No strings, no annuity trap: This NPS rule change could unlock ₹80 lakh in your hands

Your NPS account could soon become more flexible and powerful than ever. The Pension Fund Regulatory and Development Authority (PFRDA) has proposed sweeping changes to the National Pension System—giving subscribers more control, longer investment timelines, fewer annuity obligations, and greater liquidity. The draft is open for feedback until October 17.

The proposed reforms aim to modernize NPS for non-government subscribers, including corporate professionals, freelancers, and entrepreneurs. Key highlights from the draft include:

• Mandatory annuity cut from 40% to 20%: You’ll have to annuitize only one-fifth of your corpus at exit, giving you access to a larger lump sum.
• Maximum NPS age extended to 85: Both entry and exit age limits are being pushed up, allowing subscribers to stay invested or defer withdrawals until age 85.
• More tax-efficient withdrawals: On a corpus of ₹1 crore, ₹60 lakh remains tax-free. Only ₹20 lakh is taxed, and ₹20 lakh must go into annuity.
• Partial withdrawals increased from 3 to 6: You’ll be able to make more withdrawals over your lifetime, with broader reasons permitted.
• End of the ‘incremental’ clause: Each withdrawal is now calculated fresh on total contributions since the last one—no deductions for past withdrawals.
• Post-retirement withdrawals allowed: Up to three partial withdrawals per financial year can now be made before final closure.

The scope of permitted withdrawals is also expanding. In addition to existing uses like children’s education and medical emergencies, the revised list includes:

• One’s own higher education
• Disability-related medical expenses
• Seed capital for a business
• Margin money for home or vehicle loans
• Home repairs after natural disasters
• Skill development or upskilling

Further, the reforms allow subscribers to pledge their NPS account as collateral for loans—making it a potentially valuable liquidity source without disrupting retirement planning.

Other proposed changes include a mechanism for nominees to access up to 20% of the pension corpus if a subscriber goes missing, and a full exit route for those renouncing Indian citizenship—no annuity purchase required.

Whether you're 30 or 60, planning early or deferring retirement, the proposed changes promise greater autonomy over how and when you use your pension wealth.