PFRDA (Pension Fund Regulatory and Development Authority) is giving its subscribers the option to partially withdraw funds from their NPS (National Pension Scheme) accounts to set up a business or pursue higher education.

In a statement, the regulatory body said, "Partial withdrawals will now be allowed to National Pension System (NPS) subscribers who wish to improve their employability or acquire new skills by pursuing higher education/ acquiring professional and technical qualifications." The PFRDA took this decision after last week's board meeting.

Apart from higher education, one is also allowed partial withdrawal to set up new business.

At present, a subscriber under the NPS program is allowed a withdrawal not more than 25 percent of the contribution made after completing 10 years of subscription. Also, these subscriptions can only be made for special needs like home purchase, marriage, higher education or critical illness.

The new rule will also cover areas of medical expenses that arise out of the subscriber's disability or incapacitation.

Equity investment in NPS

It was further decided by the board to increase the cap on equity investment from 50 percent to 75 percent on an "active choice" basis for NPS subscribers. However, this facility can only be availed till the subscriber turns 50 years old. NPS gives an "active" and "auto" choice to its subscribers to help design their investment portfolio in NPS.

In the "active" option, one can invest in equity, G-sec, corporate bonds and up to 5 percent in 'Alternate Investment Fund.

Additionally, PFRDA board has approved the proposal to change the investment grade rating of corporate bonds from "AA" to "A." In its statement, the regulatory body said, "The change is subject to a cap on investments in 'A' rated bonds to be not more than 10 percent of the overall corporate bond portfolio of the pension funds." This initiative will enlarge the scope of investment for the fund managers while ensuring credit quality, it added.

It also said, "Further, it was also approved that the principles enumerated in such code shall be circulated to all pension funds for compliance and implementation."

Inputs from PTI