NPS's new retirement income option: How PFRDA’s RIS framework works
Under NPS rules, government employees must still use at least 40 per cent of their corpus to purchase an annuity, while private-sector and other non-government subscribers must annuitise a minimum of 20 per cent.
- Jun 25, 2026,
- Updated Jun 25, 2026 8:20 AM IST
The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new Retirement Income Scheme (RIS) under the National Pension System (NPS), giving retirees a structured way to convert a portion of their retirement corpus into a regular income stream without withdrawing the entire amount at once.
The scheme marks a significant evolution in NPS's retirement framework, which has traditionally focused on corpus accumulation during an individual's working years.
Lump-sum versus annuity choice
For nearly 17 years, NPS subscribers reaching retirement largely had two options: withdraw the permitted lump-sum portion of their corpus or use part of the corpus to purchase an annuity that provides guaranteed pension income.
According to Value Research, while many subscribers preferred taking the lump sum, managing retirement savings over a potential 20- to 30-year retirement period often proved challenging. In 2023, PFRDA introduced the Systematic Lump Sum Withdrawal (SLW) facility, allowing retirees to stagger withdrawals. However, the withdrawals continued to depend on the subscriber's existing asset allocation and required individuals to determine their own withdrawal pace.
The newly launched RIS seeks to provide a more structured framework for post-retirement income management.
How the RIS scheme works
Under NPS rules, government employees must still use at least 40 per cent of their corpus to purchase an annuity, while private-sector and other non-government subscribers must annuitise a minimum of 20 per cent.
The new RIS applies only to the remaining non-annuitised corpus.
Instead of withdrawing this balance as a lump sum, subscribers can keep the money within the NPS ecosystem and receive monthly, quarterly, half-yearly or annual payouts until the age of 85.
The objective is to help retirees manage longevity risk — the possibility of exhausting savings during retirement — while allowing the corpus to remain invested.
MUST READ: How employer contributions to NPS can push effective tax-free income to ₹13.5 lakh
Dedicated RIS Steady fund
A key feature of the scheme is a new investment option called RIS Steady.
The fund follows a glide-path strategy that gradually reduces risk as a retiree ages.
At age 60, the asset allocation comprises:
35% equities 10% corporate bonds 55% government securities
The equity allocation is progressively reduced over time, while exposure to fixed-income instruments rises. According to Value Research, the approach recognises that retirees still need some growth-oriented assets to combat inflation but may require lower risk as they grow older.
MUST READ: India’s retirement shock: 75% near age 60 lack a plan as savings fall 3.6x short of goal
Two withdrawal choices
Subscribers can choose between two payout methods.
Systematic Payout Rate (SPR)
Under SPR, annual withdrawals are linked to age. At age 60, the payout rate is approximately 4 per cent.
For example, a retiree with a ₹1 crore drawdown corpus would receive around ₹4 lakh annually, or roughly ₹33,000 per month. The payout amount is recalculated every year.
Systematic Unit Redemption (SUR)
SUR works similarly to a mutual fund Systematic Withdrawal Plan (SWP).
The corpus is converted into units, and a fixed number of units are redeemed at each payout interval. Since payouts depend on the fund's net asset value (NAV), the amount received may vary over time.
MUST READ: NPS new rules 2026: PFRDA now allows annuity exit in critical illness cases, eases lock-in norms
Advantages and risks
According to Value Research, one of the biggest advantages of RIS is that it addresses a common retirement challenge — generating sustainable income from accumulated savings without making complex investment decisions after retirement.
The age-linked withdrawal framework under SPR may also reduce the risk of retirees withdrawing too much too early, a common concern in retirement planning.
However, RIS does not offer the certainty of a traditional annuity. Since the corpus remains invested in market-linked assets, returns and payout amounts can fluctuate.
MUST READ: 8th Pay Commission: NPS subscribers seek OPS option, key demands submitted
Experts caution that the scheme is not a one-size-fits-all solution. Some retirees may find the initial 35 per cent equity exposure too high, while others may prefer a greater allocation to growth assets. Income requirements, risk appetite, tax implications and overall financial circumstances will continue to play a critical role in determining the suitability of the scheme.
With the launch of RIS, PFRDA has expanded the range of retirement income options available to NPS subscribers, potentially making retirement planning more flexible for India's growing base of pension investors.
MUST READ: NPS Swasthya update: PFRDA mandates health insurance, allows full exit for treatment
The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new Retirement Income Scheme (RIS) under the National Pension System (NPS), giving retirees a structured way to convert a portion of their retirement corpus into a regular income stream without withdrawing the entire amount at once.
The scheme marks a significant evolution in NPS's retirement framework, which has traditionally focused on corpus accumulation during an individual's working years.
Lump-sum versus annuity choice
For nearly 17 years, NPS subscribers reaching retirement largely had two options: withdraw the permitted lump-sum portion of their corpus or use part of the corpus to purchase an annuity that provides guaranteed pension income.
According to Value Research, while many subscribers preferred taking the lump sum, managing retirement savings over a potential 20- to 30-year retirement period often proved challenging. In 2023, PFRDA introduced the Systematic Lump Sum Withdrawal (SLW) facility, allowing retirees to stagger withdrawals. However, the withdrawals continued to depend on the subscriber's existing asset allocation and required individuals to determine their own withdrawal pace.
The newly launched RIS seeks to provide a more structured framework for post-retirement income management.
How the RIS scheme works
Under NPS rules, government employees must still use at least 40 per cent of their corpus to purchase an annuity, while private-sector and other non-government subscribers must annuitise a minimum of 20 per cent.
The new RIS applies only to the remaining non-annuitised corpus.
Instead of withdrawing this balance as a lump sum, subscribers can keep the money within the NPS ecosystem and receive monthly, quarterly, half-yearly or annual payouts until the age of 85.
The objective is to help retirees manage longevity risk — the possibility of exhausting savings during retirement — while allowing the corpus to remain invested.
MUST READ: How employer contributions to NPS can push effective tax-free income to ₹13.5 lakh
Dedicated RIS Steady fund
A key feature of the scheme is a new investment option called RIS Steady.
The fund follows a glide-path strategy that gradually reduces risk as a retiree ages.
At age 60, the asset allocation comprises:
35% equities 10% corporate bonds 55% government securities
The equity allocation is progressively reduced over time, while exposure to fixed-income instruments rises. According to Value Research, the approach recognises that retirees still need some growth-oriented assets to combat inflation but may require lower risk as they grow older.
MUST READ: India’s retirement shock: 75% near age 60 lack a plan as savings fall 3.6x short of goal
Two withdrawal choices
Subscribers can choose between two payout methods.
Systematic Payout Rate (SPR)
Under SPR, annual withdrawals are linked to age. At age 60, the payout rate is approximately 4 per cent.
For example, a retiree with a ₹1 crore drawdown corpus would receive around ₹4 lakh annually, or roughly ₹33,000 per month. The payout amount is recalculated every year.
Systematic Unit Redemption (SUR)
SUR works similarly to a mutual fund Systematic Withdrawal Plan (SWP).
The corpus is converted into units, and a fixed number of units are redeemed at each payout interval. Since payouts depend on the fund's net asset value (NAV), the amount received may vary over time.
MUST READ: NPS new rules 2026: PFRDA now allows annuity exit in critical illness cases, eases lock-in norms
Advantages and risks
According to Value Research, one of the biggest advantages of RIS is that it addresses a common retirement challenge — generating sustainable income from accumulated savings without making complex investment decisions after retirement.
The age-linked withdrawal framework under SPR may also reduce the risk of retirees withdrawing too much too early, a common concern in retirement planning.
However, RIS does not offer the certainty of a traditional annuity. Since the corpus remains invested in market-linked assets, returns and payout amounts can fluctuate.
MUST READ: 8th Pay Commission: NPS subscribers seek OPS option, key demands submitted
Experts caution that the scheme is not a one-size-fits-all solution. Some retirees may find the initial 35 per cent equity exposure too high, while others may prefer a greater allocation to growth assets. Income requirements, risk appetite, tax implications and overall financial circumstances will continue to play a critical role in determining the suitability of the scheme.
With the launch of RIS, PFRDA has expanded the range of retirement income options available to NPS subscribers, potentially making retirement planning more flexible for India's growing base of pension investors.
MUST READ: NPS Swasthya update: PFRDA mandates health insurance, allows full exit for treatment