The Pension Fund Regulatory and Development Authority (PFRDA) recently released a circular where it highlighted that the partial withdrawal of the pension under the National Pension Scheme (NPS) has now been allowed under several provisions.
Subscribers will be allowed to partially withdraw their pensions under NPS from February 1, the circular stated. PFRDA further stated that under these provisions, subscribers will only be able to withdraw 25 percent of their pension, excluding employers’ contribution.
There are certain stipulations under which a subscriber can withdraw money from their NPS accounts. Mentioned below are the provisions highlighted by the PFRDA regarding the same –
- Higher education expenses for children, covering legally adopted children
- Marriage expenses for children, including legally adopted children
- Construction of purchase of residential house or flat in the name of the subscriber, joint ownership covered
- Medical expenses for illnesses such as cancer, kidney failure, primary pulmonary arterial hypertension, multiple sclerosis, major organ transplant, coronary artery bypass graft, and others.
-Medical expenses arising from certain disabilities or incapacitations of the subscriber
- Expenses to set up a start up or a new venture
- Expenses for skill development
NPS new rule: How to withdraw pension
In order to make a partial withdrawal from the NPS account after February 1, the subscriber of the pensions scheme can submit a self-declaration with any of the above listed reasons to the central recordkeeping agency (CRA) through their respective government nodal office or point of presence.
Further, if the reason for withdrawal is any persisting ailment, a family member can submit the declaration on their behalf. The CRA then conducts the ‘penny drop’ test with the subscribers’ bank, where it transfer a small amount of money to the bank account of the subscriber to check if the name matches.
The bank account of the subscriber will have to pass this ‘penny drop’ test before the request of the partial withdrawal or change in bank account details is entertained. Only after this the amount sought by the subscriber will be transferred to their account.