The pension fund regulator’s proposal to reduce the mandatory annuitisation level from 40% of the accumulated corpus to 20% will enable subscribers to efficiently utilise their retirement savings as annuity yields modest returns.

However, there is a rider. While 60% of the corpus withdrawn as lumpsum will continue to be tax-free, the additional 20% if withdrawn as lumpsum will be taxed at the marginal rate.

Compulsory annuity

Currently, subscribers in the National Pension System (NPS) need to mandatorily buy an annuity with at least 40% of their corpus at exit from the age of 60 to 75 years. Experts say this limits liquidity and ties them to an annuity product which may potentially give modest returns.

This proposed flexibility will make NPS more attractive to individuals who are hes

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