In a significant overhaul of retirement withdrawal norms, exiting the National Pension System (NPS) has become more flexible for non-government subscribers. Under amended rules notified by the Pension Fund Regulatory and Development Authority (PFRDA), eligible NPS members can now withdraw up to 80 per cent of their retirement corpus as a lump sum at the time of exit, reported Economic Times.The revised rules apply to subscribers under the All Citizen Model and Corporate NPS, bringing major relief to non-government sector employees who were earlier required to allocate a larger share of their savings to annuity purchases.
Mandatory annuity requirement cut to 20 per cent
As per the amended PFRDA (Exits and Withdrawals under the NPS) Regulations, 2025, notified on December 16, the compulsory annuity purchase requirement for non-government subscribers has been reduced to a minimum of 20 per cent of the accumulated pension wealth in specified cases.Annuities provide regular pension income after retirement, while the remaining portion of the corpus can be withdrawn as a lump sum or through systematic unit withdrawal.Earlier, non-government NPS subscribers had to use at least 40 per cent of their retirement corpus to buy an annuity on exit.The revised annuity requirement applies to normal exits at the age of 60, exits after completing the minimum subscription period, and exits between the ages of 60 and 85.For subscribers whose accumulated pension wealth crosses certain monetary thresholds, at least 20 per cent of the corpus must be set aside for annuity purchase, while up to 80 per cent becomes available for withdrawal.
How the corpus thresholds work
The amended regulations lay down different withdrawal rules based on the size of the retirement corpus:
- Accumulated pension wealth up to Rs 8 lakh: Subscribers can withdraw the entire amount as a lump sum. Annuity purchase is optional, up to 20 per cent.
- Accumulated pension wealth between Rs 8 lakh and Rs 12 lakh:
Lump sum withdrawal is capped at Rs 6 lakh, with the balance available for annuity purchase or systematic unit withdrawal over a period of up to six years. - Accumulated pension wealth above Rs 12 lakh: At least 20 per cent of the corpus must be used to purchase an annuity, while up to 80 per cent can be withdrawn as a lump sum.
Greater control over retirement savings
By lowering the mandatory annuity component from 40 per cent to 20 per cent, the PFRDA has given non-government NPS subscribers greater control over how they use their retirement savings. The move increases liquidity at exit and allows retirees more flexibility in planning post-retirement income, while still ensuring a minimum assured pension through annuity purchase.
