NPS Withdrawal Rules For Government & Private Sector Employees Explained

NPS premature exit rules

Subscribers who joined NPS between the age group of 18 and 60 can make a lump sum withdrawal before reaching the age of 60 or superannuation of their corpus is equal to or less than Rs 2.5 lakh. In case the account corpus or investment is equal to or less than 2.5 lakh for government sector subscribers, a lump sum settlement on premature exit will be applicable.

If somehow the corpus is more than 2.5 lakh, then a minimum of 80% of the accumulated pension amount should be used to purchase an annuity and the remaining 20% is handed to the subscriber as a lump sum. In case the investment amount is equal to or less than 2.5 lakh, a lump sum payment is made to non-government sector subscribers.

But if the corpus is higher than the said limit, then a minimum of 80% of the subscriber’s accumulated pension amount should be used to purchase an annuity and the remaining 20% is provided in a lump sum. It is important to remember that in order to make a premature exit, private sector employees must have been active subscribers for ten years.

NPS regular exit rules

Both government sector or private sector subscribers if their corpus is equal to or less than Rs 5 lakhs can also undertake a normal exit from NPS at 60 years of age or beyond or at the time of superannuation. For government employees, if their corpus is more than the said, then a limit of a minimum of 40% of their pension wealth should be used to purchase an annuity and the remaining 60% of the balance can be withdrawn as a lump sum at the time of exit. In the case of private-sector employees with a corpus of more than 5 lakhs, at least 40% of their cumulative pension corpus must be used to purchase an annuity and the remaining 60% can be withdrawn as a lump sum.

In case of unfortunate death of the subscriber joined NPS between 18-60 years of age

If the corpus is less than or equivalent to Rs 5 lakhs, a lump sum amount is provided to nominees/legal heirs upon the tragic death of a government sector employee. However if the corpus is more than the said amount then a minimum of 80% of the subscriber’s accumulated pension amount must be used for the purchase of a Default Annuity for dependents, with the remaining 20% given as a lump sum to the nominee/legal successor.

If no dependent family members, such as the spouse, mother, or father, are alive, the nominee/legal heir will get a lump sum amount of 20% and the remaining 80 percent of the corpus is handed to the demised government employee’s surviving children or legal heirs. The whole accumulated pension income of a private sector employee is payable to the nominee or legal heirs in case of his or her unfortunate death.

NPS withdrawal rules who joined NPS beyond 60 years of age

According to the guidelines set by PFRDA, a premature exit is regarded as an exit made before 3 years, and a normal exit is regarded as an exit or withdrawal made beyond 3 years. The lump-sum threshold for premature exit is 2.5 lacs, while the normal exit limit is 5 lacs without purchasing an annuity. In the event of the subscribers’ untimely death, the full corpus will be handed to the nominee/legal heirs.

If the corpus is equal to or below 2.5 lakhs, private sector employees who joined NPS between the ages 60 and 70 can make a premature exit before the end of the three-year period; if the corpus is higher than 2.5 lakhs then a minimum of 80% of the accumulated pension income must be used to purchase an annuity providing a monthly pension to the subscriber and the remaining 20% is paid in one single amount.

In case the corpus is equal to or less than 5 lakhs, a lump sum withdrawal is permitted if the normal exit is conducted before the conclusion of 3 years. If the corpus is higher than 5 lakhs, at least 40% of the subscriber’s accumulated pension amount must be used to purchase an annuity and the remaining 60% is paid to the subscriber in a lump sum.

In the event of the untimely death of a private sector employee, the subscriber’s entire accumulated pension amount is handed to the nominee or legal heirs.