New Delhi: The Pension Fund Regulatory and Development Authority (PFRDA) has issued orders raising the upper-age limit for joining National Pension Scheme (NPS) from 65 years to 70.

Those joining the scheme between 65 years and 70 years can continue up to 75 years. With the upper-age limit being raised, those who had closed their account earlier have also now been permitted to open new accounts.

For investors joining NPS after 65 years, there is now opportunity to invest up to 50 percent of their funds in various asset class. The amount deposited in NPS, is invested in equity, corporate bonds, government securities and alternate assets.

An NPS subscriber has the freedom to allocate his/her contributions to different asset classes through “Active Choice” or “Auto Choice.” Under Active Choice a subscriber has mandatory say on allocation of funds across asset clases, while in “Auto Choice: the funds get invested in pre-determined proportion as per the age of the subscribers.

Under “Active Choice” one can invest up to a maximum of 50 per cent in equity. Others can use the “auto choice” method to invest a maximum of 15 percent in shares.

There is an opportunity to change the pension fund once a year and change the ratio of shares, corporate bonds, and government securities twice a year.

Exiting from scheme
“Normal exit” for the subscribers joining NPS beyond the age of 65 years shall be after three years.

The subscriber will be required to utilise at least 40 percent of the corpus for purchase of annuity and the remaining amount can be withdrawn as lump sum.

If the corpus is equal to or less than Rs 5 lakh, the subscriber may opt to withdraw the entire accumulated pension in lump sum.

The exit before the completion of three years would be treated as “premature exit”. Under “premature exit, the subscriber is required to utilise at least 80 pe cent of the corpus for purchase of annuity and the remaining can be withdrawn in lump sum.

If the corpus is less than Rs 2.5 lakh the subscriber may opt to withdraw the entire accumulated amount in one go.

In the event of the death of the subscriber, the entire corpus will be added to to the nominee as lump sum.

There is opportunity to open tier-2 accounts besides tier-1 accounts for withdrawing money at any time.

What is NPS?
The government’s pension scheme is called the National Pension Scheme (NPS). Any employed person between the age group of 18 to 70 can join the scheme as a subscriber.

The amount deposited in the NPS can be invested in various asset classes; equity, corporate bonds, government securities and alternate assets.

When government/ bank employees invest 10 percent of their salary, the government/bank deposits 14 percent. The Kerala government is depositing 10 percent in NPS in the name of government employees who are enrolled in contributory pension scheme.

Those working in other establishments would get tax relief on the amount contributed by the employer.

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