Under the National Pension System (NPS), “exit” refers to the closure of an individual subscriber’s pension account. It can occur in various circumstances, including:
- On attaining the age of superannuation,
- Before reaching the age of superannuation,
- Anytime after superannuation until the age of 75 years,
- In the event of death or when a subscriber is declared missing by the employer,
- Due to invalidation, disability, or premature retirement.
For detailed provisions, individuals must refer to the PFRDA (Exits and Withdrawals under the National Pension System) Regulations, 2015 and any amendments thereafter.
Procedure for Exiting NPS
When a subscriber intends to exit the NPS, they must submit an exit or withdrawal application to their associated nodal office on or before the expected date of exit.
In the unfortunate event of the subscriber’s death or if the subscriber is declared missing, the nominee(s), family member(s), or legal heir(s) must submit the claim settlement application along with necessary documentation to the associated nodal office.
Benefits Available Upon Exit at Superannuation
Upon reaching the age of superannuation, the subscriber must utilize at least 40% of the accumulated pension wealth to purchase an annuity for monthly pension payments. The subscriber may also choose to allocate a higher portion towards annuity purchase if desired.
The remaining 60% of the accumulated pension wealth will be paid to the subscriber as a lump sum.
Subscribers also have the flexibility to defer the withdrawal of their lump sum amount or the purchase of an annuity. This deferment is allowed until the subscriber reaches the age of 75 years.
Deferment of Lump Sum and Annuity
If a subscriber opts to defer the lump sum withdrawal and/or the annuity purchase, they must submit a written request at least 15 days prior to their date of superannuation to the Central Recordkeeping Agency (CRA) or NPS Trust.
In the event of death during the deferment period, the deferred lump sum amount will be paid directly to the nominee(s) or legal heir(s). For annuity purchase deferment, if the subscriber passes away before executing the annuity purchase, a default annuity option will be applied.
It is important to note that during the deferment period, regular maintenance charges and fees applicable under the NPS continue to be levied.
Subscribers retain the right to exit and settle their account at any point during the deferment period by making a request to the CRA or NPS Trust.
Complete withdrawal of the accumulated pension wealth, without purchasing an annuity, is allowed if the total corpus is ₹5 lakh or less. However, in such cases, the subscriber’s right to any future pension benefits is extinguished.
Continuation of Contributions Beyond Superannuation
Subscribers may opt to continue contributing to their NPS account even after attaining 60 years of age or after superannuation, up to a maximum age of 75 years.
For this, the subscriber must submit a written request at least 15 days before the date of superannuation. Their account will then be shifted from the Government sector to the “All Citizens Model” or Corporate sector, and applicable fees and charges under NPS shall continue.
If a subscriber fails to submit the continuation request within the stipulated timeframe, they may still apply by writing to the NPS Trust, explaining the delay. The authorized officer at the NPS Trust has the discretion to condone such delays.
It must be noted that once a subscriber opts for continuation beyond superannuation, the facility of deferment of lump sum withdrawal and/or annuity purchase is not available.
Subscribers continuing their NPS account after superannuation can exit at any point during the continuation period by submitting a request.
Exit Due to Invalidation, Disability, or Premature Retirement
In case of invalidation, disability, or premature retirement before reaching the age of superannuation, a subscriber can also exit the NPS. The employer must certify that the subscriber has been discharged from service under the applicable service rules.
The exit benefits under such circumstances are similar to those available at normal superannuation.
If the employer provides pensionary relief due to invalidation or disability during service, they may adjust or seek the transfer of part or the entire accumulated pension corpus from the subscriber’s account. Any remaining corpus is then paid as a lump sum to the subscriber.
Conclusion
The exit and withdrawal process under the National Pension System offers flexibility to subscribers at various stages of life — be it at retirement, premature exit, or unfortunate circumstances like death or disability.
Understanding the timelines, deferment options, and procedural requirements is crucial for making informed decisions that safeguard your retirement savings.
For comprehensive and updated information, always refer to the latest PFRDA regulations and guidelines issued by the NPS Trust.
