As new NPS withdrawal rules come into effect, what has changed now? An explainer

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lump sum withdrawal facility. This will allow subscribers to receive regular payments instead of withdrawing the sum in one go from their investment in the National Pension System (NPS). As per the revised rules, up to 60 percent of their NPS maturity amount can be withdrawn in instalments till the subscribers hit the age of 75.

The payouts can be monthly, quarterly, half-yearly and yearly. In order to apprise the subscribers, the regulator has urged Central Record Keeping Agencies (CRAs) to keep them abreast of the latest changes. It is vital to note that the investors are currently allowed to withdraw only 60 percent of their NPS corpus as lumpsum on maturity, while the remaining 40 percent of corpus is to be used as annuity.

For instance, if a subscriber has accumulated ₹50 lakh as NPS corpus, ₹20 lakh (40%) is supposed to be withdrawn as annuity, while the remaining ₹30 lakh (60%) is treated as lumpsum. With the new rules in force, the lumpsum component — along with annuity — can also be withdrawn in instalments which could be monthly, quarterly, half-yearly and yearly. In the above case, the lumpsum component of ₹30 lakh can be withdrawn in instalments along with annuities amounting to ₹20 lakh.

The advantages of opting for systematic withdrawal is to increase the cash flow on a regular basis. So, instead of relying on 40 percent of corpus for annual payouts, subscribers can now use their lumpsum component of 60 percent also to generate a regular income. Additionally, subscribers can prevent the adverse impact of a bearish market at the time of retirement.