.  Nodal office shall not assist in uploading of contribution after the date of superannuation. Subscriber has to operate account in his/her individual capacity only.

Such option shall be exercised at least fifteen days prior to the age of attaining sixty years or age or superannuation, as the case may be, and same should be authorized by the associated Nodal office in the CRA system.

Such subscriber who has not exercised the option within the period of fifteen days, so stipulated, but desires to continue with his individual pension account under National Pension System, beyond the age of sixty years or the age of superannuation, as the case may be, and to the extent so permitted, may do so by making an application in writing with reasons for such delay to the National Pension System Trust, within one hundred and eighty days of attaining such age or superannuation. Where an application is received by the National Pension System Trust, from any subscriber, beyond the period of one hundred and eighty days, together with justification and sufficient cause, so shown by the subscriber, the National Pension System Trust, shall cause to forward such application along with its recommendation thereon, for consideration and approval of the Authority.

Subscriber has to bear the maintenance charges like PoP, CRA PFM etc.

13. If I continue my Tier-1 account even after retirement /             superannuation, Can I avail the facility of deferment of lump sum and annuity during the extended period? No, Upon exercise of the option of continuation after the superannuation, the other options of deferment of benefits (lump sum and annuity) shall not be available to superannuation, such a subscriber.
14. Can I terminate my extension any time before the attaining the age of 70 years or I have to continue the Tier -1 till the age of 70 years? Even after exercise of such option, the subscriber   may exit at any point of time from National Pension System, by submitting a withdrawal request as prescribed.
15. Who shall bear the transaction and other charges, if I avail the facility of continuation of Tier-1 account after the retirement / superannuation? Subscriber    has   to   bear   all the applicable    charges including maintenance  charges like PoP, CRA, PFM etc., if he avails such facility.
16. Can I continue my Tier-2 account after the closure of Tier -1 account? No.

Upon exit from Tier-1 account, the Tier-2 account gets closed automatically.

17. Can I continue my Tier-2 account, if decide to continue Tier-1 account even after the retirement / superannuation?

 

Yes.

A subscriber can contribute to his Tier 2 account till the time he has an active Tier 1 account.

18. What is annuity? An annuity is a product that pays out regular income.  It is a contract for deferred payment. The main objective of an annuity is to give regular income to the subscriber even after retirement working age.
19. In case of pre-mature exit, when will my annuity start    i.e. immediately or after the or age of 60 years? Annuity starts immediately after the minimum age required for purchasing any annuity. (Depending   upon choice of ASP and Annuity scheme. For e.g.  30, 35 38)   from    any of the empanelled    annuity    service providers.   Subscriber need not wait till the age of 60 years.
20. What are the annuity options available to me under NPS?

 

The  following   are  the  most  common variants  that  are available:

a. Default  scheme:   Annuity  for life of the subscriber and his or her spouse  (if any) with provision for return of purchase price of the annuity-     After the demise  of such subscriber, the annuity will be re-issued  to the family members  in the order specified hereunder:

b.   living dependent  mother;

C.   living dependent father.

After the coverage  of all the family  members specified  above, the purchase  price shall be returned  to the surviving  children  of the subscriber  and in the absence  of children, the legal heirs of the subscriber,  as may be applicable.

If subscriber  does not want to purchase default  annuity scheme, he may choose any of the following schemes:

b.  Annuity   for  life with  return  of purchase   price(amount   given  to annuity   service   provider) on death– Employee  shall get annuity  (monthly pension)  till he/she  is alive and payment  of annuity  ceases  on the death and the purchase price is returned  to the nominee.

c. Annuity   guaranteed   for  5,10,   15 or 20 years and for  life thereafter

 • On death  during   the guarantee   period  – Employee  shall get annuity  and after his/her death during the guaranteed  period, annuity is paid to the nominee  till the end of the

Guaranteed period after which the same ceases and no return of purchase price to the nominee.

•   On death  after  the guarantee period  – Employee  shall get payment  of annuity till he/she  is alive even after the guaranteed  period and annuity  ceases  after his/her death and no return of purchase  price to nominee.

d. Annuity   for  life  – Employee  shall get payment of annuity till he/she  is alive & payment  of annuity  ceases  on death and no return of purchase price to nominee.

e. Annuity for life increasing at simple rate of 3% p.a.  Employee shall get payment of annuity till he/she is alive & payment of annuity ceases on death and no return of purchase price to nominee.

f.    Annuity   for  life with  a provision for 50% of the  annuity  to the spouse  of the annuitant for life  on death  of the annuitant- Payment of annuity  ceases  on death of subscriber  and 50% of the annuity is paid to the surviving named spouse  during  his/her  life time.  If the spouse predeceases the annuitant, payment of annuity will cease after the death of the annuitant.  It can be with or without return of purchase price.

g.   Annuity   for  life with  a provision    of 100% of the  annuity   payable  to spouse  during   his/her lifetime on death  of the  annuitant.- Payment of annuity  ceases after death  of the annuitant and full annuity is payable  to the surviving named  spouse during  his/her  life time. If the spouse predeceases the annuitant, the annuity ceases after death of the annuitant.  It can be with or without return of purchase price.

Subscriber   can also  add  spouse  in any  of the  variants (Other than default) above.

All ASPs may not provide all the variants. It may vary from ASP to ASP.

Pricing of annuity also varies ASP to ASP.

21. Whether I have to go by the default annuity or I have a choice to decide other annuity type also?

 

The subscriber can choose any other annuity, other than default annuity, available with the empanelled Annuity Service Providers (ASPs).
22. Where can I check the rates offered by the annuity service providers on various types of annuities? Details   of   annuity   rates   and   other  details   may   be checked on CRA website (link given below).

https:llwww.npscra.nsdl.co.in/annuity-service-providers.php

23. Can I change my annuity service provider or annuity type any time?

 

Once an annuity  is purchased,  the option of cancellation or reinvestment  with another Annuity  Service  Provider or in other  annuity  scheme  shall  not be allowed  unless the same  is within  the  time  limit  specified   by the  Annuity Service  Provider,  for the free  look period  as provided  in the terms of the annuity  contract  or specifically  provided by    the     Insurance     Regulatory     and    Development Authority.
24. What functions are performed by Annuity Service Providers (ASPs)? Annuity Service   Providers   (ASPs) are empaneled by PFRDA to annuity to subscribers through their various schemes. Subscribers will have the option to invest their amount into one annuity scheme upon retirement/ resignation.  ASPs would be responsible fOI delivering a regular monthly   pension   (annuity)   to the subscriber for the rest of his/her life.
25.  Is it mandatory to purchase annuity under NPS at the time of exit?

 

Yes, but there are some scenarios where the subscriber/nominees/legal    heirs can withdraw the whole accumulated wealth.
26. Which companies are empanelled under PFRDA as Annuity Service Providers (ASPs)? 1. Life Insurance  Corporation  of India

2. SBI Life Insurance Co. Ltd.

3. ICICI Prudential Life Insurance Co. Ltd.

4. HDFC Standard  Life Insurance  Co Ltd

5. Star Union Dai-ichi  Life Insurance  Co. Ltd

*Subject   to change from time to time.

27. Will get back the amount invested for annuity purchase? Only in annuity types where there is a provision of return of purchase price.
28.  In case of retirement / superannuation,  when should I submit my  withdrawal request i.e. after the date of retirement or before the retirement? CRA network sends a communication  6 months before the superannuation/ retirement  date generating  a Claim ID to the subscriber and nodal office. It is advisable that the subscriber should submit all the documents to the nodal office atleast 1 month before the superannuation/retirement date.
29. Can I withdraw before attaining the age of retirement / superannuation? Yes, it is termed as Partial Withdrawal.
30. If yes, how much amount can be withdrawn? Up to 25% of the contribution made by the subscriber (without considering the appreciation/returns on the amount) as on date of application of withdrawal.
31. Can I withdraw any number No. of times during the service? A subscriber is allowed to withdraw only three times during the entire tenure of service.
32. What are the conditions under which partial withdrawal can happen? Conditions:

1. The subscriber  shall have been in the National Pension  System  at least for a period  of three years from the date of his or her joining;

2.   Withdrawal is allowed for some specific purposes only.

a.  For the higher education  of  children

b.   For the marriage  of children

c.  For the purchase/construction of residential house or flat in his or her own name or in a joint name with his or her legally wedded  spouse.  In case, the subscriber already owns either individually or in the joint name a residential house or flat, other than ancestral property, no withdrawal under these regulations shall be permitted.

d. Treatment  for prescribed  illnesses – suffered  by subscriber,  his legally wedded spouse,  children including  a legally adopted child and dependent parents.

Prescribed  illnesses  includes: (i) Cancer;

(ii) Kidney  Failure (End Stage Renal Failure);

(iii) Primary  Pulmonary  Arterial Hypertension; (iv) Multiple  Sclerosis;

(v) Major Organ Transplant;

(vi) Coronary  Artery  Bypass Graft; (vii) Aorta  Graft Surgery;

(viii) Heart Valve Surgery;

(ix) Stroke;

(x) Myocardial Infarction

(xi) Coma;

(xii) Total blindness;

(xiii) Paralysis;

(xiv) Accident of serious/ life threatening nature.

(xv) Any other critical illness of a life threatening nature as stipulated in the circulars, guidelines or notifications issued by the Authority from time to time.

e. To meet medical and incidental expenses arising out of the disability or incapacitation suffered by the subscriber.

f.Towards  meeting  the expenses  by subscriber  for skill development/re-skilling  or for any other self-development  activities, as may be permitted  by the Authority  by issuance  of appropriate guidelines,  in that behalf

g. Towards  meeting  the expenses  by subscriber  for establishment   of own venture or any start-ups, as may be permitted  by the Authority  by issuance  of appropriate guidelines,  in that behalf.

33. If I avail partial withdrawal facility, will I get the same benefit as applicable at the time of retirement/superannuation? Yes.
34. Whether I am eligible for Gratuity?

 

Yes as per latest   OM No. 7/S/2012-P&PW (F)/B dt. 26.08.2016 issued by Department of Pension and Pensioners Welfare, the  Central Government employees covered under NPS are eligible for ‘Retirement Gratuity and Death Gratuity’.
35. What are tax benefits available  under  IT Act, 1961 for Tier 1 Account?

 

I.  On Contributions:

Employee’s  own Contribution-  Eligible for  tax deduction  under  sec 80 CCD  (1) of Income  Tax Act  up to 10% of salary  (Basic  + DA) within  the  overall  ceiling of Rs. 1.50 Lacs under Sec. 80 C of the Income Tax Act. From   F.Y.   2015-16, subscriber will be allowed   tax deduction in addition to the deduction allowed under Sec. 80CCD(1) for contribution in  his  NPS account   subject to maximum  of  Rs. 50,000/- under sec. 80CCD 1(B).

Employer’s contribution: Upto 10% of Basic & DA (no   upper monetary ceiling) under 80CCD (2). This rebate is over and above 80 C. (This tax benefit is only Available for NPS subscribers).

II. Partial Withdrawal- Tax free.

III. Lump sum Withdrawal-   In case of superannuation,   lump sum withdrawal (40 % of the accumulated corpus)   is tax free.

IV. Annuity- Amount utilized for purchase of annuity is not taxable in the hands of the subscriber.

36. What are tax benefits available under IT Act, 1961 for Tier 2 Account? No tax benefit is available for Tier 2 account.
37. Whether employer can withhold the contributions under NPS?

 

Yes

Employer   can  withhold   its  co-contribution    along  with income   accrued  on   it  under   Tier-I   account   of  the subscriber  and the investment  income accruing  thereon, for the purpose  of recovery  of the whole  or part of any pecuniary  loss caused,   provided    such  loss    is established,  in any departmental  or judicial  proceedings, initiated   against  such  subscriber  by  the  employer concerned

2. Right of withholding  shall  have to be exercised  prior to the date of superannuation of the subscriber,  pursuant to a notice to be given to the National  Pension  System Trust  or an entity to whom  such authorization   has been given,  and seeking  to withhold  the said pension  wealth of such subscriber. Upon such right of withholding  being validly exercised-

i.  the pension wealth which are payable under the National  Pension System shall not be paid to such subscriber until the conclusion  of the departmental  or judicial proceedings,  as the case may be and subject to the final orders, passed  in such proceedings.

ii. the amount withheld  as specified  in sub-clause (i) shall remain subscribed  to the scheme  in the mode and manner  in which  it was held prior to resorting  to such action by the employer specified,  and the final settlement  of the withheld amount  shall be made by the National  Pension System Trust, or any intermediary  or other entity, authorized  for this purpose  by the Authority, in normal course within  ninety days of the receipt of an appropriate  order from the concerned employer;

iii.  the amount withheld  becomes  payable to the subscriber  on the final settlement,  as certified  by the employer  specified,  which has sought withholding  of such benefits,  and shall be paid to the subscriber  as soon as possible  and in no case  beyond ninety days of receipt  of the final order by the National Pension  System  Trust or any other entity or person, authorized  for the purpose  by the Authority;

38. What happens if the nominee predeceases the subscriber? If the nominee predeceases the subscriber, the nomination shall so far as it relates to the right conferred upon the said nominee, become void and of no effect;
39. Can I distribute amount/percentage of fund under nomination Yes, a subscriber may in his nomination distribute the amount that may stand to his credit in the fund  amongst his nominees  at his own discretion;
40. Can I make nomination in favour of a person not belonging to his family?

 

If a  subscriber   has  a family  at  the  time  of making  a nomination,  the  nomination  shall be in favour  of one or more  persons belonging  to  his family.  Any  nomination made  by  such  subscriber   in  favour   of  a person   not belonging  to his family shall be invalid;

he expression  “family”,

i. in relation to a male subscriber,  means  his legally wedded  wife, his children,  whether married or unmarried,  his dependent parents and his deceased  son’s widow  and children;

ii. in relation to a female  subscriber,  means her legally wedded  husband,  her children, whether married or unmarried,  her dependent  parents, her husband’s dependent  parents  and her deceased  son’s widow and children;

Explanation  II — In either of the above two cases, if the child of a subscriber  [or as the case may be, the child of a deceased  son of the subscriber]  has been adopted by another person  and if, under the personal  law of the adopter,  adoption  is legally recognized, such a child shall be considered  as excluded  from the family of the subscriber.

41. Nomination made before such marriage shall be valid or not? A fresh nomination  is required  to be made by the subscriber  on  his  marriage  and any nomination   made before such marriage shall be deemed  to be invalid;

 

Source: npstrust

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