Are you a National Pension System (NPS) subscriber? Do you want to know more about the Systematic Lump Sum Withdrawal (SLW) facility? Here are answers to some frequently asked questions about SLW that can help you understand its benefits and how it works.
As per PFRDA regulations, upon reaching the age of 60 or retirement/superannuation, NPS subscribers can withdraw up to 60% of their corpus as a lump sum. The remaining 40% is mandatorily used to purchase an annuity. SLW provides an alternative to withdrawing the entire 60% at once, allowing for phased withdrawals to generate regular income.
Example: If your NPS corpus at retirement is ₹50 lakh, ₹20 lakh (40%) must be used for annuity purchase. The remaining ₹30 lakh (60%) is eligible for SLW.
General SLW FAQs
What is Systematic Lump Sum Withdrawal?
Systematic Lump Sum Withdrawal (SLW) allows NPS subscribers to withdraw a portion of their accumulated savings in a phased manner, providing regular income after retirement.
What are my exit options at age 60 or retirement/superannuation?
You have several choices:
- SLW: Withdraw up to 60% of your corpus in a phased manner. The remaining 40% must be used to purchase an annuity.
- Lump Sum Withdrawal: Withdraw the entire 60% eligible for lump sum at once. The remaining 40% must be used to purchase an annuity.
- Continuation: Your entire corpus (both the lump sum and annuity portions) remains invested in NPS until age 75. You must continue contributing to keep your account active.
- Deferment: Postpone your exit and keep your corpus invested until age 75. You can defer withdrawing the entire corpus, only the annuity portion, or only the lump-sum portion. Contributions are not required during the deferment period.
Who can opt for Systematic Lump Sum Withdrawal?
SLW is available to all NPS subscribers across sectors (government, autonomous bodies, corporate, POP, and e-NPS) upon reaching age 60 or retirement/superannuation.
Is SLW applicable to both Tier I and Tier II accounts?
Yes, SLW is available for both Tier I and Tier II accounts. Note: The rules and options differ slightly between the two tiers. Tier II allows contributions during SLW and is available at any age, unlike Tier I.
Can I use SLW for both lump sum and annuity portions?
No, SLW applies only to the lump sum portion (up to 60% of the corpus). The annuity portion must be used to purchase an annuity. However, you can defer the annuity purchase until age 75.
Example:
If the amount in your NPS account at the time of Superannuation or Normal Exit is say Rs.50 Lakh, then minimum 40% of the corpus is mandatorily required to be utilized for purchase of annuity i.e. Rs.20 Lakh (40% of Rs.50 Lakh) and balance amount i.e. Rs.30 Lakh (60% of Rs.50 Lakh) is the lump sum portion for which SLW can be availed.
Can I still opt for SLW if my corpus is less than or equal to Rs. 5 lakh? Yes. If your corpus is Rs. 5 lakh or less, you can:
a) Withdraw the entire amount of Rs.5 lakh;
b) Utilize the entire corpus of upto Rs.5 Lakh for SLW;
c) Purchase annuity and withdraw the remaining balance as a lump sum or via SLW.
If your corpus exceeds Rs. 5 lakh, you cannot withdraw the entire amount directly. In that case, you can opt for c) above.
Who is eligible for SLW?
SLW is available for both government and non-government NPS subscribers, across all sectors (corporate, autonomous bodies, POP, and e-NPS).
Which Tier is SLW applicable to?
SLW is applicable to both Tier I and Tier II accounts. However, the conditions for availing SLW differ between the two tiers.
When can I opt for SLW from Tier I?
You can opt for SLW from your Tier I account upon attaining the age of 60 or your retirement/superannuation age, whichever is applicable. It's available during normal exit or superannuation, but not during premature exit, exit due to incapacitation, or death.
When can I opt for SLW from Tier II?
You can opt for SLW from your Tier II account at any time.
EXAMPLE: Say you are 25 years or 45 years of age presently which is not your age of superannuation, you can opt for SLW in Tier-II account but not in Tier-I account.
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Is SLW applicable to both lump sum and annuity amounts?
No. SLW is only applicable to the lump sum portion (up to 60% of your corpus) and not to the annuity portion (minimum 40% of your corpus).
What are the benefits of SLW over taking the lump sum in one go?
SLW provides regular income streams, offering better financial planning and stability post-retirement. You can defer your annuity purchase until age 75, allowing your funds to remain invested and potentially grow.
How do I activate SLW?
You can activate SLW online through your CRA system using a dual OTP or eSign. There is no requirement of verification/authorization by Nodal Office / POP / CRA or by any other entity.
How will I be notified about SLW activation?
You'll receive SMS/email alerts from your CRA upon SLW activation and after each fund transfer to your bank account. Please keep your mobile number and email ID updated in CRA system to receive such alerts.
What are the SLW options?
Till what age can I avail the SLW facility?
a) The maximum age till when SLW facility can be availed is 75 years. However, any age earlier than 75 years can also be chosen as per your requirement.
b) In case you do not choose any age, the SLW will continue till the corpus is available or till the age of 75 years, whichever is earlier.
EXAMPLE – If at the age of 60 years, you opt for SLW and do not choose the end date i.e. the
age till when SLW should continue then:-
a) If the corpus in your NPS account lasts say till 70 years of age, the SLW will go on till 70
years of age only.
b) If the corpus remains in your NPS account even after attaining 75 years of age, the
corpus/units will then be redeemed and transferred to your bank account.
What withdrawal frequencies are available?
Monthly, quarterly, half-yearly, and yearly frequencies are available.
I am 67 years of age and have not opted for withdrawal of lump sum from my NPS Account. Can I opt for SLW now?
Yes. In case the lump sum amount is lying in your NPS account and you have not withdrawn the same after attaining the age of 60 years or retirement/ superannuation, you can choose SLW.
Can I modify or cancel SLW?
Yes, you can modify or cancel your SLW online through your CRA system.
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What happens to the remaining lump sum amount after opting for SLW?
It remains invested in NPS according to your chosen scheme preference. You can also change your scheme preference or Pension Fund Manager (PFM) even during SLW, but this only applies to the lump-sum portion.
When will SLW start after I have submitted the request in the system?
It will take at least 30 days for creation of SLW mandate in the CRA system. On decided frequency, SLW request will be considered in PayIn and credited to your bank account as per the frequency and date chosen.
What if selected date for SLW is a non-settlement day?
If selected date for SLW is a non-settlement day, the request will be considered for the next
settlement day.
EXAMPLE - If the selected date happens to be a Saturday or Sunday or a Business Holiday,
SLW will get executed in the CRA system on the next working day.
Can I contribute an additional amount or withdraw partially during SLW?
Contributions are not allowed during SLW for Tier I accounts. However, contributions are allowed alongside SLW in Tier II accounts.
What happens in case of death during SLW?
The balance lump sum amount will be paid to the nominee/legal heirs. For the annuity portion (if not already purchased), government sector nominees must purchase an annuity, while it's optional for non-government nominees.
What are the charges for SLW?
There are no extra charges for opting for SLW itself. However, standard CRA transaction charges apply to each withdrawal.
What types of requests / transactions I can carry out once SLW is activated?
You can carry out any of the following transactions after the activation of SLW:
- Modification of Bank Details
- Updation of Contact Details (Mobile Number and/or email ID)
- Change in Scheme Preference or Pension Fund Manager
- Modify/Cancel SLW
Will I have to pay any extra charges for opting SLW?
You do not have to pay any extra charges for opting for SLW. However, each withdrawal under SLW will be considered as a separate transaction and accordingly, normal transaction charges will be levied by CRA. Charges will be recovered from your account by way of unit deduction along with other charges (such as Annual Maintenance Charges, penny drop verification etc.).
What will happen to the balance lump sum amount in my NPS Account after opting for SLW?
After opting SLW, the balance lump sum amount will remain invested in NPS as per the scheme preference chosen by you.
Is SLW applicable for all types of Exit under NPS?
No. Only if you are eligible for Normal Exit or Superannuation, you can opt for SLW. At present, SLW facility is not available for premature exit or exit due to incapacitation or death.
Can I opt for SLW after opting for continuation in my NPS Account post superannuation or retirement or 60 years of age?
Yes. You can opt for SLW after opting for continuation in your NPS Account post superannuation or retirement or 60 years of age.
Can I opt for Scheme Preference / PFM Change during SLW?
Yes. You can opt for Scheme Preference / PFM Change during SLW. However, it will be
applicable only for the lump sum portion. Annuity portion, if not already purchased will remain invested as per existing scheme choice only and no changes can be made to the annuity corpus.
Can I keep the end date for SLW blank?
Yes. If you keep the end date as blank, SLW will continue till the corpus is available or till you
attain 75 years of age, whichever is earlier.
What is the process if I want to withdraw the lump sum portion instead of continuing with SLW?
If you want to withdraw the lump sum portion after opting for SLW, then you will have to discontinue SLW and follow the process applicable for lump sum withdrawal.
What if, on the scheduled SLW date, sufficient balance is not available in Tier-I account?
If on the scheduled SLW date, sufficient balance is not available, then withdrawal will be executed only for the available amount and all remaining SLW requests will be auto-cancelled.
What will happen to annuity in case I opt SLW for lump sum portion?
You can purchase the annuity from any of the Annuity Service Providers (ASPs) empanelled with PFRDA. In case the annuity is not purchased by you, the same will remain invested under NPS. However, you will not be able to change the scheme preference of the corpus meant for annuity.
Is there a separate screen for SLW mandate registration in Tier II?
Yes. A separate screen for mandate registration and modification is available for Tier II.
How does the SLW option differ between Tier I and Tier II?
SLW Process Flow: A Step-by-Step Guide
To help you better understand the SLW activation process, we've outlined the steps involved for both Tier I and Tier II accounts:
Tier I SLW Process Flow:
- Superannuation/Normal Exit: This facility is available during superannuation or normal exit. It's not applicable for death or premature exit.
- Replaces Phased Withdrawal: SLW replaces the existing phased withdrawal option.
- Lump Sum and Annuity Percentage: At the time of exit, you'll specify the percentage allocated to lump sum and annuity, selecting your Annuity Service Provider (ASP).
- SLW Applies to Lump Sum Only: SLW applies only to the lump sum portion. You can choose to purchase annuity immediately or defer it until age 75.
- Deferment Process: If deferred, the equivalent annuity units/amount are blocked until the deferment period ends. Then, the units are redeemed, and the amount is transferred to the ASP for policy issuance. The value earmarked for annuity depends on market performance.
- Immediate Lump Sum Withdrawal: If you opt for immediate lump sum withdrawal, the existing withdrawal process remains the same. For SLW, you'll be guided through an e-mandate creation process.
- Subscriber-Initiated Process: You can activate SLW through your subscriber login using eSign or dual-factor OTP authentication. No Nodal Office authorization is required.
- Modify and Cancel Options: You can modify or cancel the SLW mandate through your online login.
- Cancellation and Redemption: Cancellation triggers redemption of all available units, and the proceeds are transferred to your account.
- SLW Mandate Creation: You'll select the frequency (monthly, quarterly, half-yearly, annual), amount/units, start date, and end date. The system calculates the end date based on your corpus, amount, frequency, and start date. Leaving the end date blank continues SLW until the corpus is exhausted, the Tier is inactive, or you reach age 75. Upon reaching 75, the remaining units are redeemed and transferred to your bank account.
- SLW Commencement: SLW starts at least 30 days after mandate creation. The request is processed on the chosen frequency, provided the date is a settlement day. Otherwise, it's processed the next settlement day.
- Insufficient Balance: If the balance is insufficient on the scheduled SLW date, the available amount is withdrawn, the lump sum category becomes zero, and remaining SLW requests are auto-cancelled.
- Restrictions During SLW: Contributions and conditional withdrawals are not allowed during SLW in Tier I.
- Scheme Preference/PFM Change: You can change your scheme preference/PFM during SLW, but this applies only to the lump sum portion. The annuity portion remains under the existing scheme.
- Bank Account Verification: Your bank account is verified through Penny Drop before SLW execution.
- Bank Account Updates: To update bank details, use the existing bank account update option in your subscriber login, and penny drop verification applies.
- Charges: Billing/Penny Drop verification and transaction charges are recovered from the lump sum portion through unit deduction.
- Alerts: You'll receive email and SMS alerts for SLW setup, modification, and cancellation.
- Demise of Subscriber: In case of demise during SLW, the associated Nodal Office/POP/NPST initiates a death withdrawal request. The entire corpus is paid to the nominee. If the annuity hasn't been withdrawn, the nominee/legal heir must opt for annuity withdrawal (mandatory for government sector subscribers, optional for non-government subscribers).
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Tier II SLW Process Flow:
- Similar to Tier I: The process is similar to Tier I.
- Separate Screen for Mandate: A separate screen is available for Tier II SLW mandate registration, modification, and cancellation. eSign or dual-factor OTP authentication is required.
- Contributions Allowed: Unlike Tier I, contributions are allowed in Tier II alongside SLW.
- Insufficient Balance: If the balance is insufficient on the SLW date, redemption is not executed that day, and the system retries on the next cycle.
- Availability: Tier II SLW is available at any time, even before age 60.
Also Read
For more insights and detailed information regarding the National Pension System (NPS) and related topics, please check out the following articles:
- FAQs on NPS Contributions and Benefits: Get answers to common questions about contributions, benefits, and investment strategies in NPS. Read more here.
- NPS Tax Benefits: Understand the tax advantages associated with NPS contributions and withdrawals. Explore this article.
- NPS Maturity Calculator: Learn how to calculate your expected maturity amount under NPS and plan your retirement better. Check it out.
- NPS Exit Options: Familiarize yourself with the various exit options available under NPS, including the implications of each choice. Find out more.
- Planning NPS Investment FAQs: This article addresses frequently asked questions regarding strategic planning for NPS investments. Read the FAQs.
These resources will help you deepen your understanding of the National Pension System and make informed decisions about your retirement planning.
Written by Bruhadeeswaran R.
