In order to resolve challenges faced in creating payments to subscribers on exit or partial withdrawal from the National Pension Scheme (NPS), the pension fund regulator has initiated Instant Bank Account Verification by ‘penny drop’. It will be accomplished by the central record maintaining agencies (CRA) by integrating their information and facts technologies method and exit framework with the fin-tech service providers.
This initiative by Pension Fund Regulatory and Development Authority (PFRDA) will assure timely credit of revenue and further due diligence to determine the rightful beneficiary as there have been situations when the subscribers’ withdrawal quantity could not be credited into their savings bank account due to causes such as invalid account quantity or account sort, invalid or incorrect IFSC code, name mismatch, dormant account, and so forth.
Active status of bank account
Through the penny drop procedure, the central record agencies will validate the bank account that an person has supplied by remitting `1 and the transaction will validate the specifics on the name of the account holder, bank, and IFSC with the name in the Permanent Retirement Account Number (PRAN) or as per the documents submitted.
The regulator in its circular has underlined that the ‘penny drop’ can occur at the time of processing of the exit/withdrawal request. The response of achievement or failure will be supplied by the service provider based on validation of the savings bank account quantity name checked as per CRA—K Fin Technologies (KCRA) and NSDL e-Governance infrastructure (NCRA)—records.
If the bank account specifics and other specifics are not appropriate, the alternate account quantity or further supporting documents will have to be submitted for updating the records. In case the penny drop fails at the time of processing, the point-of-presence or the subscriber will be informed to appropriate the bank account quantity and resubmit the application so that the withdrawal request can be processed in a time bound manner.
Moreover, the CRAs will have to inform the subscriber to not modify or close the current bank account as soon as the exit or partial withdrawal request is offered till the time the quantity is credited to the account.
Partial, premature and final withdrawal
After retirement, a subscriber can withdraw 60% of the accumulated corpus as lump sum and has to mandatorily purchase an annuity program for the 40% of the remaining corpus. It is mandatory for the NPS subscribers to buy an annuity item from an empanelled life insurance coverage organization recognized as annuity service provider (ASP). The subscriber selects the ASP at the time of submitting the withdrawal request or soon after the payment of lumpsum withdrawal. However, if the accumulated corpus is much less than Rs 5 lakh, then the subscriber can withdraw the complete quantity.
In NPS, a subscriber can opt for a premature exit. Any exit, just before completion of 3 years is treated as premature exit. In such a case, 20% of the accumulated corpus can be withdrawn as lumpsum and the rest (80%) is invested with a life insurance coverage organization empanelled by PFRDA for purchasing annuity. However, if the total corpus is much less than or equal to Rs 2.5 lakh, then the complete quantity can be withdrawn.
A subscriber can go for partial withdrawal for remedy of crucial illnesses, larger education of children, marriage of children and for buy/building of residence. A subscriber ought to be in NPS atleast for 3 years and the quantity to be withdrawn ought to not exceed 25% of the contributions made by the subscriber. The partial withdrawal can be accomplished for a maximum of 3 instances in the course of the complete tenure of subscription.