If all goes well, you may soon be able to withdraw a partial corpus from the National Pension System (NPS) after three years instead of the currently mandated period of 10.
The government is considering a proposal to drastically reduce the minimum lock-in period for withdrawing a portion of the principal amount invested in the NPS. It hopes to draw more people to the pension scheme through this move.
“We have asked the government to allow partial withdrawal after three years,” Pension Fund Regulatory and Development Authority chairman Hemant G Contractor told Hindustan Times, adding that they were “looking at various ways to make the pension scheme more attractive for people”.
Finance minister Arun Jaitley’s Union budget for 2017-18 had increased the contribution limit of self-employed people to 20% in an attempt to bridge the existing gap between them and those hailing from the salaried sector.
Salaried people can make a maximum contribution of 10% while the employer puts in another 10% to achieve a total of 20%. However, until now, self-employed individuals could only contribute 10%, and make a partial tax-free withdrawal of the corpus not exceeding 25%.
“Any subscriber can now withdraw a part of the corpus for certain purposes like marriage, illness or house construction and still enjoy tax exemption… the attempt is to eliminate the problems that keep people away from the NPS,” said Contractor.
As of December 2016, the number of subscribers under the NPS had grown to 1.41 crore while the assets under management stood at Rs 1,61,016 crore. Any KYC-compliant person in the 18-60 age bracket is allowed to join the system.
At present, only 11% of the country’s population is covered by pension schemes and a mere 20% is insured. In 2015, the NDA government had launched the Atal Pension Yojana to expand its social security umbrella.