How SLW will help in NPS withdrawal

 How SLW will help in NPS withdrawal

• Once the SLW option is activated, the customer can choose from various options at the time of exit

The Pension Fund Regulatory and Development Authority (PFRDA) has recently proposed the 'Systematic Lumpsum Withdrawal (SLW)' option, which allows National Pension Scheme (NPS) subscribers to withdraw 60 per cent of the corpus periodically from the age of 60 years. Permission is granted.

Subscribers can opt for periodic withdrawals monthly, quarterly, half-yearly or annually till the age of 75 years.

As per the extant guidelines, on attaining the age of 60 years, customers can withdraw up to 60% of the amount as a lump sum (with a minimum of 40% being transferred to annuity). However, the subscribers have the option to defer the lump sum withdrawal up to 75 years. While avoiding lump sum withdrawals, investors also have the option of 'phased withdrawals' on an annual basis. This way, the customer can make partial withdrawals every year, but the investor has to submit a separate request every year.

The new offer allows one-time orders to process the redemption of units and transfer of funds at predetermined intervals.

This facility will be made available for both Tier-1 and Tier-2 accounts. Unlike Tier I, which allows withdrawals only at the time of retirement or in times of exigencies, Tier II is a voluntary investment account with no withdrawal restrictions. The SLW option for Tier II account can be started even before the subscriber attains the age of 60 years.

Note that the SLW proposal is still under consideration and is not yet in effect. Experts feel that this rule provides investors with additional options at the time of exit and makes the NPS retirement product a little less stringent.

predetermined amount

Once the SLW option is activated, the customer can choose from various options at the time of exit. This includes lump sum withdrawal, SLW, deferment and continuation.

For SLW, investors need to pre-define the number of units or the amount to be paid to them from time to time. The balance amount after each payment will remain invested in the NPS account.

The option to select the SLW will be provided to the investor in the Central Record-Keeping Agency (CRA) withdrawal module with e-Sign or Dual-Factor OTP (One-Time Password) authentication.

In case the customer wishes to change the terms of the SLW option already created, the facility of 'modifying' and 'cancellation and encashment' will be available only in the CRA login.

Experts say that providing more withdrawal options to NPS customers will make them feel more comfortable.

Note that the SLW offer, if offered in this form, will come with two conditions. After opting for SLW, investors will not be able to contribute any more to Tier I NPS Fund. Further, partial withdrawal will not be allowed after the establishment of the SLW.

“While investing in retirement products, customers are more focused on how that money will come back to them after they retire. The more options they have, the more they can choose the one that works for them at that particular point. Vishal Dhawan, Founder and CEO, Plan Ahead Wealth Advisors said, “It is very difficult today to ascertain which option will work after many years.