6/20/2016

Don'tmissyourNPSmaturitydateValueResearch:TheCompleteGuidetoMutualFunds

Fundwire

Don'tmissyourNPSmaturitydate
IfyoufailtoindicateyourwithdrawalchoicetoNSDL,yourpensionfundmanagerwillmonetizeyourcorpusonmaturity
ByDeeptiBhaskaran|Jun16,2016

Toprotectitsinvestorsfrommarketvolatility,thePensionFundRegulatoryandDevelopmentAuthority(PFRDA),inacircularissued
on9June,statedthattheaccumulatedfundsintheNationalPensionSystem(NPS)willbemonetisedautomaticallyifonedoesnot
comeforwardtowithdrawandannuitiseitintimeuponretirement.
SubscribetothefreeValueResearchInsightnewsletter
Accordingtotheregulator,ifthewithdrawalapplicationisnotreceivedatleastamonthbeforethedateofsuperannuationorattaining
theageof60years,thecentralrecordkeepingagency(CRA)systemwillautomaticallyinitiateaprocessofmonetisationofunitsheld
intheaccountofthesubscriberasonthelastbusinessdayofthemonth.(Readthecircularhere:http://bit.ly/1tqbJL4).Thiswillbe
effectivefrom1August2016.
Industryexpertsestimatethatmorethan40,000accountsarelyingunclaimed.Thiscircularaimstoprotectthesubscribersfrom
marketvolatility.

Exitoptions
NPSisadefinedcontributionretirementproductthatneedsyoutokeepcontributingtill60yearsofage.Theminimumcontribution
totheschemeisRs.6,000ayear,andyoucanchoosefromthreeinvestmentfunds,namelygovernmentsecuritiesfund,fixedincome
instrumentsotherthangovernmentsecuritiesfundandequityfund.Theequityexposureisamaximumof50%.
NPShasalockintill60yearsofage.InthecaseofcorporateNPSwhereyoucontributethroughyouremployeryoucanexitatanage
thatisdesignatedforretirementbytheemployer.
Onexit,youhavethefollowingoptions.Youcanannuitisetheentireamountoraminimumof40%.Anannuityisaretirement
productthatgivesyoupensionforlife.Youcanalsochoosetoannuitisetheminimummandatorypart(whichis40%ofthelumpsum)
andkeeptherestinvestedorcontributefurthertill70yearsofage.Inthecaseofdeferment,youcouldalsodefertheannuity
paymentsbythreeyearsAlso,ifyoudonotwishtowithdrawthisinvestedlumpsumallatonce,youcanwithdrawitin10annual
instalmentstill70yearsofage..
https://www.valueresearchonline.com/story/h2_storyview.asp?str=200217&utm_source=20160620fundline&utm_content=Mon1300&utm_medium=email&ut 1/2

6/20/2016

Don'tmissyourNPSmaturitydateValueResearch:TheCompleteGuidetoMutualFunds

Exitprocess
TheexitprocessstartssixmonthsbeforetheduedateandtheCRA,whichistheNationalSecuritiesDepositoryLtd(NSDL),willnotify
you.Youhavetofillupthewithdrawalformwiththehelpofyourpointofpresence(PoP),adistributorofNPS.ThePoPwillkeyin
yourdetails,verifyyourknowyourcustomerdetails(KYC)andinitiatethewithdrawalrequestintheCRAsystemonline.Youcanalso
initiatethewithdrawalrequestonline,whichwillsubsequentlyhavetobeverifiedbythePoP.
IfCRAdoesnotreceivethewithdrawalapplicationbythelastmonthbeforematurity,thenonthelastworkingdayofthemonthitwill
instructyourpensionfundmanagertomonetisetheamountheldinyouraccount.Accordingtothecircular,Thismoneywillthen
moveintoaseparatewithdrawalbankaccountheldwiththetrusteebank,i.e.,AxisBankLtd,preferablywithanautosweepinfacility
andtheinterestwillbecreditedtothesubscribersonanannualbasis.According,toPFRDAthemodalitiesarestillbeingworked
upon.
"BythistheNAV(netassetvalue)isguardedtotheextentpossible,"saidtherecentPFRDAcircular.
ThePoPandsubscriberwillthenbeinformed,andtheywillberemindedtoclaimthemoney.
"Itistruethatcustomerswillbeprotectedifmarketscrash,butatthesametimetheywillalsoloseifthemarketsrise.Iftheideaisto
protectthesubscribersfrommarketvolatility,themoneycansimplymovetothegovernmentsecuritiesfundinsteadofmonetisingit,"
saidSumitShukla,chiefexecutiveofficer,HDFCPensionManagementCo.Ltd.
Keepinmindthatthosewhoalsohaveatier2account(aliquidaccountthatworksmorelikeasavingsbankaccount),thenon
superannuationoronattainingtheageof60years,thetier2accountwillceasetoexist.Accordingly,thataccountwillalsoget
monetised.
Evenwhenyouchoosetodeferwithdrawalsorannuitisation,thesameruleswillholdgood.TheCRAwillinformyousixmonths
beforetheduedateandifyoudonotrespondwithinthetimeframe,themoneygetsmonetised.
Evenastheauthoritiesaretryingtoputsafeguardsinplace,youshouldbevigilantandmakesureyouexerciseyourretirement
optionsontime.
InarrangementwithHTSyndication|MINT

2016ValueResearch.Allrightsreserved.Pleasereadour:PrivacyPolicy|Feedback|Disclaimer

https://www.valueresearchonline.com/story/h2_storyview.asp?str=200217&utm_source=20160620fundline&utm_content=Mon1300&utm_medium=email&ut 2/2