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Pension Fund Regulatory and Development Authority (PFRDA) is going to introduce two new options for pensioners, which would benefit them at a time when building pension corpus is becoming a major headache for salary earners.

National Pension System (NPS) is one of the best investment instruments for retirement purposes. Debt and equity portion is well balanced and can be changed according to the investor’s risk appetite.

Late entry

In April this year, PFRDA proposed to allow subscribers to enter at the age of 70.

In 2018, the regulator increased the entry age to 65 from 60.

Whoever joins after 60 years of age can continue NPS accounts till the turn 75. For others, the maturity age will remain at 70.

Data shows that until January 2021, around 16,000 people above 60 joined NPS since the entry age limit was raised from 60 to 65 in 2018.

Full withdrawal

PFRDA has also proposed to allow subscribers to withdraw the full NPS amount if the pension corpus is below Rs 5 lakh.

According to the rules, if the corpus is up to Rs 2 lakh, it can be withdrawn fully now. But if the corpus exceeds Rs 2 lakh, it can’t be withdrawn fully.

One can withdraw a maximum of 60% of his/her corpus and that amount is tax free.

The rest of the 40% is paid in the form of monthly pension.

Experts feel if this new rule comes into place, then the investors will get some benefits even after the age of 60.

Details of NPS

Currently, NPS gives two investment options to choose from — Active and Auto.

Under the Active choice, you can save regularly through different asset classes which are equity (E), corporate debt (C) and government bonds (G). You have the flexibility and the right to choose the ratio of funds to be invested among E, C & G.

On the other hand, in Auto choice, there is a Lifecycle Fund. You have to choose your Pension Fund Manager and your money gets invested as per the Lifecycle fund matrix on the basis of your age.

With every passing year, the ratio of E, C nd G are adjusted according to the existing norms.

NPS also offers you two account types Tier-I and Tier-II. While investment in a Tier-I account is compulsory, Tier II is optional and allows withdrawals.

Subscriber base

PFRDA is eyeing a sharp rise in subscription base in FY22 by around 53%.

Currently the NPS subscriber base is around 6.5 lakh. The authorities are trying to raise it to 10 lakh by the end of FY 22 along with Atal Pension Yojona.

Currently the pension regulator manages assets of around Rs 5.80 trillion under NPS and Atal Pension Yojana as of 31 March 2021.