In a significant reform aimed at enhancing retirement flexibility, the Pension Fund Regulatory and Development Authority (PFRDA) has announced key changes to the National Pension System (NPS). Under the revised norms, non-government (private sector) NPS subscribers can now withdraw up to 80 per cent of their accumulated pension corpus, compared to the earlier cap of 60 per cent. The decision marks an important shift in India’s pension framework, giving private subscribers greater control over their retirement savings.
What Has Changed in NPS Withdrawal Rules
- Earlier, both government and non-government NPS subscribers were allowed to withdraw only 60 per cent of their corpus, with the remaining 40 per cent mandatorily invested in an annuity.
- The new rules apply only to non-government subscribers, while government employees will continue under the existing 60:40 structure.
- Under the revised framework, if a non-government subscriber’s accumulated corpus exceeds ₹12 lakh, they can withdraw up to 80 per cent as a lump sum, and only 20 per cent needs to be invested in an annuity.
Revised Withdrawal Slabs Explained
- The PFRDA notification clearly defines withdrawal options based on the total accumulated pension wealth.
- If the total corpus is ₹8 lakh or less, the subscriber can withdraw the entire amount in a lump sum, with no annuity requirement.
- If the corpus is between ₹8 lakh and ₹12 lakh, the subscriber can withdraw ₹6 lakh, while the remaining amount must be used to purchase an annuity.
- If the corpus exceeds ₹12 lakh, up to 80 per cent can be withdrawn as a lump sum, and only 20 per cent must go towards annuity purchase, replacing the earlier 60–40 rule.
- This tiered approach ensures both financial flexibility and long-term income security.
Who Is Eligible for These New Rules
- The revised withdrawal norms apply to non-government NPS subscribers, including private sector employees, self-employed individuals, and others enrolled voluntarily.
- There is no change for government employees, whose withdrawal limit remains capped at 60 per cent, with 40 per cent compulsory annuitisation.
Changes in Exit and Investment Age Limits
The PFRDA has also introduced flexibility in the exit timeline. Subscribers are now allowed to remain invested in NPS until the age of 85, unless they choose to exit earlier.
A normal exit is now permitted after,
- Completion of 15 years of subscription, or
- Attaining 60 years of age, or
- Superannuation or retirement whichever comes first.
This allows subscribers to align NPS withdrawals with their personal retirement planning.
Rules in Case of Death or Missing Subscriber
- The notification also clarifies provisions for unfortunate contingencies.
- If a subscriber dies before annuity purchase or lump-sum withdrawal, the entire accumulated pension wealth will be paid to the nominee or legal heirs.
- If the subscriber is missing and presumed dead, 20 per cent of the corpus will be released as interim relief to the nominees or legal heirs.
- The remaining amount will be paid once the subscriber is officially declared missing or presumed dead, as per the Bharatiya Sakshya Adhiniyam, 2023.
Special Provisions: Citizenship, Disability, and Premature Exit
- In case of renunciation of Indian citizenship, the subscriber is allowed to close the NPS account and withdraw the entire corpus in a lump sum.
- For premature exit, at least 80 per cent of the corpus must be used to purchase an annuity, with only 20 per cent payable as a lump sum.
- However, if the total pension wealth is below ₹5 lakh, the entire amount can be withdrawn.
- Subscribers who are physically incapacitated or disabled (75 per cent or more) can opt for exit by submitting a medical certificate from a government doctor or surgeon.