The Pension Fund Regulatory and Development Authority(PFRDA) on 1 st November 2017 has raised the maximum age of joining National Pension System (NPS) for the private sector citizens to 65 yrs from the existing 60 yrs.Now any Indian citizen, resident or nonresident, between the age of 60 to 65 yrs, can also join NPS and continue up to the age of 70yrs in NPS.With this increase of joining age, the subscribers who are willing to join NPS at the later stage of life will be able to avail the benefits of NPS.This initiative will allow a larger segment of the society particularly senior citizens to reap the benefit of NPS and plan for their regular income.
What is NPS?
NPS is a voluntary, defined contribution retirement savings scheme. It has been designed to enable systemic savings during the subscriber’s working life. It is an attempt towards finding a sustainable solution to provide adequate retirement income to every citizen of India. All citizens above the age of 18yrs (up to the age of 65yrs) are now eligible.
How it works?
Under NPS an individual savings is pooled in a pension funds. These funds are invested by PFRDA regulated professional fund managers as per the approved guidelines in diversified portfolios comprising of Government bonds, bills, corporate debentures and shares. These contributions would grow and accumulate over the years depending on the returns earned on investment made.
Besides, under provisions of Income-Tax, an individual making voluntary contributions under NPS would get an additional benefit up to Rs. 50, 000/- under section 80 CCD (1B) which would be over and above the ceiling limit of Rs. 1, 50,000/-prescribed under Section 80 CCE.
Now the increase in joining age will provide the options to the subscribers who are at the fag end of their employment and expecting lump sum amount at the time of retirement but willing to defer their retirement planning for future, may open NPS account and contribute the lump sum corpus to NPS for better fund management by the professional fund manager to fetch better returns and plan for the regular income after some time. The following are applicable clauses:
- The subscriber joining NPS beyond the age of 60yrs.will have the same choice of the pension
fund as well as the investment choice as is available under the scheme for subscribers joining before the age of 60 yrs,
- The subscriber joining NPS after the age of 60 yrs will have an option of normal exit from NPS.after completion of 3yrs. in the scheme. In this case, the subscriber will be required to utilize at least 40% of the corpus for purchase of Annuity and the remaining amount can be withdrawn in lump sum.
- In case of such subscriber willing to exit from NPS before completion of 3 yrs in the NPS, he/she will be allowed to do so, but in such case, the subscriber will have to utilize at least 80% of the corpus for purchase of Annuity and the remaining can be withdrawn in lump sum. In case of subscriber’s death, the entire corpus will be paid to the nominee.