NPS Changes in 2021 – New changes you must know

NPS turning to be one of the common investment options for many Indians. Hence, updating yourself with the NPS changes is very much important. I thought to keep this post for updating any NPS changes in 2021 as and when they happen or are announced.

NPS Changes in 2021

As you may be aware, National Pension System (NPS) governed by the PFRDA (Pension Fund Regulatory and Development Authority), is a retirement pension scheme established by the Government of India to provide the subscribers with a regular income after retirement. Do remember that NPS will help you to accumulate the retirement corpus. But it will not give you a pension. To avail the pension, you have to buy pension plans offered by Life Insurance Companies from such accumulated corpus. NPS is mandatory now for Government employees. However, individuals also can participate in NPS to create their retirement corpus.

Note:- Refer our latest post on NPS Returns “NPS Returns for 2021 – Who is the best NPS Fund Manager?“.

NPS Changes 2021 – Recent changes you must know

Let us go through the NPS changes 2021 one by one.

# Launch of NACH mandate

PFRDA stated that ” At present, the nodal offices of Government Sector deposit NPS contributions of associated Subscribers by preparing Subscriber Contribution File (SCF) and uploading the same in “NPSCAN system” after validating it. Thereafter, the Nodal Office visits its Bank (accredited bank) in order to transfer the funds (equivalent to the amount uploaded in the
SCF) to the Trustee Bank (TB) appointed by PFRDA. PFRDA has observed instances where in the transferred contributions are returned due to certain errors as mentioned below”.

(i) Non-mentioning of Transaction id in the inward message while transferring the funds which is a mandatory field.
(ii) Invalid 7-digit A/c no.
(iii) Remittance made by Offices for expired Tran id.
(iv) Amount mismatch between the file and actual amount remitted.
(v) FRC completed previously.
(vi) Non-existence of Tran id provided in CRA system.
(vii) Duplicate fund received on same day.
(viii) Different PAO id in beneficiary a/c.

In order to overcome the above challenges and to ease the process of contribution upload by Nodal officers, PFRDA introduced a NACH mandate jointly hosted by Trustee Bank (TB) and Central Record Keeping (CRA) through National Automated Clearing House (NACH) operated by National Payments Corporation of India (NPCI).

The circular further added that “The NACH mandate is technology-enabled which offers end to end solution and is a secured mode of contribution fund transfer. Under NACH Mandate, all the nodal offices have to provide the ‘one-time mandate registration’ for auto debiting their bank accounts with the amount based on the SCF uploaded in NPSCAN. The facility can also be availed by POPs/Corporate which prepares SCF and transfer contributions on a regular basis. There is no additional cost to avail the facility from CRA and TB.”

# Instant Bank Verification of Subscribers

When you exit (due to Superannuation, premature exit or due to death) or partially withdraw from NPS, the amount must be credited to your bank account. However, there are various instances where the amount could not be credited to your bank account mismatches like –

(i) Invalid account number/account type
(ii) Invalid/Wrong IFSC code
(iii) Name mismatch
(iv) Account dormant/frozen
(v) Account closed
(vi) Account does not exist
(vii) Account is inactive.
(viii) Account is transferred.
(ix) Credit freeze.
(x) Account type mismatch etc

Due to unsuccessful transactions for the reasons mentioned above, the amounts meant for the Subscribers could not be credited into the SBA remain with Trustee Bank till the correct account number is obtained from the Subscriber. This can be overcome with suitable technology intervention viz Instant Bank Account Verification.

In order to resolve the issue of return of remittances, to protect the interest of subscribers with timely credit of amount and for additional due diligence to identify the rightful beneficiary, Instant Bank Account Verification by ‘penny drop’ would be adopted by CRAs, by integrating their IT system and exit framework with the Fin-tech service providers.

Through ‘penny drop’ process, CRAs would check the active status of SBA and match the name in bank account number with the name in PRAN (Permanent Retirement Account Number) or as per the documents submitted. The validity of account is verified by making a ‘test transaction’ by penny dropping a specified amount into the beneficiary’s SBA and matching the name based on the penny drop response.

The ‘penny drop’ can happen at the time of processing of the Exit/Withdrawal request. The response of ‘Success’ or ‘Failure’ would be provided by the service provider based on validation of the SBA number name check as per CRA records. If the bank account details and other details are not correct, the alternate account number or additional supporting documents are to be submitted for updating the records. In case the penny drop fails at the time of processing, the nodal officer /POP/subscribers will be informed to correct the bank account number and resubmit the application so that their withdrawal request can be processed in a time bound manner. CRAs may also use ‘penny drop’ process for registration of entities wherever possible.

# Withdrawal of Rs.5 lakh pension corpus without buying annuity

The subscribers of NPS can withdraw the entire accumulated pension at one go, without purchasing an annuity if the corpus is equal or less than Rs. 5 lakh.

Earlier, those who had a pension corpus of Rs.2 lakh were allowed to withdraw the whole corpus without buying an annuity product.

# Partial withdrawal through Self Declaration

Subscribers are allowed to withdraw their money from the account once they complete 3 years under some specified circumstances (like kids education, kids marriage, construction of the house, skill development, and treatment for specified diseases). However, for premature withdrawal, the amount can not exceed 25% of contributions made by the NPS subscribers. NPS investors can make a partial withdrawal a maximum of three times during the entire tenure of subscription.

As per PFRDA Circular (CIR No. PFRDA/2021/3/SUP-ASP/3) dated January 14, 2021 on Ease of Partial withdrawal of NPS Subscribers through self – declaration, the Partial Withdrawal Requests will be processed on the basis of Self-declaration provided by Subscriber for reason of partial withdrawal.

No supporting documents (w.r.t. stated withdrawal reason) are required to be submitted by the Subscriber for availing Partial Withdrawal. The Subscriber is required to accept the ’’Self-declaration’’ for Partial Withdrawal which is provided in Withdrawal Form as part of – Declaration by the Subscriber. In addition, the Subscriber is required to provide Bank Proof of the details of Bank Account registered in CRA system. If the Bank Account details given in the application are different from the Bank Account details registered in CRA system, then partial withdrawal request shall be rejected by POP. Bank Details are non-editable at the time of initiation of Partial Withdrawal request.

If bank details are incorrect/not available or If Subscriber wishes to update any other Bank Account details, then the Subscriber has an option to update the same online in CRA system (www.cra-nsdl. com) or submit Form S2 – Subscriber details change Form to associated POP and then initiate Withdrawal request.

User will not be allowed to modify bank details at the time of initiation of the Withdrawal request.

# Contributions under D-Remit via IMPS

From now onwards you can set a Systematic Investment Plan or SIP in NPS using the D-Remit deposit facility of PFRDA and get the same-day NAV. It is one of the best features one can opt for if you are investing regularly in NPS.

D-Remit is an electronic system through which money can be directly transferred from your Bank account to the Trustee Bank (currently Axis Bank) so that you can get same-day Net Asset Value (NAV) for your investment in NPS. To use the D-Remit process under NPS, a Subscriber is required to have a Virtual ID (or Virtual Account) with the Trustee Bank.

The D-Remit process will optimize your investment as you will get the same-day NAV if contributions are received at Trustee Bank before 9:30 am on any bank working day except Saturday, Sunday and Public Holidays.

The contributions received after 9.30 AM will be invested on the next working day, i.e. T+1 day. In the existing model of deposits such as e-NPS or Points of Presence(POP) contributions are invested into NPS after two working days, i.e. T+2 days.

However, if you use the D-Remit facility then the subscribers will get the benefit of same-day NAV by depositing contributions into NPS investments on the same working day, i.e. T day if deposits are made before the cut-off time.

I have written an article on this earlier. You can refer to the same to know the full details and features of this ” SIP in NPS – How to set using D-Remit deposit facility?“.

# Entry and Exit Ages

Earlier the age bracket for opening an NPS account was 18 to 60 years, which was later increased to 65years. Now the age limit for joining the National Pension System (NPS) increased from 65 years to 70 years with no cap on the maximum investment limit provided the sources are declared.

The exit age limit has also been extended to 75 years.

These are the major NPS changes in 2021. I will update this section throughout the year as and when I receive such information.

13 Responses

  1. Dear Basu ,
    Good day….

    I am an NRI (Working in middle east) , Age 34
    – How does work NPS for NRIs ?
    – Is it good to invest in NPS for retirement ? Or simple mutual fund portfolio is enough.
    – Debt fund & Tax/TDS wise , NPS is good for NRIs ?

  2. Dear concern,
    Really it is very short and neat with good information. I would like to know can a subscriber can opt for the pension at the age of 58? Or he / she has to wait till 60 years?
    Kindly confirm

  3. I wish to exercise premature complete exit option in nps tier1,since corpus is below 2.5 lacs. Will this be taxable and how much.

  4. Dear Basunivesh,
    It is very good article.
    Is there any Nifty 50 index (same weightage) based Equity investment option in LIC Fund Manager (OR other fund Manager )in Active choice option in NPS Tier-1?

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