National Pension System or NPS rule changed: The Pension Fund Regulatory and Development Authority (PFRDA) has increased the maximum age of joining the National Pension System (NPS) to 70 years. Also, the NPS account holders have been permitted to defer their account up to the age of 75 years.

The Pension Fund Regulatory and Development Authority (PFRDA) has revised the guidelines on entry and exit following an increase in the maximum age for joining the NPS from 65 year to 70 years of age. The entry age for NPS has been revised to 18-70 years from 18-65 years.

Any Indian citizen and Overseas Citizen of India (OCI) in the age group of 65-70 years can also join NPS and continue up to the age of 75 years, according to a PFRDA circular on the revised guidelines.

Those subscribers who have closed their NPS accounts have also been permitted to open a new account as per increased age eligibility norms. The maximum equity exposure, however, will be only 15 per cent if subscribers joining NPS beyond the age of 65 years decide to invest under the default ‘Auto Choice’.

“The subscriber, joining NPS beyond the age of 65 years, can exercise the choice of PF (pension fund) and asset allocation with the maximum equity exposure of 15 per cent and 50 per cent under Auto and Active Choice, respectively,” it said.

The investment options for NPS subscribers 

An NPS subscriber has the freedom to allocate his/her contributions to different asset classes through ‘Active Choice’ or ‘Auto Choice’. Under ‘Active Choice’, a subscriber has more say on allocation of funds across asset classes, while in ‘Auto Choice’ the funds gets invested in pre-determined proportion as per the age of the subscribers.

The contributions of subscribers are invested by the PFs (chosen by subscribers) in compliance with the investment guidelines for each asset class — equity, corporate bonds, government securities and alternate assets.

New Exit and Withdrawal Rules

Subscribers joining NPS beyond the age of 65 years can exit normally after 3 years. S/he will be required to utilize at least 40% of the corpus for the purchase of annuity and withdraw the remaining amount as a lump sum. However, if the corpus is equal to or less than Rs 5 lakh, the subscriber will have the option to withdraw the entire accumulated pension wealth in a lump sum.

Premature exit is also allowed before the completion of 3 years. In this case, the subscriber will have to utilize at least 80% of the corpus for the purchase of annuity. S/he can withdraw the remaining in a lump sum. In case the corpus is equal to or less than ₹2.5 lakh, the subscriber can withdraw the entire accumulated pension wealth in a lump sum.

In case of the unfortunate death of the subscriber, the entire corpus will be paid to the nominee of the subscriber as a lump sum.

The subscribers will also be eligible to open Tier II Accounts for investing their disposable income to optimize their returns. Unlike the NPS Tier-1 account, Deposits in the Tier-II account can be withdrawn at any time.