Can I Pre-Close an NPS (National Pension System) Account
Can I pre-close an NPS (National Pension System) account: The National Pension System (NPS) is a long-term retirement savings scheme, designed to provide individuals with financial security post-retirement. While the primary aim is to hold the NPS account until the age of retirement, pre-closure of an NPS account is possible under certain conditions.
When Can You Pre-Close an NPS Account?
You can request to pre-close your NPS account after completing 10 years of contributions. Pre-closure is generally allowed in special circumstances like:
- Critical illness: If you’re diagnosed with a serious or life-threatening medical condition.
- Premature exit: After 10 years, you can exit, but strict withdrawal rules apply.
What Are the Withdrawal Rules?
When you pre-close your NPS account:
- Up to 20% of the corpus can be withdrawn as a lump sum.
- The remaining 80% must be used to buy an annuity (monthly pension) to ensure regular post-retirement income.
In case of terminal illness, however, you are allowed to withdraw the entire amount without the need to purchase an annuity.
How to Apply for Pre-Closure?
You can apply for pre-closure either online or offline through your Point of Presence (PoP) or the Central Recordkeeping Agency (CRA). You may be required to provide supporting documents, especially in cases of illness.
Conclusion
While NPS is designed to secure your post-retirement life, there is an option for pre-closure under specific conditions. However, it’s essential to understand that withdrawing before retirement could impact your long-term savings, so plan wisely.
For more information visit this: https://enps.nsdl.com/eNPS/
FAQs
1. Can I pre-close my NPS account before retirement?
Ans: Yes, but there are conditions. You can pre-close after 10 years of opening the account if you meet the required conditions.
2. What is the minimum duration before I can close my NPS account?
Ans: You can request to pre-close the NPS account after completing 10 years of contributions.
3. What is the maximum lump sum withdrawal allowed in pre-closure?
Ans: You can withdraw up to 20% of the total accumulated corpus as a lump sum. The remaining 80% must be used to purchase an annuity (monthly pension).
4. Is there any penalty for pre-closing the NPS account?
Ans: There is no penalty, but the withdrawal rules are stricter compared to closure at retirement.
5. What are the reasons allowed for pre-closure?
Ans: Pre-closure is allowed under specific circumstances, such as critical illness or if the subscriber has completed 10 years in the scheme.
6. Do I need to provide documents to pre-close the NPS account?
Ans: Yes, you may need to provide documents like medical certificates for critical illness, and identity proof, among others.
7. Can I pre-close my NPS account if I resign from my job?
Ans: No, resignation from the job is not a reason for pre-closure. You need to meet other criteria like illness or duration.
8. What happens to my Tier II account if I pre-close the NPS?
Ans: The Tier II account will also be closed, and any balance will be paid to you.
9. How do I apply for pre-closure of my NPS account?
Ans: You can submit an online or offline request through your Point of Presence (PoP) or NPS CRA (Central Recordkeeping Agency).
10. Can I withdraw the entire amount in case of terminal illness?
Ans: Yes, if you are suffering from a terminal illness, you can withdraw the entire NPS corpus without the annuity purchase requirement
