NPS subscribers get a New Year 2026 gift from PFRDA as the National Pension System (NPS) gets a major transformation. The Pension Fund Regulatory and Development Authority (PFRDA) has made significant changes in the exit and withdrawal norms. These changes have received a warm welcome by investors as it makes way for a significant shift in how the subscribers access their retirement savings.
National Pension System is a scheme where the returns are linked to market performance of the fund. The investments can be made in NPS Tier-I account (deduction up to Rs 2 lakh available under various sections) or both NPS Tier-I and Tier-II account as per subscriber’s choice.
With the revised regulatory framework, PFRDA has directly addressed the concerns regarding exit and withdrawals. The new NPS rules substantially enhance the subscribers’ withdrawal flexibility, while preserving the investment based pension-orientation of NPS.
Let us take a closer look at the key changes point-by-point and its impact on NPS subscribers –
1. Lower Mandatory Annuity; Higher Withdrawal at Retirement
As per the earlier rules, the NPS subscribers were allowed to withdraw up to 60% of their total corpus at retirement as a lump sum. It was mandatory to use the 40% part to purchase an annuity, which is an insurance product that converts a lump sum amount into regular pension payments for life. In the latest notification, PFRDA has reduced the mandatory annuity conversion to just 20%.
Read also: A Complete Guide about NPS Account Opening
In this new 80:20 NPS arrangement, subscribers can now withdraw up to 80% of corpus at the time of retirement. They can take the amount either as a one-time lump sum or through regular and structured withdrawals. This arrangement will bring a greater control over cash flows after retirement.
2. Full Withdrawal Permitted Allowed for Small NPS Corpus
The revised rules bring a major relief to the subscribers who have a small retirement corpus. The new rule says that if the total accumulated NPS corpus is ₹8 lakh or less, the investors are allowed to withdraw the entire amount as a lump sum, with no mandatory requirement to purchase an annuity. The previous rule had this threshold at just ₹5 lakh. The new rule says –
a) For subscribers whose corpus is less than ₹8 lakh, the entire amount can be withdrawn as a lump sum.
b) For subscribers whose corpus falls between ₹8 lakh and ₹12 lakh, the rules allow a lump-sum withdrawal of up to ₹6 lakh. The balance amount can be accessed either through an annuity or through Systematic Unit Redemption (SUR).
c) Where the accumulated corpus is more than ₹12 lakh, the standard exit framework stands at 80:20.Up to 80% of the corpus can be withdrawn at the time of retirement, while at least 20% must be used to buy an annuity.
3. Premature Exit Before 60
Another major reform relates to premature exit from the National Pension System. In place of the earlier rule that said that the investors need to remain invested until the age of 60, the new framework introduces a minimum lock-in period of 15 years. An NPS exit is now permitted when any of the following conditions is met:
- Completion of 15 years in the NPS
- Attainment of 60 years of age
4. NPS Tenure Extended up to Age 85
In New NPS rule Subscribers are no longer compelled to exit purely on the basis of age. Under the revised regulations, NPS accounts can now be continued until the age of 85. Earlier, subscribers were required to exit the scheme by the age of 75, regardless of whether they actually needed to access their retirement savings at that stage or not.
5. Simplified Exit Norms in Case of Death
Streamlining the exit and withdrawal process in the event of a subscriber’s death, the PFRDA has now defined that the withdrawal options available to nominees or legal heirs are linked to the size of the accumulated National Pension System corpus. The nominee or legal heir may withdraw the entire amount as a lump sum.
6. More Flexibility for Pre-60 Partial Withdrawals
The revised NPS framework further relaxes rules around partial withdrawals before retirement. Under the new rules, NPS subscribers can now make up to four partial withdrawals before turning 60 or before retirement. However, to prevent frequent drawdowns, a minimum gap of four years is mandated between two such withdrawals.
7. Partial Withdrawals Allowed after Retirement
The new regulations also clarify withdrawal flexibility after retirement. Subscribers are not required to withdraw their entire National Pension System corpus upon reaching 60. A subscriber can continue to remain invested after 60 and not opt for systematic withdrawals or partial withdrawals. A minimum gap of three years must be maintained between two withdrawals. Each partial withdrawal is capped at 25% of the subscriber’s own contribution to the NPS. In cases where the account consists solely of the subscriber’s own contributions, i.e.no employer contribution, the 25% limit applies to the entire contribution amount.
8. Clear Exit on Renouncing Indian Citizenship
For subscribers who renounce Indian citizenship, the revised framework allows the closing of the NPS account. The subscriber can withdraw the entire accumulated corpus as a lump sum. There is no requirement to purchase an annuity.
9. Loan Facility Against NPS Corpus
Subscribers can now avail loans on their National Pension System holdings as collateral from regulated financial institutions, subject to limits and conditions prescribed by the PFRDA.
All in all, the National Pension System has now emerged as a more flexible retirement product. Taken together, the changes in NPS substantially improve liquidity, flexibility, and accessibility for NPS subscribers. PFRDA has directly addressed the most persistent criticisms of the NPS. For subscribers, who previously viewed the scheme as restrictive, the revised framework now makes NPS more compelling as a long-term retirement solution.
Related link: Become an NPS Agent
Frequently Asked Questions (FAQs)
Q1: Can I withdraw 80% of my NPS as a lump sum now?
Yes, if you are a non-government subscriber and your corpus is over ₹12 lakh, you can withdraw 80% as a lump sum and use 20% for an annuity.
Q2: What is the new NPS withdrawal limit for a 100% lump sum?
If your total accumulated pension wealth is ₹8 lakh or less, you can now withdraw the all 100% amount as a lump sum.
Q3: Has the maximum age for NPS changed in 2025?
Yes, both government and non-government subscribers can now remain invested in the NPS up to the age of 85 (increased from 75).
Q4: What is Systematic Unit Redemption (SUR)?
Systematic Unit Redemption (SUR) is a new withdrawal method for those with a corpus between ₹8 lakh and ₹12 lakh. It allows you to take a lump sum of ₹6 lakh and withdraw the remaining balance periodically over at least six years.