Indian retirement schemes are crafted for long-term safety, but imagine a medical emergency striking you in pre-retirement. But you don't need to worry, as certain schemes do have partial withdrawal facilities that help you out at the time of need. Read how schemes like EPF, NPS, and ULIPs can work for you before retirement, when your health takes centre stage.
Key Takeaways
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Partial withdrawals serve as a useful safety net when life hurls medical curveballs your way. They're particularly important when other savings or insurance coverage are insufficient to cover high hospital bills or chronic illness costs. While retirement schemes are designed for the long term, some of them have been carefully designed to help subscribers in times of adversity.
The ability to withdraw without destroying the entire corpus provides financial security with solutions to current health needs. Let's analyse the nomenclature and design that regulates such withdrawals.
Most assume that retirement investment schemes remain inaccessible until the predetermined retirement age, yet this may not always be the case. In the event of medical emergencies, certain retirement instruments allow relief measures in the form of partial withdrawals. Read on.
Partial withdrawals enable one to withdraw a particular amount of his or her built-up corpus as a reaction to qualifying life events, like medical emergencies. Unlike loans, these are non-repayable. Depending on the scheme, the allowed amount, lock-in period, and tax treatment differ considerably.
You can withdraw from your retirement corpus under the following conditions:
The EPF is one of the most accessible retirement funds during medical emergencies. Thanks to progressive reforms, withdrawing funds has become quicker and less dependent on employer approvals. It’s an excellent resource for those needing immediate help.
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NPS, under the rule of the Pension Fund Regulatory and Development Authority (PFRDA), permits withdrawal on a portion of the fund in case of medical emergencies, but within limits set.
Conditions & Restrictions:
You should have made at least three years of contributions.
Withdrawal is limited to 25% of your own contribution, minus employer share and gains.
This can be done only thrice during the tenure of NPS.
Admissible Medical Grounds:
Hospitalisation due to life-threatening illness.
Treatment for specified critical ailments (e.g., cancer, renal failure, heart surgery).
Permanent disability incidents.
Procedure:
Login to CRA portal (e.g., NSDL or Karvy).
Send the withdrawal form along with KYC documents, medical evidence, and the reason.
Processing time: 10–15 working days.
Taxation:
Withdrawals in case of medical emergencies from NPS are exempt under Section 10(12B).
Pro Tip: Get your POP coordinated for quick submission and updation.
ULIPs are life insurance blended with investment and provide part withdrawal after lock-in, so convenient in emergency situations.
Withdrawal Flexibility:
Documentation:
Tax Status:
ULIPs bought on or before Feb 1, 2021: exempt under Section 10(10D).
ULIPs acquired after Feb 1, 2021, with annual premium > ₹ 2.5l: tax as capital gains.
Strategy Tip:
Withdraw during times of high NAV and opt for low-exit-load ULIPs to maximise gains.
Public Provident Fund (PPF), Long-Term Vehicle With Mid-Term Relief
PPF provides restricted premature access but can otherwise be used for medical funds.
Conditions for Withdrawal:
Permitted upon completion of six financial years.
Can be availed of only once a year.
Maximum limit: 50% of the balance as on the end of the fourth preceding year or the preceding immediate year, whichever is less.
Documentation:
Withdrawal form (Form C).
Passbook or account statement.
ID proof and a cancelled cheque.
Tax Benefits:
Whole withdrawal is exempt from tax.
No effect on interest for the balance corpus.
*Caution: The PPF corpus is accumulated gradually and must be utilised for partial requirements only.
These are often overlooked but may offer options for early access under extreme conditions. The process, however, is not uniform and depends heavily on policy wordings or employer leniency.
Employer-Backed Superannuation Funds:
Withdrawals are usually permitted only at retirement or resignation.
Yet, employers might permit early access for serious illness, subject to trustee approval.
Needs a strong reason and Board sanction.
Traditional Pension Policies (LIC Jeevan Akshay, etc.)
Funds become locked once the annuity starts.
Surrendering before the vesting period incurs heavy charges.
Seek policies with health-based riders providing early payout for critical illnesses.
Recommendation:
Go through the policy document carefully and seek the advice of the insurance advisor.
Make use of the customer grievance redressal system if denied access unjustifiably.
Case Studies & Real-Life Scenarios
You can withdraw EPF for medical emergencies without employer approval, all thanks to a 2018 rule that made online claims lightning-fast!
Source: EPFO India
Your retirement strategy isn't merely a distant safety net - it can also be your money cushion when real-life storms strike early. Medical crises can blow even the best-planned finances off course, but knowing partial withdrawal provisions gives you the power to safeguard your health without financial devastation.
Read more: Get professional help for retirement plan
From the accessible EPF to the structured yet helpful NPS and the flexible ULIPs, India’s retirement instruments are more responsive than many realise. Digital reforms, tax relaxations, and simplified paperwork mean faster, cleaner access to your own money when it matters most.
Stay ahead by reading your policy's fine print and planning for contingencies. While actual financial planning is about saving for retirement, it's also about safeguarding life along the way. That's precisely why certain insurers such as Canara HSBC Life Insurance provide carefully designed retirement-linked plans, combining long-term growth with immediate support when you need it the most.
Yes, pension funds can be partially withdrawn before retirement under certain conditions. For example, in the case of the National Pension System (NPS), a partial withdrawal is allowed for medical emergencies, critical illnesses, or higher education, after a minimum of three years of contribution. However, the rules vary depending on the pension scheme, with some funds offering more flexibility than others. It’s crucial to check the specific policy terms for early withdrawal options.
Under the Employees’ Provident Fund (EPF), you can withdraw up to six months' salary or your contribution with interest, whichever is lower, to cover medical emergencies. This includes hospitalisation, surgery, or long-term treatments. The good news is that there is no minimum service period required for medical withdrawals, making it a vital safety net during urgent health crises.
Partial withdrawals from the National Pension System (NPS) are allowed for specific reasons such as:
Medical emergencies (e.g., cancer, kidney failure, or critical surgeries)
Children's higher education (for up to three times during the tenure)
Marriage (for self or children).
The withdrawal amount is capped at 25% of your own contributions, excluding employer contributions, and can be made after three years of investment.
The 90% withdrawal rule generally refers to the EPF rule that allows you to withdraw 90% of your accumulated corpus before retirement under certain conditions, such as housing-related expenses. For medical emergencies, EPF offers more flexible withdrawal provisions, as discussed earlier. However, the 90% rule is more commonly associated with housing loans or final settlement withdrawals before you retire.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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