NPS Rule Changes 2025: 80% Withdrawal Allowed, Exit Age Raised to 85, Annuity Cut to 20%

The Pension Fund Regulatory and Development Authority (PFRDA) has announced major changes to the NPS Exit and Withdrawal Regulations, 2015, mainly impacting non-government subscribers under the All Citizen Model and Corporate Model.

These changes significantly increase withdrawal flexibility, reduce compulsory annuity requirements, expand partial withdrawal options, and raise the maximum exit age.

Higher Lump-Sum Withdrawal At Exit

One of the biggest changes is the increase in lump-sum withdrawal limits.

• Earlier: Up to 60% lump sum, 40% annuity mandatory
• Now: Up to 80% lump sum, only 20% annuity required

This applies to both All Citizen and Corporate NPS subscribers at normal exit.

Full Withdrawal Limits Increased

The slabs for full withdrawal have been expanded:

• Corpus up to ₹8 lakh: 100% withdrawal allowed (earlier limit was ₹5 lakh)
• Corpus between ₹8–12 lakh: Up to ₹6 lakh lump sum, balance via Systematic Unit Redemption (SUR) or annuity
• Corpus above ₹12 lakh: Up to 80% lump sum, minimum 20% annuity compulsory

Government employees continue to have a 60% lump-sum cap.

No More 5-Year Lock-In For All Citizen Model

The earlier mandatory 5-year lock-in for premature exit under the All Citizen Model has been completely removed.

What this means: Subscribers can now exit at any time without completing a minimum subscription period.

Vesting Period Reduced To 15 Years

Normal exit rules are now more flexible:

• Earlier: Exit only at age 60
• Now: Exit allowed after 15 years of subscription or age 60, whichever comes first

Example:

• Join at 30 → exit at 45
• Join at 50 → exit at 60

Big Relief For Those Joining After 60

Individuals who join NPS after the age of 60 no longer face any vesting period.

They can now:

• Withdraw up to 80% as lump sum
• Take 100% withdrawal if corpus is up to ₹12 lakh

Exit Age Extended To 85 Years

The maximum exit age has been increased:

• Earlier: 70 years
• Now: 85 years

This allows subscribers to invest longer and build a bigger retirement corpus.

More Partial Withdrawals Allowed

Withdrawal flexibility has been enhanced:

• Up to 4 partial withdrawals allowed before age 60
• Minimum 4-year gap between withdrawals
• After 60, withdrawals allowed every 3 years

Wider Reasons For Partial Withdrawals

The scope of partial withdrawals has been expanded:

• Medical treatment allowed without restriction to specific illnesses
• One-time withdrawal for purchase or construction of a house clarified

New Payout Options: SLW And SUR

Two new structured withdrawal options have been introduced:

• SLW (Systematic Lumpsum Withdrawal): Fixed amount withdrawn periodically
• SUR (Systematic Unit Redemption): Units redeemed periodically, similar to mutual fund SWP

These options give retirees market-linked, phased income instead of a one-time payout.

Also Read: PFRDA Adds New High-Equity Options to NPS and UPS for Govt Employees: What’s Changing!

What Happens On Premature Exit Or Death?

Premature Exit

• If corpus ≤ ₹5 lakh: 100% withdrawal or SLW/SUR allowed
• If corpus > ₹5 lakh: Old rule continues (20% lump sum, 80% annuity)

On Death Of Subscriber

Nominees can now choose from:

• 100% lump sum
• Annuity
• SLW
• SUR

Conclusion

The 2025 NPS changes mark a major shift towards flexibility and subscriber choice. With higher lump-sum withdrawals, lower annuity requirements, earlier exits, and extended investment age, NPS has become more liquid, inclusive, and suited to modern retirement needs, especially for private-sector and self-employed individuals.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.