NPS systematic withdrawal plan suits retirees with large corpus – Newz9

MUMBAI: The systematic withdrawal scheme launched below the National Pension System (NPS) supplies retirees with a facility to deploy their retirement corpus and have their funds managed in a price-environment friendly method.
The NPS has already demonstrated its means to outperform most retirement funds when it comes to returns. Previously, a subscriber, on exit from NPS, didn’t have the choice to systematically withdraw the 60% corpus after buying the annuity with the 40%.
With the introduction of the systematic lumpsum withdrawal characteristic, one can select to stay invested with 60% of the corpus in NPS and allow the SLW characteristic whereas the corpus continues to develop.
“The NPS product now allows you to keep the account live and contribute up to the age of 75 and enjoy growth in the corpus. The product matures at 75 – at which time one has to compulsorily exit from the scheme. At this age, on exit, an individual could potentially enjoy a higher annuity rate while benefiting from the full withdrawal of the remaining 60% as a tax free lumpsum,” stated Sriram Iyer, CEO of HDFC Pension Management.
The systematic withdrawal scheme permits traders to withdraw a set quantity in installments for publish-retirement bills, whereas deferring their annuities to safe higher month-to-month returns. “Unlike life insurance, which becomes costlier with age, guaranteed annuities get more attractive with higher rates at higher ages.”
This facility works effectively for people who’ve constructed a sizeable corpus below voluntary pension contributions. “In the high net worth category, people tend to defer withdrawals. They may not need the cash flow, or they might be looking for better returns. Annuity rates also improve with age. Govt employees, who typically have a smaller corpus, tend to annuitise at 60 because they need the income,” Iyer stated.
On taxation, Sriram famous that interpretations range. One perspective is that the positive aspects portion of the withdrawal could also be taxed like mutual funds, whereas one other means that the 60% tax-free corpus can also permit tax-free systematic withdrawals.
For these saving for retirement and not sure about liquidity wants, the tier-2 scheme of the NPS provides a very good possibility.