The government now allows premature withdrawal from NPS or National Pension System under certain conditions. NPS subscribers are eligible for three partial withdrawals from the pension scheme, with each withdrawal not exceeding 25 per cent of the contributions made by him or her, Minister of State for Finance Shiv Pratap Shukla said in response to a question in Rajya Sabha on Tuesday. The partial withdrawals from the NPS account will exclude the contributions made by the employer, the minister said.
Here are five things to know about the NPS or National Pension System accounts:
1. The government allows partial withdrawal from the mandatory Tier-I account after three years from the date of joining, with effect from August 10, 2017. Previously, the Tier-1 account holder had to wait for 10 years from the date of joining to be eligible for the partial withdrawal facility.
2. There is, however, no restriction on withdrawals from the Tier-II account of the subscriber.
3. The government offers two types of accounts under the National Pension System: Tier 1 and Tier 2. While the Tier I NPS account is a pension account, the Tier II NPS account is a savings account.
4. The government has reduced the minimum required period under NPS Tier 1 account for partial withdrawal "keeping in view the possibility of sudden financial needs of the subscribers", the minister noted.
5. With effect from August 10, 2017, the government has also removed the requirement of maintaining a mandatory gap of five years between two partial withdrawals. This means that the partial withdrawals up to 25 per cent from the NPS Tier-1 account need not be at a gap of five years.
The government in December last year raised its contribution towards the National Pension System (NPS) accounts to 14 per cent from 10 per cent. Contributions by the subscriber, however, were capped at 10 per cent of the basic salary.
National Pension System, a government-sponsored pension scheme, was initially launched for government employees in January 2004. In 2009, the NPS was opened to all sections.