Last Updated on August 3, 2016 at 2:56 pm
Should a subscriber be given the option to make partial withdrawals from a pension plan? The EPFO always allowed it. That is how mom and dad funded my education! Which, many argue is the main reason why retirees do not have much of a corpus to speak of!
Now the pension fund regulatory and development authority which manages the NPS has allowed partial withdrawals from a tier 1 account.
Now an NPS subscriber can withdraw up to 25% from his own contributions after subscribing for 10 years. Three withdrawals can be made with a spacing of 5 years for:
Extract from gazette
🔥Secure your future with our Robo-advisory tool trusted by over 3,500 investors and advisors. From effortless retirement planning to funding your children’s biggest dreams, turn your financial goals into reality. 🔥
Subscribe for money management solutions via email! (Link takes you to our email sign-up form) Join 32,000+ readers in our community.
👉 New Tool Alert! NaviPlan: A Privacy-Focused Multi-asset Tracker and Goal Planner 👈
(a) for Higher education of his or her children including a legally adopted child
(b) for the marriage of his or her children, including a legally adopted child;
(c) for the purchase or construction of a residential house or flat in his or her own name or in a joint name with his or her legally wedded spouse.
(d) for treatment of specified illnesses: if the subscriber, his legally wedded spouse, children, including a legally adopted child or dependent parents suffer from any specified illness, which shall comprise of hospitalization and treatment in respect of the following diseases:
- Cancer;
- Kidney Failure (End Stage Renal Failure);
- Primary Pulmonary Arterial Hypertension;
- Multiple Sclerosis;
- Major Organ Transplant;
- Coronary Artery Bypass Graft;
- Aorta Graft Surgery;
- Heart Valve Surgery;
- Stroke;
- Myocardial Infarction
- Coma;
- Total blindness;
- Paralysis;
- Accident of serious/ life threatening nature.
- Any other critical illness of a life-threatening nature as stipulated in the circulars, guidelines or notifications issued by the Authority from time to time.
Think twice before hitting the debit button! Photo credit: gotdebit.com
So should such partial withdrawals be allowed?
Yes, but ….
No product should lock an investors money forever. That is plain wrong. Even the PPF allows decent partial withdrawals. I think the allowed NPS withdrawal limit is quite small!
The biggest enemy for compounding is the investor’s behaviour. Interrupting corpus creation with repeated withdrawals can have a huge impact on its final value and financial independence in retirement.
However, while it is possible to plan ahead and avoid certain withdrawals, like for children’s education or marriage, nothing can be done about emergencies.
As mentioned in point (d) above, if we or our dear ones are seriously ill, withdrawals are inevitable.
It is precisely to combat for such uncertainties, a pension fund should freely allow withdrawals.
However, the pension authority does not need to need to make a song and dance about it as above.
There is no need to limit withdrawals for a particular set of reasons.
If my kid gets into trouble with a loan shark, call me emotional, but I will not hesitate to withdraw from my corpus.
The point is, emergencies and exigencies in life are innumerable.
While it is good to know that part of the NPS corpus will serve as critical illness insurance, the government is sending a bad message by explicitly naming conditions for withdrawals.
Instead, it should allow at least 50% withdrawal without conditions but with a statutory warning that
“repeated withdrawals will be injurious to financial health in retirement”. Something like that with an illustration. I have a visual tool for this but forgot its name!
Subscribers, especially young ones, via frequent awareness camps should be urged to independently plan for certain financial expenses in future (children’s education, marriage etc.). That is the right way to combat withdrawals. Not by imposing limitations.
######
Register for Hyderabad Investor Workshop – June 28th, 2015
We are on Google News
Use this button to add freefincal.com as a preferred personal finance source on Google News.
Explore 1,400+ videos on YouTube!
Subscribe to get posts via email!
Join 32,000+ readers and get free money management solutions delivered to your inbox! (Link takes you to our email sign-up form)Join our WhatsApp Channel
Explore our products
🔥Join our community of 9000+ users! 🔥- Use our Robo-advisory Tool to create a complete financial plan! More than 3,500 investors and advisors use this! Use the discount code robo25 for 20% off. Plan your retirement (early, normal, before, and after), plus non-recurring financial goals (such as child education) and recurring financial goals (such as holidays and appliance purchases). The tool helps anyone aged 18 to 80 plan for retirement, plus six non-recurring and four recurring financial goals, with a detailed cash flow summary.
- Our Flagship Course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market conditions! Watch the first lecture for free! One-time payment! No recurring fees! Lifelong access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
- Join the freefincal investor circle! An exclusive space for investors, advisors, fintech employees and students to access financial planning and insurance tools, mutual fund and stock analysis tools, coding strategies and Excel macros for data extraction. 750+ members are now part of our investor circle.
- Increase your income by getting people to pay for your skills! More than 900 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for side or passive income, we will show you how to do it by showcasing your skills and building a community that trusts and pays you. (Watch the 1st lecture for free). One-time payment! No recurring fees! Lifelong access to videos!
- Portfolio Tracker! Track your mutual funds and stock investments with our Google Sheet!
- We also publish monthly screeners for
Our Podcast: Let's Get Rich With Pattu
On Spotify: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! On Audible: Listen to the Let's Get Rich with Pattu Podcast
Listen to the Let's Get Rich With Pattu podcast on YouTube.
Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
Dr M Pattabiraman giving a lecture
- Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras.
- He has over 14 years of experience publishing news analysis, research and financial product development. He has over 28 years of teaching and research experience. He is also a public speaker and keynote presenter.
- He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.
- Connect with him via @pattufreefincal on X LinkedIn YouTube
- Pattabiraman has co-authored three print books.
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
About freefincal & its content policy
Freefincal is a News Media organisation dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact Information: To get in touch, please use our contact form. (Sponsored posts or paid collaborations will not be entertained.)Our publications
- Your Ultimate Guide to Travel. This is an in-depth exploration of vacation planning, including how to find affordable flights, budget accommodations, and practical travel tips. It also examines the benefits of travelling slowly, both financially and psychologically, with links to relevant web pages and guidance at every step. Get the PDF for Rs 300 (instant download)
- How to profit from content writing: Our ebook is for those interested in getting a side income via content writing. It is available at a 50% discount for Rs. 500 only!