PFRDA tweaks NPS to make it attractive
Under PFRDA regulations, NPS subscribers can withdraw 60% of the total accumulated amount at maturity. This will be tax-free.
The Pension Fund Regulatory and Development Authority or PFRDA has made changes to improve the national pension system (NPS). The authority has allowed investors to easily exit from the scheme. It has also provided more annuity options when the investment matures. You can also choose your preferred annuity plan. Upon maturity, subscribers can withdraw 60% of the accumulated amount, while the remaining 40% will have to be used to purchase annuity. This annuity provides a regular monthly, quarterly, or annual pension.
PFRDA has made selection of a pension scheme easier. The regulator has stated that after exiting the pension fund, NPS account holders can now choose the annuity and pension scheme of any insurance company they prefer. Previously, subscribers could only opt for annuities from the same fund manager whose NPS scheme they were invested in. But now, investors can choose annuities from any insurance company with better returns. This means an investor who invested in Company A’s NPS scheme can choose annuity from Company B or C after maturity. PFRDA’s panel currently has annuity plans of 15 companies. Investors can choose any of those.
No extra fees required
PFRDA has clarified that subscribers won’t have to pay any taxes or additional fees for choosing any kind of annuity service. Although, insurance companies can charge NPS subscribers fees for giving annuity plan. But the fees will also be regulated by IRDA.
The regulator has made it clear that NPS is exempt from government taxes and many other charges. Therefore, there should be no pressure on investor to pay any type of fees. Additionally, insurance companies will provide annuities directly to NPS subscribers. No services of aggregators or agencies will be required.
Rules for exiting
Under PFRDA regulations, NPS subscribers can withdraw 60% of the total accumulated amount at maturity. This will be tax-free. The remaining 40% of the amount needs to be used to purchase annuity for pension. However, if you exit this pension plan before the age of 60, you can only withdraw 20% of the amount. The remaining 80% must be used to purchase annuity. If the total accumulated amount in the subscriber’s pension fund is less than 5 lakh rupees, they he can withdraw the entire amount.
Personal finance expert Jitendra Solanki says that NPS is a long-term investment. For people who lack knowledge about stock market, asset allocation, and where and how to invest their money, NPS can be a good option. Choosing the auto-choice option in NPS can help you build a good corpus. For individuals aged 25 to 30, NPS can be a beneficial investment.