NPS reforms: Panel set up on assured payouts, Vatsalya exit norms eased

Pension regulator overhauling National Pension System to introduce assured payouts and flexible withdrawal norms, aiming to bridge the gap between long-term savings and immediate liquidity needs

The pension regulator has announced new measures to make retirement savings under the National Pension System (NPS) more flexible and accessible for various subscribers, including children and employees of small businesses.

 

The Pension Fund Regulatory and Development Authority (PFRDA) has set up a 15-member expert committee to recommend a framework for assured payouts under NPS, while also easing exit and withdrawal rules under the NPS Vatsalya scheme meant for minors, according to PTI.

 

Panel to work on assured payouts under NPS

The committee will develop guidelines and regulations for introducing assured payouts within the NPS architecture. The move is aimed at improving income certainty for subscribers after retirement, PTI reported, citing a statement from the regulator.

 

The committee is chaired by M S Sahoo, former chairman of the Insolvency and Bankruptcy Board of India, and includes experts from law, actuarial science, finance, insurance, capital markets, and academia. The panel can also invite external specialists to support its work.

 

Key areas the committee will examine include:

 

A smooth transition from the accumulation phase to the payout, or decumulation, phase

• Market-based and legally enforceable assurance mechanisms
• Lock-in periods, withdrawal limits, pricing, and fee structures
• Risk management norms, including capital and solvency requirements
• Tax treatment of assured payouts that remain within the NPS system

 

On the consumer side, the panel will work on standardised disclosure norms to prevent mis-selling and ensure subscribers clearly understand the nature of guarantees, PTI said.

 

PFRDA said the initiative aligns with the PFRDA Act and the broader national goal of strengthening retirement security as part of the Viksit Bharat 2047 vision.

 

Focus on MSMEs and retirement awareness

 

Alongside regulatory changes, PFRDA has been stepping up outreach efforts. The regulator recently held awareness sessions on NPS for micro, small and medium enterprises (MSMEs) during the Vibrant Gujarat Regional Conference in Rajkot, PTI reported.

 

Addressing MSME stakeholders, PFRDA executive director Mamta Rohit highlighted the need for retirement planning in a sector that employs around 290 million people nationwide. She pointed to recent reforms such as higher equity exposure limits, greater withdrawal flexibility, extension of the maximum account age to 85 years, and the launch of NPS Vatsalya for early pension planning.

 

NPS Vatsalya rules made more flexible

 

In a separate development, PFRDA has relaxed exit and partial withdrawal norms under the NPS Vatsalya scheme for minors to make it more attractive, PTI reported.

 

Under the revised rules:

 

Partial withdrawals are allowed after three years from account opening 

Up to 25 per cent of the subscriber’s own contributions can be withdrawn for education, medical treatment, or specified disabilities 

Withdrawals are permitted twice before age 18 and twice between 18 and 21, subject to conditions

 

For exits, subscribers can either shift to a regular NPS Tier-I account on attaining majority or exit with up to 80 per cent of the corpus as a lump sum, with at least 20 per cent annuitised. Full withdrawal is allowed if the total corpus is Rs 8 lakh or less.

 

NPS Vatsalya, announced in the Union Budget for 2024–25, allows parents and guardians to start pension savings for children with a minimum contribution of Rs 250, with no upper limit. The scheme also includes incentives for community-level workers to promote awareness, particularly in rural and semi-urban areas.

 

(With inputs from PTI)