NPS exit rules changed: Non-govt subscribers can now withdraw up to 80% of retirement corpus

Non-government subscribers of the National Pension System (NPS) have been given significantly greater flexibility in accessing their retirement savings, following a key regulatory overhaul notified on Tuesday. The Pension Fund Regulatory and Development Authority (PFRDA) has issued the PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025, reducing the mandatory annuity purchase requirement to just 20% of the accumulated corpus for eligible non-government subscribers.

Under the revised framework, non-government NPS members, including those under the All Citizen Model and Corporate NPS, can now withdraw up to 80% of their retirement corpus as a lump sum or through structured withdrawal options at the time of exit. Earlier, such subscribers were required to use at least 40% of their accumulated pension wealth to purchase an annuity.

The lower annuity threshold applies if the subscriber has completed a minimum of 15 years under NPS, has attained the age of 60, or has superannuated or retired as per employment terms. In these scenarios, at least 20% of the corpus must be used to buy an annuity that provides periodic pension income, while the remaining amount can be accessed through lump-sum withdrawals, systematic lump-sum withdrawals, or systematic unit redemption.

Before the 2025 amendment, non-government NPS subscribers were required to use 40% of their retirement corpus to purchase an annuity at the time of exit. The revised rules have reduced this mandatory annuity requirement to 20%, significantly increasing flexibility for subscribers. With the change, non-government NPS members can now withdraw up to 80% of their corpus, giving them greater control over how they choose to deploy their retirement savings.

20% annuity corpus rule

Under the revised NPS regulations, non-government subscribers whose total accumulated pension wealth crosses the prescribed monetary limits are required to allocate at least 20% of their corpus toward the purchase of an annuity, ensuring a regular pension income. The balance, up to 80%, can be withdrawn either as a lump sum or through structured options such as systematic unit withdrawals.

This requirement applies at the time of normal exit, including retirement at age 60 or after completing the minimum subscription period, and also covers exits made between the ages of 60 and 85.

Relief for smaller retirement savings

The amended rules also provide relief for smaller retirement savings. Subscribers whose total accumulated pension wealth does not exceed Rs 8 lakh will not be required to purchase any annuity and may withdraw the entire amount as a lump sum or through systematic withdrawals. For those with a corpus above Rs 8 lakh but below Rs 12 lakh, up to Rs 6 lakh can be withdrawn upfront, while the balance may be taken through periodic payouts for at least six years or converted into an annuity.

However, the regulations offer no relaxation for early exits. Subscribers who exit NPS before completing 15 years, before turning 60, or before retirement or superannuation will still be required to allocate 80% of their accumulated corpus towards annuity purchase, with only 20% available for lump-sum withdrawal.

The new rules also allow non-government subscribers to defer annuity purchase or lump-sum withdrawal until the age of 85, subject to submitting a request to the National Pension System Trust or an authorised intermediary. Subscribers retain the flexibility to exit at any time during this period.

For individuals joining NPS after the age of 60 but before 85, the regulations mandate a minimum 20% annuity purchase at exit. However, if the total corpus is Rs 12 lakh or less, the entire amount may be withdrawn as a lump sum or through periodic payouts.

For government subscribers, the existing framework largely remains intact. While they may continue in NPS until the age of 85, they must still utilise at least 40% of their retirement corpus to purchase an annuity upon exit, with the balance available for withdrawal.