October 29, 2020

Latest change in the rules of the National Pension System

NPS i.e. National Pension System is a popular option for saving in the country today. The scheme, launched on May 1, 2009, has also been launched for employees working in the private sector, i.e. the unorganized sector. Taking advantage of this, a total of two crore subscribers have joined the scheme. In fact, this is a pension saving scheme, which offers financial security in the future. The question is how to plan for a pension through NPS. So, let’s look at the rules attached to this, which the government has changed.

NPS rules changed: National Pension System means old NPS subscribers who have dropped out of the scheme before the stipulated time can rejoin the scheme. This has been exempted from PFRDA. Under the current rule, subscribers can opt out of the scheme 60 years ago if they wish. 80 per cent of the deposit in NPS is converted into a regular pension, while 20 per cent can be withdrawn. Now those who have withdrawn 20 per cent will have to deposit this amount if they want to reconnect with NPS. In addition to the regular pension, the withdrawal pension process has been abolished. After which they can open a new NPS account.

PFRDA offers subscribers a number of options: The National Pension System offers its subscribers a chance to retire at a lower cost. Benefits of NPS include portability, flexibility, many easy means to distribute contributions, pension fund options, priority in scrim, special tax benefits, etc.

What is PRAN, what will happen now: Subscribers under NPS are being given PRAN, which is unique. Subscribers can have only one PRAN at a time. So, they can close the existing NPS account and open a new one. Under NPS, subscribers can opt for Premature Exit (withdrawal 60 years ago) or at the time of attaining Final Exit or Superannuation at the age of 60 or any time thereafter as per regulation.

In case of premature exit, up to 20% of the pension corpus deposited in PRAN can be withdrawn. The remaining 80% can be used to purchase an annuity plan from an annuity service provider (ASP) proposed by PFRDA. While now the regulator has said that nowadays PFRDA is getting many requests from the subscribers in which they have withdrawn some amount, but the annuity has not been withdrawn yet. Now these subscribers want to continue their NPS account.

What to do for this: Open a new NPS with the new PRAN, if it is appropriate to connect to the NPS. To continue the same PRAN in NPS, re-deposit the previously withdrawn amount (20%) in NPS account (PRAN). A second deposit option can be selected once to continue the current PRAN. The amount has to be deposited in one installment only.

How to join NPS: A salaried person between the ages of 18 to 60 can join NPS. There are two types of accounts in NPS – Tier- I and Tier- II are involved. TIER – I is a retirement account that every government employee needs to open. While a Tier-II account is voluntary, any salaried person can invest in their own way and withdraw money at any time.

If you join this scheme at the age of 25, then till the age of 60 i.e. 35 years, you will have to deposit Rs. 5,000 per month in this scheme. The total investment from you will be Rs 21 lakh. Assuming an estimated return of 8% on the total investment in NPS, the total corpus is Rs 1.15 crore. If you buy an annuity of 80 per cent of this amount, this amount will be Rs 93 lakh. While 20 per cent of the amount will be around Rs 23 lakh. If the annuity rate is eight per cent, then at the age of 60, you will get a pension of around Rs 60,000 per month. Apart from this, a separate fund of Rs 23 lakh will also be provided.

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