NPS pandemic relief inferior to EPF’s unconditional withdrawal

The NPS has responded to the lockdown by merely updating its list of critical illnesses eligible for partial withdrawal highlighting the superiority of EPF

Published: April 10, 2020 at 5:26 pm

In view of the lockdown across the country, the EPF act was amended to include a “no-questions-asked” withdrawal from the EPF on March 28th 2020. Almost two weeks later the NPS has announced a starkly inferior amendment to its partial withdrawal rules once again highlighting its ill-liquid nature.

While discussing if the  EPF advance can be invested in equity now, we had pointed out that the EPF had taken the pains to come out with a wonderful FAQ on its “advance to fight the COVID-19 pandemic”.

The EPFO’s advance is for all subscribers whether they are affected by the pandemic or not, whether they are affected by the lockdown or not.  No documentation is necessary for the application with a precise enumeration of the procedure.

In stark contrast, the NPS announcement is only for subscribers whose family is diagnosed as COVID-positive and requires a medical certificate and a “formal withdrawal request”.

Unlike the NPS announcement, the finance minister found the EPF advance important enough to announce in her relief package. While the lower-income EPF subscriber base is the reason for this, the conditional advance has been extended to everyone.

This disparity among the two schemes is disturbing and unfair. While the EPFO amended its rules to accommodate the unconditional advance, the NPS merely updated its list allowed critical illnesses.

With even state and central govt employees staring at pay cuts and an increasing NPS corporate subscriber base (who are likely to suffer worse), NPS has failed to deliver when most needed. The argument that a retirement product should be locked so that it will help after retirement will not wash during a crisis like this. Money that is inaccessible at the time of need is essentially worthless.

Partial withdrawals from the Atal Pension Yojana (previously NPS lite) for the majority unorganised sector (who are likely to suffer more) has not been announced.

The Pension Fund Regulatory and Development Authority which took pains to introduce staggered withdrawals and variable asset allocation to counter market risk must also consider a pillar of portfolio management: liquidity and stop taking a holier than thou, “lock-in is good for you” approach. It is not. Not during a lockdown.

Note: I am referring to essential NPS withdrawals made to counter job loss and pay cuts and not for rebalancing into equity.

Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps