PFRDA mulls various withdrawal options to optimise pension

MUMBAI: In its bid to optimise the retirement income of the New Pension System ( NPS) members, PFRDA is exploring alternative mechanisms for introducing different variants of the withdrawal options, a senior official said.

This may include systematic/phased withdrawal options, under which different combinations of withdrawal packages with/without annuity options can be offered to the subscribers.

Moreover, Pension Fund Regulatory and Development Authority (PFRDA) is also looking at possibilities of combining other assets like house as source of income for the subscribers together with the pension asset.

"We are looking at all options for optimising the pension wealth for the retirees including SWP/phased withdrawal combined with tax exemption on entire pension wealth as well as housing as a source of supplementary income particularly in view of the subdued and shallow annuities market," PFRDA whole time member (finance) RV Verma told PTI.

"We have already set up a committee to look into housing related retirement incomes for the NPS members," he added.

Under the extant regulations, a minimum of 40 per cent of the pension wealth (AUM at superannuation) has to be mandatorily annuitized and balance 60 per cent may be withdrawn as lump-sum.

However, only 40 per cent of the lump-sum withdrawal is tax exempt. Thus, there is already a built-in disadvantage to the National Pension Scheme (NPS) subscribers by way of tax payable on balance 20 per cent of the lump-sum withdrawal, falling on the lines of EPF/PPF.

This acts as a disincentive for the subscribers for withdrawing more than 40 per cent of the accumulated amount as lump sum. For lack of alternative options, these amounts also have to be annuitized.

Though endeavor is made to provide for optimum pension