NPS: 5 tweaks that make it more attractive

National Pension System (NPS) is the best equity-based yet secured retirement investment instrument. Any Individual can open an NPS account at any point between 18 years and 70 years of age. The investor can make his/her own choice where to invest his/her money. NPS is perhaps the only pension instrument that offers this facility to the investor to choose between equity, corporate and government bonds. Pension Fund Regulatory and Development Authority (PFRDA) has changed multiple things in NPS recently, making the retirement savings scheme attractive for investors. Money9 gives you a brief description of those changes.

Late entry

Earlier, an individual could start an NPS account till one was 65. It has been extended to 70. With this relaxation, even those who exited from NPS can reopen their accounts.

Late exit

With this new entry age, the exit age from NPS is also being increased to 75 years. Previously It was 65 years. But if anyone re-enters NPS after 65 years of age, there will be a lock-in period of three years. However, if the maturity corpus is below Rs 5 lakh, the subscriber can withdraw the entire amount.

Premature exit rule

80:20 rule of premature exit applies to both government and non-government sector subscribers of NPS joining between 18-60 years of age. However, in the case of non-government sector, the person should be a subscriber for 10 years, and then only he/she is eligible to get the benefits.

According to a PFRDA circular dated September 21, 2021, if the corpus is equal to or below Rs 2.5 lakh, then the full amount will be paid as a lump sum to the subscriber. Otherwise, 20 percent of the total amount would be paid as lump sum and rest would be paid as monthly pension.

Asset allocation

According to the new order of PFRDA, subscribers joining NPS after 65 years can exercise the choice of pension fund and asset allocation with the maximum equity exposure of 15% and 50% under auto and active choice, respectively.

The pension fund exposure can be changed once per year whereas the asset allocation can be changed twice in a year according to the choice of the investor.

Extension of online exit process

In a circular dated October 4, 2021 PFRDA said, ‘Online exit would be integrated with instant bank account verification as per the existing guidelines as part of enhanced due diligence in the interest of the subscribers. The facility would be available only to the employees of central and state government who are covered under NPS.”