Lesson 3 of 3 · 8 min
How much you may actually take
A pension corpus is not entirely yours to withdraw. The exit rules set slabs, and above one threshold a fixed share of it is converted into a pension for life.
Every calculation in the first two lessons assumes the corpus is yours to draw from as you choose. For a pension account it is not entirely. The exit rules set slabs, and where a corpus falls among them decides how much may come out as a lump sum and how much has to be converted into a pension for life.
| Accumulated pension wealth | What may be taken |
|---|---|
| Up to ₹8 lakh | The entire amount as a lump sum, or as periodic payouts |
| Above ₹8 lakh and up to ₹12 lakh | Up to ₹6 lakh as a lump sum; the balance buys an annuity or funds periodic payouts for at least six years |
| Above ₹12 lakh | At least 40% must buy an annuity; the balance as a lump sum or periodic payouts |
Your turn
A corpus of ₹40 lakh at premature exit. At least what amount, in rupees, is annuitised?
This is why a retirement plan that ends at a corpus figure is only half a plan. The number you reach and the number you can take are different, the gap depends on which slab you land in and when you leave, and the annuitised portion becomes an income stream rather than a balance. None of that changes whether the corpus was big enough — it changes what the corpus turns into.
So is the annuity part a bad thing?
KabirTara
Kabirasking
Being made to buy an annuity sounds like losing control of my own money.
Taraexplaining
It is a trade rather than a loss. What you give up is the use of the capital. What you get is an income that does not stop if you live longer than your arithmetic assumed — which is the risk a corpus on its own does not cover.
Kabirasking
Then which is better?
Taraexplaining
Not a question this page can answer, and not one anyone should answer for you from a distance. What it can tell you is that the split is set by rules and by your exit date, so both belong in the plan rather than being discovered at the end of it.
Check yourself
1 / 3
Kabir asks
On a normal exit with a corpus above ₹12 lakh, what share is annuitised?
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