The Pension Fund Regulatory and Development Authority has proposed stiff riders for partial withdrawal from the national pension system (NPS), including a 10-year lock-in period, 25% withdrawal limit and a maximum of three withdrawals in the lifetime of the subscriber.
However, PFRDA has proposed some relaxation if the partial withdrawal are made for treatment of critical illnesses, house purchase and children education and marriages. The norms are similar to what EPFO offers to its subscribers and could help lure more investors in the NPS.
As stipulated in the PFRDA Act, the regulator’s proposed guideline says withdrawals can't exceed 25% of the contribution made by the subscriber. However, the withdrawal will only be permitted for higher education of children, marriage of children, purchase or construction of residential house or flat and treatment for critical illnesses such as cancer, kidney failure, coronary artery bypass graft, coma, blindness and paralysis. The withdrawal from NPS will be permitted only if the subscriber contributes in NPS for at least 10 years.
PFRDA also recommended the subscriber may be allowed to withdraw at the most three times from the scheme during the tenure and should have a gap of at least 5 years before availing the withdrawal facility for the next time. However, the mandatory requirement of 5 years gap between two successive permitted withdrawals would not be applicable in case of treatment.
“We are proposing the above frequency to make sure the subscriber should be left with a decent and considerable accumulated pension wealth at the time of superannuation/age of 60 years enabling him to purchase sustainable annuity," PFRDA said in the draft note.