The Pension Fund Regulatory and Development Authority (PFRDA) has recently changed the entry and exit rules to make it easier for senior citizens to invest in the National Pension Scheme (NPS). Going by the new guidelines, the age of entry for the National Pension Scheme has been changed from 18 - 65 years to 18 - 70 years. Thus, senior citizens can join the scheme even when they are seventy years old. But should senior citizens choose NPS? What do the new rules mean for them? Read on to understand.

The Recently Released Guidelines of NPS

As mentioned before, the recently revised guidelines have raised the entry age for Indian citizens (resident and non-resident). Take a look at the changes made:

Extending the Entry Age:

In the revised guidelines, the PFRDA has raised the age of entry to 70 years against 65 years earlier. Thus, according to the recent revisions, the total age of entry that was 18 - 65 years, has now become 18 - 70 years. The ones who had closed the NPS accounts are now permitted to reopen that account according to the changed age eligibility regulations.

Capped Equity Exposure:

NPS lets fund investments in the equity assets too, though that comes with a cap. Investors or subscribers have two options, namely Active Choice and Auto Choice.

Selecting Auto Choice by default will restrict the allocation of equity at fifteen percent. On the other hand, senior citizens can decide the allocation based on the cap which is usually fifty to seventy-five percent. It remains capped at fifty per cent for the government employees.

The investor who joins NPS over sixty-five years is able to go for PF (pension fund), along with asset allocation, with the highest equity of fifteen per cent and fifty per cent under Auto Choice and Active Choice, as per the PFRDA. Senior citizens can change the PF annually, though the asset allocation might be changed twice.

Normal Exit Norms:

The usual exit for the investors is going to be after three years. But, the rule outlines that the account holder joining NPS after sixty-five years of age will have to use at least forty per cent of the total corpus or buy the annuity as the rest is allowed to be taken out as the lump sum. However, when the total corpus is INR 5 lakh or less than that, the account holder might choose to take out the complete accumulated pension amount.

Premature Exit Regulations:

In situations where the premature exit is before three years, the investor will need to use a minimum of eighty per cent of the total corpus to buy the annuity and the rest of the amount can be taken out as a lump sum. But, in case the total corpus is INR 2.5 lakh or less, an account holder is going to be eligible for withdrawing the complete accumulated pension wealth.
If the account holder meets with a sudden demise, then the complete corpus is going to reach his/her nominee as the lump sum.

Do the Revised Guidelines Make NPS Suitable for Senior Citizens?

Revisions in NPS regulations have been introduced to make the pension investment tool much more appealing to the present investors and senior citizens who have reached superannuation. Also, it allows them to make investments in equities for a long time and get better returns than conventional instruments like fixed deposits.

However, NPS investments by a senior citizen might not be as advantageous as a young investor whose investment will have a long duration of staying invested to get a higher return. Thus, though senior citizens can profitably invest in NPS, it is better to invest in the scheme early on.