For the subscribers who want to stay invested under National Pension System (NPS) beyond 60 years or beyond their superannuation or individuals above 65 years of age who want to open an NPS account, Pension Fund Regulatory And Development Authority (PFRDA) has increased the entry age under NPS. In a circular issued on 26th August 2021, PFRDA has said that "In response to the large number of requests received from the existing Subscribers to remain invested under NPS beyond 60 years or beyond their superannuation, and the desire from citizens above 65 years to open NPS, it has been decided to increase the entry age of NPS in the interest of Subscribers and benefit them with the opportunity of creating a long term sustainable pension wealth. The existing age of entry which is 18-65 years has been revised to 18-70 years."
The authority has also said that "Accordingly, PFRDA has revised the guidelines on entry and exit. Any Indian Citizen, resident or non-resident and Overseas Citizen of India (OCI) between the age of 65-70 years can join NPS and continue or defer their NPS Account up to the age of 75 years. Those Subscribers who have closed their NPS Accounts are permitted to open a new NPS Account as per increased age eligibility norms."
Features and benefits increased age of entry under NPS
According to the press release of PFRDA, the unique features and benefits of increased age of entry are as follows:
1. Choice of Pension Fund (PF) and Asset Allocation: The subscriber, joining NPS beyond the age of 65 years, can exercise the choice of PF and asset allocation with the maximum equity exposure of 15% and 50% under auto and active choice respectively. The PF can be changed once per year whereas the asset allocation can be changed twice.
2. Exit and withdrawals: The exit conditions for subscribers joining NPS beyond the age of 65 years will be as under:
a. Normal Exit shall be after 3 years: The subscriber will be required to utilize at least 40% of the corpus for purchase of annuity and the remaining amount can be withdrawn as lump sum. However, if the corpus is equal to or less than Rs 5.00 lakh, the subscriber may opt to withdraw the entire accumulated pension wealth in lump sum.
b. Exit before completion of 3 years shall be treated as premature exit: Under premature exit, the Subscriber is required to utilize at least 80% of the corpus for purchase of annuity and the remaining can be withdrawn in lump sum. However, if the corpus is equal to or less than Rs 2.5 lakh, the subscriber may opt to withdraw the entire accumulated pension wealth in lump sum.
c. In case of unfortunate death of the subscriber, the entire corpus will be paid to the nominee of the subscriber as lump sum.
3. NPS Tier II Account: The subscribers are also eligible to open a Tier II Account for investing their disposable income to optimize their returns which unlike Tier-I accounts can be withdrawn at any time.
Investment options for subscribers
Here are the investment options for subscribers under Auto and Active choice according to PFRDA:
1. Auto Choice: The maximum exposure under equity asset class is 15%.
|Sr No.||Auto Choice||Asset Class in per cent||Asset Class in per cent||Asset Class in per cent|
|Equity (E)||Corporate Bonds (C)||Government Securities (G)|
|1||Aggressive Life Cycle Fund (LC 75)||15||10||75|
|2||Moderate Life Cycle Fund (LC 50)||10||10||80|
|3||Conservative Life Cycle Fund (LC 25)||5||5||90|
2. Active Choice: The cap on equity exposure is 50% and rest of the asset classes as per choice of the subscriber.
|Active Choice||Cap on Asset Class||Cap on Asset Class||Cap on Asset Class||Cap on Asset Class|
|Equity (E)||Corporate Bonds (C)||Government Securities (G)||Alternate Investment (A)|
|Percentage of Allocation||50%||100%||100%||5%|
|(Alternate Investment as asset class not provided under Tier II)|
Exit Option for Subscribers
|Type of Exit||Lump sum withdrawal (Maximum)||Annuity (Minimum)|
|Normal Exit (if Corpus > 5 Lakh)||60%||40%|
|Pre-Mature Exit (if Corpus > 2.5 Lakh)||20%||80%|
|Unfortunate Death of the Subscriber||Entire corpus payable to the nominee as lump sum|