Pension fund regulator Pension Fund Regulatory and Development Authority (PFRDA) is planning to come out with a systematic withdrawal plan in National Pension Scheme (NPS) which will provide flexibility to pension account holders to withdraw a lump sum fund as per their choice on completion of 60 years.
“It is at a very advanced stage. Hopefully, by the end of next quarter we should be able to come out with a scheme like that,” PFRDA Chairman Deepak Mohanty recently told news agency PTI.
What Is A Systematic Withdrawal Plan?
A systematic withdrawal plan (SWP) is a facility that allows investors to withdraw a predetermined amount of money at regular intervals from their investment holdings. It is commonly used as a strategy for generating a steady stream of income during retirement or to meet specific financial goals. It is commonly offered by mutual funds.
SWPs are popular among individuals looking to generate regular income from their investments while keeping their principal intact. They provide flexibility in terms of withdrawal frequency and amount, allowing investors to tailor their cash flow according to their needs. However, it’s crucial to consider factors such as investment performance, fees, and tax implications before opting for a SWP.
Systematic Withdrawal Plan In NPS: Why It Matters To NPS Subscribers?
Currently, National Pension Scheme subscribers after turning 60 years withdraw up to 60% of the retirement corpus as a lump sum while the remaining 40% of the corpus mandatorily goes into buying an annuity.
However, a systematic withdrawal plan will allow NPS subscribers to opt for periodic withdrawal — either monthly, quarterly, half-yearly, or annually, till the age of 75 years.
Mohanty had said, “Many people requested why we cannot stay with the fund. When my fund is giving a very good return why should I take an annuity. I like to stay on and draw that money on the frequencies on a monthly basis or quarterly basis. But that option we cannot provide as of now. So we are asking for a product like that (SWP).”
“So what we are trying to do is come out with a systematic withdrawal plan which is permitted within our statute that somebody’s going to take a deferred annuity and can draw the balance 60% in a systematic withdrawal plan,” Mohanty had said.
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