Don't withdraw your entire NPS corpus immediately upon retirement! You can earn substantial interest even after the age of 60..

NPS Post-Retirement Growth & PFRDA Rules: Regarding the National Pension System (NPS), most people believe that upon turning 60, one should withdraw the entire amount and close the account. However, the Pension Fund Regulatory and Development Authority (PFRDA) offers a different facility. If you do not withdraw the full amount immediately after retirement, your fund remains invested in the market even after age 60, continuing to generate substantial returns.

By utilizing PFRDA options such as 'Deferment' and 'Systematic Lump-sum Withdrawal,' pensioners can benefit from impressive compounding on their NPS corpus up to the age of 75.

How does NPS money grow after age 60?
At the time of retirement, subscribers have two options for managing their total corpus that allow their money to continue growing:

1. Deferment Facility: You can postpone the lump-sum withdrawal or the purchase of an annuity from your NPS account until the age of 75. As long as your money remains in the NPS account, it stays invested in equity (E) and corporate/government bonds (C & G), earning market-linked annual returns ranging from 8% to 12%.

2. Systematic Lump-sum Withdrawal (Phased Withdrawal): This PFRDA rule allows you to withdraw the 60% lump-sum portion in installments—monthly, quarterly, half-yearly, or annually—instead of all at once. The remaining balance in your account continues to earn interest and grow.

Why does withdrawing money immediately result in a significant loss? If a subscriber hastily withdraws their 60% lump-sum fund at the age of 60 and deposits it into a bank savings account or a standard fixed deposit (FD), they face two major disadvantages:

Lower Interest Rates: Bank FDs typically offer interest rates between 6.5% and 7.5%, whereas the NPS long-term portfolio retains the potential for growth ranging from 9% to 11%.

Tax Impact: The 60% lump-sum amount withdrawn from the NPS is entirely tax-free; however, when you deposit that money into an FD, the interest earned becomes fully taxable according to your tax slab.

How much can your fund grow post-retirement under PFRDA rules?

Suppose your total NPS corpus at the age of 60 is ₹1 crore:

Don't withdraw the entire NPS amount immediately upon retirement! Earn substantial interest even after age 60; learn about this PFRDA rule.

3 things NPS subscribers should keep in mind at retirement:

1. Mandatory purchase of at least 40% annuity: According to the rules, a minimum of 40% of the total corpus must be used to purchase an annuity, which provides a lifelong monthly pension.

2. Option to keep the account active until age 75: You can choose to withdraw your lump-sum amount or start receiving your pension at any time up to the age of 75.

3. Keep nomination details updated: Ensure that the correct nominee and bank account details are updated in your account at the time of retirement so that Systematic Lump-sum Withdrawal (SLW) or pension installments are credited directly to your account without interruption.

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