The Pension Fund Regulatory and Development Authority (PFRDA) has proposed to provide the option of phased withdrawal of the lump sum through Systematic Lump Sum Withdrawal (SLW) facility. With this, NPS subscribers will be able to withdraw their pension savings in a phased manner. This means subscribers will be able to choose to take out a portion of their lump sum corpus periodically – be it monthly, quarterly, half-yearly, or annually – all the way up to the age of 75.

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Currently, NPS subscribers can withdraw their lump sum only in one go or on an annual basis, which could be a bit inconvenient. With SLW, they will have the freedom to defer purchasing an annuity until they reach 75, while enjoying regular cash flows from their pension savings.

The benefits are clear:

More cash flow: SLW will provide pensioners with regular income, increasing monthly earnings alongside annuity payments.

Wealth growth: The remaining corpus will continue to earn returns, contributing to the long-term financial security.

Tax advantages: Pensioners can take advantage of tax benefits on all SLW withdrawals.

The choice of SLW at periodical intervals through automation will

add flexibility, provide liquidity and hence optimise the retirement benefits, according to PFRDA. It will further enable and empower the subscribers with periodical withdrawal to manage his/her needs and requirement. It will allow subscribers to participate and reap market-linked investment gains for the amount not withdrawn, which will continue to lie in PRAN and remain invested as per the investment choice.

Further, this will reduce the risk of reinvestment associated with a one-time lump sum withdrawal even though the option shall continue. In essence, SLW will provide NPS subscribers with a mechanism similar to a Systematic Withdrawal Plan often seen in Mutual Funds.

According to Kurian Jose, CEO, Tata Pension Management, SLW will offer the subscriber an additional advantage of withdrawing the retirement corpus on a systematic and periodic basis, which could earlier be removed only on a lump sum basis or annually by having to necessarily give a redemption request.

"Withdrawal using the recently introduced SLW methodology helps in supplementing the pension a subscriber would receive on purchase of an annuity. This feature can be opted at the time of retirement and is applicable only on lumpsum NPS corpus post purchase of the annuity. SLW is suitable for all retirees who want to benefit from systematic cash flows in their post-retirement phase which allows them to meet their periodic expenses. This is also beneficial as the SLW can be opted as a onetime request and the cash flow would flow periodically as selected by the NPS subscriber," he said.