How to set up systematic withdrawal from NPS?

You make daily improvements to become the best version of yourself. The National Pension Scheme (NPS) is no different. It has undergone a series of changes over the years to become an investor-friendly product.

The numbers are a testament to it. The NPS has become a popular investment option for retirement planning, with its subscriber base skyrocketing eightfold in just 10 years and asset base growing at an enviable 59 per cent each year.

But the process of adding finesse to the product never stops. Recently, the NPS announced a couple of changes that can help investors pick different pension fund managers across various asset classes and enjoy better withdrawal flexibility during retirement.

So, let's take a deep-dive to understand the changes and how you can implement them.

#1 Cherry-picking pension fund managers for different asset classes

Until November 2023, NPS subscribers could only choose a single pension fund manager (PFM) for all four asset classes (equity, government bonds, corporate bonds and alternative investments). However, investors now have the flexibility to select different fund managers for each asset class based on their track record.

Here's how you can select a different fund manager across each asset class:

1. Login to your NPS account.
   
2. Select the 'Transact Online' option followed by 'Change PFM' from the dropdown list.
   
3. Choose your account type (Tier 1 or Tier 2) and select 'Active'. You will then be presented with a dropdown list of fund managers and the respective schemes that you have chosen.
   
4. You can now select the PFM you want to change and then opt for the schemes they manage as well. Please refer to the images below as an example, where the subscriber has selected LIC Pension Fund Limited as the PFM for government securities.
   


5. After selecting the requisite option, it will be verified, which you then need to authorise.

Please note

• The provision for changing the fund manager does not apply to alternative investments.
  
• Further, it is only applicable under the 'Active' asset allocation mode.
  
• If you are a new NPS subscriber, choosing from multiple PFMs will only be available three months after registration.
  
• The option to change between PFMs is available once a financial year.
  
• While the above steps are applicable for subscribers registered through NSDL, they broadly remain the same for CAMS and KFintech users as well.

#2 Allowing systematic lumpsum withdrawals

Investors can now periodically withdraw their NPS corpus through a systematic lumpsum withdrawal (SLW) between the ages of 60 and 75. It only applies to withdrawing 60 per cent of the NPS corpus. The remaining money must be utilised to subscribe to an annuity plan.

One of the key benefits of SLW is that it allows subscribers to withdraw their lumpsum corpus in a phased manner until 75, helping the money stay invested for a longer time period.

However, two things need to be kept in mind:

• The SLW feature is not available for premature withdrawals.
  
• The SLW provision is also not applicable in the event of the investor's demise or if they become incapacitated. The entire corpus will be paid out as a lumpsum to the nominees or legal heirs in such cases.

How to activate SLW?

1. Login to your NPS account.
   
2. Choose the 'Exit from NPS' option, followed by 'Initiate Request' under the 'Continuation and Withdrawal' dropdown menu.
   
3. Once the request has been initiated, you will be asked to verify your email address, mobile number and bank account details.
   
4. After verification, you will be presented with two options:
• SLW tenure based on age: Here, the amount you receive will be calculated for you. This is done once you select the date (pre-specified in the dropdown) and withdrawal frequency.
  

• SLW tenure based on instalment amount:Here, you will be informed about the duration of your SLW, provided you know how much money you require at specific intervals and how frequently.

5. Once you have selected the preferred option, it will be authenticated and verified, following which you will receive an acknowledgement receipt.

Please note

• Subscribers should note that there will be a five-day gap between authorisation and the start of SLW.
  
• Once SLW gets activated, the contribution or partial withdrawal option will no longer be available.
  
• Post activation, you may choose to make changes to or cancel your SLW.
  
• While the above steps are applicable for subscribers registered through NSDL, they broadly remain the same for CAMS and KFintech users as well.

Also read:
How to get started with NPS
(Maybe) Another upgrade for NPS