83% of NPS subscribers proceed to contribute after age 60

Data launched by the Government in response to a query within the Lok Sabha confirmed that 83% of NPS subscribers who’ve accomplished the age of 60 (the age of maturity) within the NPS, selected to proceed contributing to their NPS accounts somewhat than begin receiving their pension. According to authorities information 342,887 people selected to proceed contributing whereas 61,679 opted to obtain their pension. The NPS was launched for presidency staff in 2004 and opened to the personal sector in 2009. Its relative current inception could have prevented some subscribers from constructing a big sufficient pension pot and therefore incentivised them to maintain contributing. In complete, the NPS had 1.43 crore subscribers with 73.15 lakh of them being authorities staff on the finish of FY 2020-21. 

Under present guidelines, 60% of an NPS pension pot could be withdrawn tax free after the age of 60. The steadiness 40% should be used to purchase an annuity. “The comparatively low annuity charges in India stay a sore level with many subscribers and this will contribute to the deferral,” said Amit Gopal, Principal and India business leader (Investments) at Mercer. Annuity rates are linked to interest rates which are expected to rise over the next few years. The growth of money inside an individual’s pension pot is also free of tax. Only the annuity component is taxed. “The NPS is essentially a middle class pension with mostly government employees as members. Its subscribers can afford to defer their pots,” mentioned Gopal. “The PFRDA has lately launched computerized deferral. This means, except you actively select to begin receiving your pension, you possibly can maintain contributing even after the age of 60. The most age of entry has additionally been prolonged from 65 to 70 this yr and you’ll defer the pension up  to age 75,” mentioned an trade knowledgeable who declined to named. However readers ought to word that in the event that they choose to make a partial withdrawal from the NPS account after it matures, the annuity part (40%) can solely be deferred by 3 years.   

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