Exit from National Pension System NPS, Regulations 2017

"Exit" from the NPS means the closure of pension account of the subscriber under New Pension System, which may happen upon and on the date of the following events -

1. A subscriber having superannuated/retired from employment, as per the terms of such employment. Age of retirement need not to 60 years, it can be 50, 60 or any other age as per your organization. If a subscriber wishes to continue investment in NPS even after attaining sixty years of age than his account will not close.
      
2. Voluntary closure of account before attaining the superannuation age.
      
3. Death of subscriber before attaining the age of superannuation, or the age of sixty years.
      

1. Upon Normal Superannuation

If an individual exits pension scheme upon retirement or superannuation then below regulations are applicable to him.
   

## Common Rules for all citizens / subscribers ##

• At least 40% of the accumulated pension wealth of the subscriber has to be mandatorily utilized for purchase of annuity providing for monthly or regular pension of the subscriber and the balance is paid as lump sum to the subscriber.
     
• Subscriber has the option to defer the withdrawal of the lump sum amount until he or she attains the age of 70 years.
     
•  Subscriber has the option to defer the purchase of annuity for a maximum period of three years from the date of attainment of age of superannuation.
     
• If a subscriber desires to continue contribution towards pension account beyond the age of superannuation, he can do so till the maximum age of seventy years. So, if a person retires at the age of 60 years, he or she also have ten years to contribute towards pension account.
      

## Only For Government Employees ##

• If the accumulated pension is equal or less than a sum of Rs. 2 lakh, the subscriber has the option to withdraw the entire accumulated pension wealth without purchasing annuity.
     
• Default Annuity scheme for government employees is "Pension for life of the subscriber and his or her spouse (if any) with the promise of return of purchase price on death of the annuitant (Policyholder)". If you don't want this than you can also choose other annuity plan for yourself.
     

## Only For Non - Government Employees and other citizens ##

• If the accumulated pension is equal or less than a sum of Rs. 1 lakh, the subscriber has the option to withdraw the entire accumulated pension wealth without purchasing annuity.
     
• There is no default annuity plan and subscriber need to purchase a annuity providing monthly or regular pension.
     

2. Upon Voluntary Exit

If an individual opts to exit from the national pension system before the age of superannuation then below regulations are applicable to him.

## Common Rules for all citizens / subscribers ##

• At least 80% of the accumulated pension wealth of the subscriber has to be mandatorily utilized for purchase of annuity providing for monthly or regular pension of the subscriber and the balance is paid as lump sum to the subscriber.
     
• If the accumulated pension is equal or less than a sum of Rs. 1 lakh, the subscriber has the option to withdraw the entire accumulated pension wealth without purchasing annuity.
     
• If the accumulated pension is more than Rs. 1 lakh than the subscriber need to purchase annuity. In case the age of the subscriber is less than the minimum age required for purchasing annuity, then such subscriber continue to be subscribed to National Pension System, until he or she attains the age of eligibility for purchase of any annuity.
     

## Only For Government Employees ##

• Default Annuity scheme for government employees is "Pension for life of the subscriber and his or her spouse (if any) with the promise of return of purchase price on death of the annuitant (Policyholder)". If you don't want this than you can also choose a annuity plan by yourself.
     

## Only For Non - Government Employees and other citizens ##

• A subscriber should be subscribed to NPS for at least 10 years to voluntary exit national pension system. There is no such regulation mentioned for government employee.
     

3. Upon Death

3a. If a subscriber dies before attaining the age of superannuation then below regulations are applicable to him.

## Only For Government Employees ##

• At least 80% of the accumulated pension wealth of the subscriber has to be mandatorily utilized for purchase of annuity providing for monthly or regular pension of the subscriber and the balance is paid as lump sum to the nominee(s) or legal heirs. Since, the subscriber is no more, nominee needs to purchase annuity.
     
• If the accumulated pension is equal or less than a sum of Rs. 2 lakh, the nominee has the option to withdraw the entire accumulated pension wealth without purchasing annuity.
     

## Only For Non - Government Employees and other citizens ##

• The entire accumulated pension wealth of the subscriber shall be paid to the nominee or nominees or legal heirs.
    
• Nominee has the option to purchase annuity, if they so desire. In my opinion, you should not choose this option and go for lump-sum payment.
     
• In case the nominee is not registered than the accumulated pension shall be paid to family members on the basis of legal heir certificate.
     

3b. If a subscriber dies after attaining the age of superannuation then below regulations are applicable to him. This may happen when after attaining the superannuation age subscriber chooses to defer the purchase of annuity plan and dies before purchasing pension plan. 

## Only For Government Employees ##

• The annuity need to be mandatorily purchased by the spouse(if any) providing for annuity for life of the spouse with provision for return of purchase price of the annuity and upon the demise of such spouse.
        

## Only For Non - Government Employees and other citizens ##

• There is no special regulation mentioned for non-government or corporate subscribers which mean that the regulations mentioned above in section 3a are applicable to them i.e. nominee can withdraw accumulated pension.

I will share NPS taxation and withdrawal rules in my next post.