NPS Rules Changed: Here’s What You Need To Know

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The Pension Fund Regulatory and Development Authority (PFRDA) revised the age rules for pension subscribers in the National Pension Scheme (NPS). In the new regulations, PFRDA has authorized the subscribers to allocate up to 50% of the funds in equity, besides helping the exit norms.


Changes in NPS rules for Entry Age

The updated guidelines of the pension fund on entry and exit increased the maximum age for registering for the NPS from 65-70 years of age. The entry age for NPS has been changed to 18-70 years from 18-65 years.

In addition, any Indian citizen and Overseas Citizen of India (OCI) within the age group of 65-70 years will be able to join the NPS and continue up to the age of 75 years, according to PFRDA amended guidelines.

According to increased age eligibility norms, subscribers who have closed their NPS accounts would be authorized to open a new account.


Equity exposure under revised NPS guidelines

The maximum equity disclosure will be only 15% of subscribers joining NPS beyond the age of 65 decide to invest under the default’ Auto Choice’.

The subscriber joining beyond the age of 65 years can exercise the choice of the pension fund and asset allocation with maximum equity exposure of 15 percent and 50 percent under Auto and Active Choice, respectively.

An NPS subscriber will have the authority to allow his/her contributions to different asset classes through ‘Active Choice ‘or ‘Auto Choice.’

Active Choice: A subscriber has more say on the allocation of funds across asset classes.

Auto Choice: The funds get invested in a pre-determined proportion according to the age of the subscribers.

The subscribers’ contributions are invested by the PFs (chosen by subscribers) in compliance with the investment guidelines for each asset class — equity, corporate bonds, government securities, and alternate assets. 


Exit Options changed under new NPS rules

On the exit conditions for subscribers joining NPS beyond the age of 65 years, the circular said, “normal exit shall be after three years.”

“The subscriber will be expected to utilize at least 40 percent of the corpus for purchase of an annuity, and the remaining amount can be withdrawn as a lump sum,” it said.

Although, if the corpus is equal to or less than ₹5 lakh, the subscriber may opt to withdraw the entire accrued pension wealth in a lump sum, it said.

The PFRDA further said exit before the completion of three years would be treated as ‘premature exit.’ Under this, the “subscriber is obliged to utilize at least 80% of the corpus to purchase an annuity, and the remaining can be withdrawn in a lump sum”.

The PFRDA further added that in case of the subscriber’s demise, the entire corpus would be paid to the nominee as a lump sum.


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