NPS withdrawal rules explained: Key things you must know

The National Pension System (NPS) Tier 1 account is the primary pension account and serves as a robust retirement planning tool, offering individuals the opportunity to build a substantial corpus after retirement.

Text: Centre for Investment Education and Learning (CIEL)

NPS subscribers must understand the withdrawal rules associated with these accounts to help them plan their retirement strategy.

NPS subscribers can withdraw a maximum of 60% of the accumulated corpus in the Tier 1 account as a lump sum at the time of retirement. The remaining 40% has to be mandatorily used to purchase an annuity that provides a regular pension income. This provides a corpus to the retired individual to be used as per his financial plan.

If the NPS subscriber faces specific financial emergencies, the NPS allows partial withdrawals, subject to specific terms and conditions. Subscribers can make premature withdrawals of up to 25% of their contributions. However, this is possible only if 10 years have been completed since the opening of the account.

The mandatory purchase of an annuity with at least 40% of the accumulated corpus ensures a regular pension income for the investor during their retirement years. This aims to provide financial security in retired life.
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