NPS annuity rider limit up to Rs 5 lakh not in sync with needs of savers

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Pension regulator PFRDA’s move to allow subscribers to withdraw an entire corpus of up to Rs 5 lakh without investing in annuities is a welcome move but falls short of providing the required fillip for savers.

Puny annuity rates have been a source of concern for subscribers, a fact admitted by PFRDA chief.

He believes a large section of subscribers will benefit from this move and they have taken this step after analysing data which showed many subscribers opted to keep the corpus with PFRDA instead of going for the annuity plan.

The introduction of NPS in 2004 opened new investment avenues for retirement planning. In 2009, it was opened to those working in the private sector.

Data indicates India’s young and middle-aged citizens are saving for retirement and NPS has witnessed robust growth in subscribers.

As of May 2021, a total of 1.45 crore National Pension System (NPS) subscribers were added in the country. The share of people in the age group of 18-40 years is 83%. Of the existing subscribers, 27 % of the subscribers are in the 18- 25 years bracket.

This growth needs to be sustained and PFRDA needs to ensure that pension products are made more attractive.

There is an additional exemption of Rs 50,000 in income tax under Section 80 CCD (1B) on NPS. Although tax savings should not be the basis of any investment, if the government cannot provide a national retirement scheme to its ageing population, then it should at least give tax exemption.