NPS Revolution: Maximizing Profits through Systematic Lampsum Withdrawals
In a significant move, the Pension Fund Regulatory and Development Authority (PFRDA) has made changes to the rules governing the withdrawal of funds from the Atal Pension Yojana (APY). Under the new guidelines, APY subscribers now have the flexibility to withdraw their money based on their individual financial needs rather than receiving a fixed lump ... Read more
In a significant move, the Pension Fund Regulatory and Development Authority (PFRDA) has made changes to the rules governing the withdrawal of funds from the Atal Pension Yojana (APY). Under the new guidelines, APY subscribers now have the flexibility to withdraw their money based on their individual financial needs rather than receiving a fixed lump sum. If you are an APY subscriber, you can opt to withdraw your majority amount on a monthly, quarterly, half-yearly, or annual basis, aligning with your specific requirements. Let’s delve into what the PFRDA’s Systematic Lumpsum Withdrawal (SLW) entails and how it can benefit you.
What is Systematic Lumpsum Withdrawal?
Systematic Lumpsum Withdrawal (SLW) allows you to access your funds periodically according to your financial requirements until the age of 75. Previously, the option for annual withdrawals was the only choice available for APY subscribers. However, with the introduction of the Lumpsum Payment Option by PFRDA, subscribers can now initiate their withdrawal requests either online or offline once the Lumpsum Payment Option becomes active. This decision includes specifying the start date, end date, and other essential details regarding how you wish to withdraw your funds. After activating the SLW, you won’t be able to make any new investments in your APY account.
What are the Advantages of SLW?
By choosing the SLW option, you ensure liquidity in your investments. APY customers have the freedom to select a lump sum amount for approximately 60% of their corpus fund and use the remaining 40% to purchase an annuity option. The SLW facility is available only for Tier-I accounts, ensuring that the withdrawn amount remains entirely tax-free. However, there have been no changes to the annuity rules; they remain the same.
How to Apply for SLW?
If you are an APY subscriber interested in the SLW option, you can apply either online or offline. When applying, you need to specify when you want to start and end this facility and how you want to withdraw your money. The remaining amount after every payout will stay invested in your APY account, continuing to earn returns.
Under the current rules, you can withdraw up to 60% of the total accumulated amount in your APY account. However, it is mandatory to purchase an annuity plan for the remaining 40%. The 60% withdrawal can be done either as a one-time withdrawal or on an annual basis. Subscribers need to apply for this annually.
PFRDA aims to inform APY officials who are about to reach the age of 60 or those who wish to exit the scheme about the new Systematic Lumpsum Withdrawal (SLW) option. On October 27, 2023, PFRDA released a circular providing details about this new option. This decision offers several advantages to subscribers.