{"sourceUrl":null,"sourceType":"text","contentType":"Explainer","apex":{"id":"n1","type":"APEX","label":"NPS new withdrawal option","text":"The National Pension System (NPS) has introduced a new withdrawal option, the Retirement Income Scheme (RIS), following recent reforms to its landscape.","children":[{"id":"n2","type":"CONC","label":"NPS recent reforms overview","text":"The National Pension System (NPS) has undergone several reforms recently, including changes to exit, investment norms, and now the withdrawal phase.","parentId":"n1","children":[{"id":"n3","type":"DETL","label":"Existing NPS withdrawal structure","text":"Currently, at least 20% of the corpus must compulsorily purchase an annuity, while the remaining 80% can be a lump sum or systematic lump sum withdrawal (SLW).","parentId":"n2","children":[]}]},{"id":"n4","type":"CONC","label":"PFRDA introduces Retirement Income Scheme","text":"The Pension Fund Regulatory and Development Authority (PFRDA) has introduced the Retirement Income Scheme (RIS) as an option for the 80% lump sum portion.","parentId":"n1","children":[{"id":"n5","type":"DETL","label":"RIS structured withdrawal plan","text":"RIS includes a structured withdrawal plan and built-in guardrails designed to help retirees make their corpus last longer.","parentId":"n4","children":[]},{"id":"n6","type":"SUBC","label":"RIS Steady phased withdrawal","text":"'RIS Steady' is the only current variant of the scheme, offering orderly exit and regular payouts via two drawdown options.","parentId":"n4","children":[{"id":"n7","type":"DETL","label":"RIS Steady drawdown options","text":"RIS Steady offers systematic unit redemption (SUR) and systematic payout rate (SPR), with SPR designated as the default option.","parentId":"n6","children":[]},{"id":"n8","type":"JUST","label":"PFRDA purpose for RIS Steady","text":"According to the PFRDA, RIS Steady aims to improve cash flow predictability and corpus longevity, minimizing the risk of funds being exhausted prematurely.","parentId":"n6","children":[]},{"id":"n9","type":"DETL","label":"RIS Steady payout duration","text":"Systematic payouts from RIS Steady commence once the accumulation phase concludes and continue until the subscriber reaches age 85.","parentId":"n6","children":[]},{"id":"n10","type":"DETL","label":"RIS Steady equity exposure","text":"RIS Steady provides a predefined withdrawal pathway where equity exposure decreases in line with the subscribers’ advancing age.","parentId":"n6","children":[]},{"id":"n11","type":"DETL","label":"Pension fund manager selection","text":"Subscribers can choose to remain invested with their accumulation phase pension fund manager or make a switch every two years.","parentId":"n6","children":[]},{"id":"n12","type":"DETL","label":"Death benefit in RIS Steady","text":"In the event of a subscriber’s death while systematic withdrawal is active, the lump sum, minus scheduled payouts, will be given to the beneficiaries.","parentId":"n6","children":[]},{"id":"n13","type":"INSG","label":"Experts on RIS benefits","text":"Experts state RIS provides retirees with greater flexibility, more stable income, and efficient management of their retirement savings.","parentId":"n6","children":[{"id":"n14","type":"JUST","label":"Vishwajeet Goel on RIS","text":"Vishwajeet Goel from PensionBazaar notes RIS allows systematic pension wealth withdrawal while the remaining corpus stays invested, benefiting from market participation.","parentId":"n13","children":[]},{"id":"n15","type":"JUST","label":"Anuj Kesarwani on longevity risk","text":"Financial adviser Anuj Kesarwani of Zenith Finserve says RIS helps manage living expenses during longer retirement phases, preventing early exhaustion of savings.","parentId":"n13","children":[]},{"id":"n16","type":"INSG","label":"Rajesh Khandagale on corpus growth","text":"Rajesh Khandagale, Senior Vice President (NPS) at KFin Technologies, states that RIS gives money a chance to grow further during retirement.","parentId":"n13","children":[]}]}]}]},{"id":"n17","type":"CMPR","label":"SLW vs RIS: Key Differences","text":"RIS is a thoroughly designed scheme with data-backed calculations ensuring corpus longevity, unlike SLW which is primarily a withdrawal method.","table":{"cols":["Feature","Systematic Lump Sum Withdrawal (SLW)","Retirement Income Scheme (RIS)"],"rows":[{"label":"Nature","cells":["Way to withdraw money","Thoroughly designed scheme with data-backed calculations"]},{"label":"Goal","cells":["Automated, regular withdrawals determined by subscriber","Ensure retirement corpus lasts long; manage longevity risk"]},{"label":"Discipline","cells":["Less structured; allows subscriber to decide amount and timing","Aims to bring better discipline to retirement withdrawals"]}]},"parentId":"n1","children":[{"id":"n18","type":"JUST","label":"Sumit Shukla on SLW vs RIS","text":"Sumit Shukla, MD and CEO of Axis Pension, states SLW is a withdrawal method, while RIS is a designed scheme ensuring corpus longevity and managing longevity risk.","parentId":"n17","children":[]},{"id":"n19","type":"INSG","label":"Anuj Kesarwani on withdrawal discipline","text":"Anuj Kesarwani highlights that a major advantage of RIS over SLW is its potential to instill better discipline in retirement withdrawals.","parentId":"n17","children":[]}]},{"id":"n20","type":"SUBC","label":"RIS Drawdown Options","text":"Once opting for RIS, subscribers can select either systematic unit redemption (SUR) or systematic payout rate (SPR), with SPR being the default plan.","parentId":"n1","children":[{"id":"n21","type":"DETL","label":"Systematic Unit Redemption (SUR)","text":"In SUR, the number of units withdrawn remains fixed, but monthly income fluctuates as Net Asset Value (NAV) changes with market performance.","parentId":"n20","children":[{"id":"n22","type":"JUST","label":"Goel on SUR mechanics","text":"Vishwajeet Goel explains that SUR involves redeeming a fixed number of units, causing payouts and residual corpus to vary with market performance.","parentId":"n21","children":[]}]},{"id":"n23","type":"DETL","label":"Systematic Payout Rate (SPR)","text":"Under SPR, retirees receive periodic payouts from their corpus based on a pre-defined age-linked payout rate prescribed by the PFRDA.","parentId":"n20","children":[{"id":"n24","type":"DETL","label":"SPR calculation and reset","text":"The SPR is fixed for 12 months and is recalculated annually on the subscriber’s birthday, based on the remaining drawdown period until age 85.","parentId":"n23","children":[]},{"id":"n25","type":"DETL","label":"SPR payout rate increase","text":"As the retiree ages, the systematic payout rate gradually increases under the SPR option.","parentId":"n23","children":[]},{"id":"n26","type":"DETL","label":"SPR payout calculation basis","text":"Periodic payouts are calculated on the market value of the remaining retirement corpus at the annual reset date.","parentId":"n23","children":[]},{"id":"n27","type":"INSG","label":"SPR market-linked payouts","text":"Since the corpus remains invested during the drawdown phase, payouts under SPR are market-linked and may fluctuate based on investment performance.","parentId":"n23","children":[]}]}]},{"id":"n28","type":"CONC","label":"Ascertaining RIS suitability","text":"While reforms aim to make RIS retiree-friendly, individuals must ascertain its suitability considering complexities and market-linked returns.","parentId":"n1","children":[{"id":"n29","type":"INSG","label":"Complexity for some retirees","text":"Some less financially-savvy retirees may find the multitude of options within NPS and RIS overwhelming.","parentId":"n28","children":[{"id":"n30","type":"JUST","label":"Kesarwani on NPS/RIS complexity","text":"Anuj Kesarwani notes NPS is already complex with multiple asset classes, annuity, taxation, and withdrawals, and RIS adds another layer.","parentId":"n29","children":[]}]},{"id":"n31","type":"INSG","label":"Market-linked returns consideration","text":"Risk-averse investors should note that RIS returns are market-linked and not guaranteed, unlike annuities or fixed deposits.","parentId":"n28","children":[{"id":"n32","type":"JUST","label":"Khandagale on investor suitability","text":"Rajesh Khandagale states RIS is likely more relevant for investors comfortable with market fluctuations who prefer keeping their corpus invested for higher returns.","parentId":"n31","children":[]}]},{"id":"n33","type":"DCSN","label":"Choice for risk-averse investors","text":"Risk-averse subscribers may prefer guaranteed income options over RIS's market-linked returns.","parentId":"n28","children":[]},{"id":"n34","type":"INSG","label":"Equity exposure limit for high-risk investors","text":"Those willing to take higher risks may find the maximum equity exposure of 35% in RIS inadequate.","parentId":"n28","children":[]},{"id":"n35","type":"DCSN","label":"Withdrawal option decision factors","text":"The choice among lump sum withdrawal, RIS Steady, or SLW depends on individual risk appetite, ability to manage withdrawals, objective, and supplementary retirement income sources.","parentId":"n28","children":[]}]}]},"slug":"nps-has-a-new-withdrawal-option-what-you-fd447e","sharedAt":{"_seconds":1780472521,"_nanoseconds":394000000},"title":"NPS new withdrawal option"}