Are you looking for more flexibility with your National Pension System (NPS) investments? If you are already contributing to Tier 1 for tax benefits, you might be wondering about the advantages of NPS Tier 2, especially regarding Systematic Lump Sum Withdrawals (SLW). This guide breaks down the key differences between Tier 1 and Tier 2 SLW, highlighting the benefits and process of accessing your Tier 2 funds. Discover how Tier 2 SLW can provide you with greater control over your retirement savings.
All the features of SLW of Tier I account are available in Tier II account except these:
a) Contribution to Tier II account is allowed ; and
b) The facility can be availed at any point in time
Did you know: if the subscriber opts for having a Tier II account, then SLW can be availed in both the accounts. Know more about Tier II SLW with the help of these FAQs.
Here are answers to some frequently asked questions about SLW in Tier II that can help you understand its benefits and how it works.
Here's a look at 5 key differences between NPS Tier 2 SLW and Tier 1 SLW.
- Can I contribute during SLW in a Tier II account?
Unlike Tier I, contribution is allowed in Tier II along with SLW.
- At what age can I opt for SLW from a Tier II account?
You can opt for SLW at any age.
- 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.
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.
- 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?
Here is a step-by-step guide to the SLW process:
To help you better understand the SLW activation process, here are outlined steps for both Tier I and Tier II accounts:
- 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.
Conclusion
The SLW feature can offer a flexible way to access NPS Tier II funds. Both tiers (I and II) allow SLW. However, Tier II provides greater freedom with features like these:
- Contributions during the withdrawal phase,
- Availability before retirement age, and
- A dedicated screen for managing your mandate.
With this, the Tier II investments becomes a comparatively more liquid investment option. It is ideal for those seeking periodic income or access to funds before their retirement. However, it is important to remember that unlike Tier I, Tier II contributions are generally not eligible for tax benefits.
Also Read:
Check out the following topics for more insights and detailed information regarding the National Pension System (NPS) and related topics:
- Systematic Lumpsum Withdrawal Tier II complete article: Access it here.
- 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: Familiarise 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.
You can get a better grip over NPS investments and make informed decisions about your retirement planning with the above handy resources.
Story by Bruhadeeswaran R.
Bruhadeeswaran has 15+ years of experience as a content strategist, communication, and editorial professional. Currently, he is leading an innovative content development process, translating complex B2B products into engaging, user-friendly narratives
