The National Pension System (NPS) provides financial security after retirement. The

Pension Fund Regulatory and Development Authority (PFRDA)  has laid out clear guidelines for exit and withdrawal from the NPS account at maturity and before and after superannuation until 75.

Here’s how one can exit from NPS after reaching 60.

A subscriber can withdraw up to 100 per cent of the accumulated NPS funds after turning 60 if the corpus is up to Rs 5 lakh. If it is more than Rs 5 lakh, the subscriber must invest 40 per cent of the money in an annuity and withdraw the rest 60 per cent in a lump sum. The subscriber can opt to invest 100 per cent in an annuity plan.

In October 2023, PFRDA introduced the Systematic Lump Sum Withdrawal (SLW) facility to allow the withdrawal of the lump sum amount in a phased manner. As per the new rule, the subscriber can exit by taking the 60 per cent in a lump sum at 60, continuing investing in the scheme up to 75, or deferring the withdrawal without any further contribution.

 Also Read: What Are The Different Ways To Contribute To The National Pension System (NPS)?

However, the subscriber must inform the NPS trust or the intermediary of their decision to defer withdrawing the lump sum, annuity, or both at least 15 days before reaching 60.

Exiting NPS If Joined Between The Age Of 60 And 70:

The NPS entry age is 18-70 years. However, if an individual subscribes to NPS after 60, they can exit anytime before 75.

For such subscribers, withdrawals within three years will be considered pre-mature, so only 20 per cent of the accumulated corpus is allowed for withdrawal. They must invest the rest 80 per cent in annuity. After three years, they can withdraw 60 per cent of the fund in a lump sum and invest the rest 40 per cent in an annuity plan. Moreover, the subscriber can make a pre-mature withdrawal of 100 per cent of the corpus if the accumulated fund is less than Rs 2.5 lakh.

However, the lump sum amount, regardless of the withdrawal time, is tax exempted, while annuity (pension) income will be taxed as per the tax slab in the year the subscriber receives it.

What Is The Procedure To Exit From NPS?

A subscriber must file an exit or withdrawal form to exit from NPS. From April 1, 2016, PFRDA has made it mandatory for nodal offices, Point of Presence (PoP), aggregators, etc., to process withdrawal claims online and submit them to CRAs for further processing.

The withdrawal process is the same for all subscribers.

Step 1: Subscribers can initiate the exit process online in their CRA portal by logging in using their Permanent Retirement Account Number (PRAN) ID and password.

Step 2: The next step is to upload clear copies of the necessary Know Your Customer (KYC) documents, a copy of the PRAN card or ePRAN, and proof of bank details.

Step 3: Once done, subscribers must enter the OTP sent to their registered mobile number for exit request verification.

Step 4: The final step is to submit the request with OTP authentication or through eSign.

Then, PoP will verify the request in the CRA system before the CRA executes it. During the process, bank details are confirmed with penny drop verification. The lump sum funds will be transferred to the subscriber’s bank account.

Also Read: What Investment Options Does NPS Offer To Its Investors?

For annuities, subscribers’ details are shared with the Annuity Service Provider (ASP). ASP will check the details and, after satisfactory verification, confirm the subscriber’s request in the CRA system and issue the annuity policy. The annuity corpus is then transferred to the ASP from the NPS Trustee Bank.