Soon NPS To Have Systematic Withdrawal Plan; Here's What PFRDA Chairman Said

Pension fund regulator PFRDA plans to come out with a systematic withdrawal plan which will provide flexibility to pension account holders to withdraw a lump sum fund as per their choice on completion of 60 years.

“It is at a very advanced stage. Hopefully, by the end of next quarter we should be able to come out with a scheme like that,” PFRDA Chairman Deepak Mohanty told PTI in an interview.

Currently, National Pension Scheme (NPS) subscribers after turning 60 years withdraw up to 60 per cent of the retirement corpus as a lump sum while the remaining 40 per cent of the corpus mandatorily goes into buying an annuity.

However, a systematic withdrawal plan will allow NPS subscribers to opt for periodic withdrawal — either monthly, quarterly, half-yearly, or annually — till the age of 75 years.

“Many people requested that why we cannot stay with the fund. When my fund is giving a very good return why should I take an annuity. I like to stay on and draw that money on the frequencies on a monthly basis or quarterly basis. But that option we cannot provide as of now. So we are asking for a product like that,” he said.

Pension Fund Regulatory and Development Authority (PFRDA), the pension fund regulator increased the entry age up to 70 and the exit age to 75 keeping in view longevity.

One can defer annuity receipt based on subscribers’ financial condition so that one gets a much higher annuity, he said, adding, those who can afford that keep it for the contingency.

“So what we are trying to do is come out with a systematic withdrawal plan which is permitted within our statute that somebody’s going to take a deferred annuity and can draw the balance 60 per cent in a systematic withdrawal plan,” he said.

Asked about the proposed amendment to PFRDA Act, he said, “We have made some suggestions to the government. And one key thing that we have suggested in the amendment is an alternate pension product.

He further said that the asset under management (AUM) under pension schemes is expected to cross the landmark figure of Rs 10 lakh crore in the first half of this fiscal, helped by regular contributions from subscribers.

As per the latest figure, assets under management (AUM), including National Pension Scheme (NPS), Atal Pension Yojana (APY) and NPS Lite, increased to Rs 9.58 lakh crore.

“We have reached an AUM size of about Rs 9.5 lakh crore. So, one will not be surprised that by the middle of this financial year, we could cross the magical figure of 10 lakh crore of NPS corpus,” he said.

It depends on so many other things like the return that the fund generates and the performance of the market, he said.

The AUM corpus is mark-to-market, so the adverse moment in the market impacts the corpus.

Out of Rs 9.58 lakh crore, he said, NPS alone has a fund size of Rs 9.29 lakh crore while the remaining Rs 28,538 crore is the corpus of APY.

In terms of numbers, Mohanty said subscribers under NPS have already crossed 10 lakh last year.

This year, he said, “We expect the number of subscribers to touch 13 lakh as this space is growing. We hope to achieve this number”.

NPS comprises contributions from government employees and the other part is the private sector, he said, adding the government sector is on autopilot because they keep coming on their own, but there is a need to grow on the private side.

For this, Mohanty said, the regulator is taking a lot of initiatives, for example, PFRDA has allowed even the agents to underwrite NPS and trade bodies are being sensitised to promote NPS among corporates.

“On the digital side, we have taken a lot of initiatives, for example, e-NPS, where one can do it on their own rather than through an intermediary,” he said.