NPS stands for National Pension System. It allows people to accumulate funds for their retirement and receive a regular pension. With NPS investment, they also qualify for tax benefits of up to Rs. 2 Lakh under different sections of the Income Tax Act. In a recent update to the NPS withdrawal rules, the PFRDA has approved withdrawals from the corpus at regular intervals. This post aims to discuss everything related to systematic lump sum withdrawals for NPS subscribers.
What is Systematic Lumpsum Withdrawal?
The National Pension Scheme is a government-backed retirement plan controlled by the PFRDA. Subscribers gain exposure to the capital market through various instruments like equity, corporate bonds, government securities, and alternative assets. The Systematic Lumpsum Withdrawal in NPS allows NPS investors to withdraw a certain amount from their corpus at regular intervals.
How Does the Systematic Lumpsum Withdrawal Work?
The SLW allows NPS subscribers to withdraw funds from their corpus. It is done in a systematic manner at regular intervals. It is allowed to subscribers from the age of 60 or at the age of retirement. This allows subscribers to withdraw 60% of their retirement corpus in a staggered manner rather than as a single lump sum.
Such a facility allows retired individuals to receive a steady income for their post-retirement life. After selecting the SLW method, they can start receiving payments per their chosen schedule. Therefore, SLW is an effective retirement planning opportunity. It gives subscribers an option to withdraw funds from their corpus systematically. Such flexibility is of great use to address certain needs and handle emergencies.
Advantages of NPS SLW
Opting for the NPS SLW promotes discipline in corpus usage. It leverages rupee cost averaging and combats inflation. Consequently, investors can handle their retirement expenses more confidently with long-term financial security. It provides market-linked investment growth by keeping the funds invested in the NPS based on the subscriber’s investment choice. Here’s a look at the benefits of Systematic Lump sum Withdrawal in the National Pension Scheme:
- Generates consistent cash flow at regular intervals
- Along with annuity, the subscriber’s monthly income increases through SLW
- The returns keep accumulating on the NPS corpus
- SLW withdrawals are eligible for tax benefits*
Changes in the New SLW Guidelines
Let’s check out the new SLW guidelines for NPS:
New Guidelines:
- The SLW facility allows lump sum withdrawal in a phased manner.
- Subscribers can withdraw a specific amount systematically at regular intervals. The frequency of withdrawals can be monthly, quarterly, half-yearly, or annually.
- Similar to earlier guidelines, the SLW facility is available till 75 years of age.
- The subscriber needs to submit the request only once. They don’t need to submit the withdrawal request every time.
- It applies upon retirement or superannuation.
Is it Wise to Opt for SLW?
When deciding whether to opt for SLW, one must assess their needs, lifestyle, and future plans. SLW is an efficient way to generate steady income. Those who opt for the facility get constant funds to cover their medical costs, expand investments, and ensure a confident retirement. Retirees seeking regular cash flows during their post-retirement life must opt for the Systematic Lump sum Withdrawal system. It helps them manage their regular expenses. Another benefit is that they need to request the SLW facility only once.
Liquidity is crucial for any investment. NPS allows the ability to withdraw 60% of the corpus periodically, making it an appealing investment option. Investors get greater flexibility with this facility. Its strong performance over the last few years makes it an attractive option for retirement planning. By opting for the SLW method, retired subscribers can withdraw funds from their corpus gradually until 75 years of age. It is a tax-free income they receive regularly. As a result, subscribers gain more control over their retirement corpus and can choose when to withdraw their money. These facilities make the National Pension Scheme more flexible, making it a safer retirement plan for investors.
Things to Remember about SLW
Here are a few important things one must know about SLW in NPS:
- The SLW option is available at retirement or superannuation only. It is not applicable for premature exits.
- The SLW option is available for 60% of the lumpsum corpus only. The remaining 40% still goes to the annuity.
- The option to contribute or partially withdraw is no longer available after activating the SLW.
NPS is a great investment choice for retirement planning, considering the benefits offered. Customers can invest in NPS through leading banks such as ICICI Bank, considering the seamless services it offers. You can access your NPS account through the iMobile Pay app and internet banking for various details regarding your NPS account, making it an ideal choice. However, it’s important to know about the NPS withdrawal rules to maximise your profits and ensure that you have access to regular funds even during retirement. The SWL method gives NPS subscribers the flexibility to choose the frequency and amount they wish to withdraw at regular intervals. With recent introduction of one time request for start of SWL making it hassle-free and efficient.
