Subscribers past the age of 65 can now avail themselves of the facilities provided by National Pension System (NPS). Pension Fund Regulatory and Development Authority (PFRDA) has eased rules and allowed the allocation of up to 50 per cent of the funds in equity.
The PFRDA has revised the entry and exit age following an increase in the maximum age for joining the NPS from 65 years to 70 years of age. The entry-exit age brackets are revised to 18-70 years from 18-65 years.
It said, “ PFRDA has revised the guidelines on entry and exit. Any Indian Citizen, resident or non-resident and Overseas Citizen of India (OCI) between the age of 65-70 years can join NPS and continue or defer their NPS Account up to the age of 75 years. Those Subscribers who have closed their NPS Accounts are permitted to open a new NPS Account as per increased age eligibility norms.”
If the subscriber joins after the age of 65 years and decides to invest under the default ‘Auto Choice’ — the maximum equity exposure, however, will remain 15 per cent only.
“The Subscriber, joining NPS beyond the age of 65 years, can exercise the choice of PF and Asset Allocation with the maximum equity exposure of 15% and 50% under Auto and Active Choice respectively. The PF can be changed once per year whereas the asset allocation can be changed twice. “ it said.
An NPS subscriber can completely utilize the facility of allocating his/her contributions to different asset classes through ‘Active Choice’ or ‘Auto Choice’.
- Under ‘Active Choice’, a subscriber can choose the allocation of funds across asset classes.
- In ‘Auto Choice’ the funds get invested in a predetermined proportion depending upon the age of the subscribers.
Subscribers’ contributions are invested via PFs, and they have to abide by investment guidelines for each asset class — equity, corporate bonds, government securities and alternate assets.
Subscribers joining the social security scheme after attaining 65 years can allot only 5 per cent of the funds to some other asset class under ‘Active Choice’. Though, this allocation of asset class option can’t be exercised in the ‘Auto Choice’ option.
The PF can be changed once per year, on the other hand, the asset allocation can be changed twice.
For subscribers joining NPS beyond the age of 65 years, the circular on the exit option said, “normal exit shall be after 3 years”.
“The subscriber will be required to utilise at least 40 percent of the corpus for purchase of annuity and the remaining amount can be withdrawn as a lump sum,” it said.
“However, if the corpus is equal to or less than Rs 5 lakh, the subscriber may opt to withdraw the entire accumulated pension wealth in a lump sum”, it added.
If a subscriber chooses to take Premature Exit i.e. exiting before 3 years, then, the subscriber will be required to utilize at least 80% of the corpus for the purchase of annuity and the rest can be withdrawn in a lump sum. “However, if the corpus is equal to or less than ₹2.5 lakh, the subscriber may opt to withdraw the entire accumulated pension wealth in a lump sum,” the statement read.
If the subscriber dies, then, the entire corpus will be paid to the nominee of the subscriber as a lump sum.