Pensioners may be allowed to withdraw their entire lifetime contribution to NPS with a higher threshold
Retired persons looking to use their pension fund money for meeting family emergencies or for making investments into better return yielding instruments would soon be permitted withdraw their entire lifetime contributions.
Sources in the government said that pension regulator, Pension Fund Regulatory and Development Authority (PFRDA) is considering coming out with a better option for National Pension System (NPS) subscribers under which they would be able to withdraw their entire money at one go if pension corpus is upto Rs 5 lakh.
At present, there is a threshold of Rs 2 lakh upto which a NPS subscriber can withdraw the entire money. Beyond this limit, currently only 60 per cent of pension corpus could be withdrawn while 40 per cent of the contributions has to be mandatorily parked in government approved annuities.
Sources said the plan is to increase the threshold to Rs 5 lakh that will offer better liquidity to a certain segment subscribers.
Also, at a corpus of Rs 5 lakh, the regular pension amount would be too insignificant to provide any significant income for life to the subscribers.
However, even with changed withdrawal plan, PFRDA is expected to provide the option of retaining a portion of subscribers pension money for investment in annuities or for investment by pension fund managers itself.
The changes are being thought as returns of annuities at present average around 5.5 per cent. Together with inflation and income tax on pension accumulation, the return for subscribers from annuities falls in the negative territory. Changed would give subscribers wider option to increase returns on their lifetime contributions.
Source : moneylife