PFRDA Announced New Rules for NPS: Al You Need to Know

On December 16, 2025, the Pension Fund Regulatory and Development Authority (PFRDA) announced a set of amendments to the National Pension System (NPS), significantly enhancing flexibility for subscribers in the non-government sector.

The revised exit and withdrawal norms under the Common Schemes (CS) and Multiple Scheme Framework (MSF) mark a major departure from earlier rules. Previously, non-government subscribers were allowed to withdraw up to 60% of their accumulated corpus at exit, while the remaining 40% had to be mandatorily invested in an annuity.

New 80:20 Withdrawal Rule for Larger Corpus

Under the updated framework, subscribers with a corpus exceeding ₹12 lakh can now withdraw as much as 80% of their savings in a lump sum, with only 20% required to be annuitised. This 80:20 structure offers retirees greater liquidity, increased control over their retirement funds, and more flexibility in planning post-retirement income.

For subscribers with smaller balances, the rules have been further liberalised. Those with an accumulated corpus of up to ₹8 lakh are now permitted to withdraw the entire amount in one go. In cases where the corpus ranges between ₹8 lakh and ₹12 lakh, subscribers may withdraw up to ₹6 lakh upfront, while the remaining amount must be invested in an annuity for a minimum tenure of six years.

Extended Investment Tenure and Exit Timeline

The amendments also extend the investment horizon under NPS, allowing subscribers to remain invested until the age of 85 unless they choose to exit earlier. A normal exit is now permitted after completing 15 years of subscription or upon attaining 60 years of age, superannuation, or retirement, whichever occurs first.

Additionally, PFRDA has removed the mandatory five-year lock-in period for non-government NPS subscribers and introduced relaxed withdrawal norms for those with lower pension balances.

Separate Rules Continue for Government Employees

For government employees covered under NPS, the five-year lock-in requirement remains unchanged. Normal exit is allowed after the age of 60. If the total pension corpus is below ₹5 lakh, 100% withdrawal is permitted. For balances exceeding ₹5 lakh, 40% must be used to purchase an annuity, while the remainder can be withdrawn as a lump sum.

Additional Exit and Withdrawal Provisions

• Subscribers may continue in NPS until the age of 85 unless an exit option is exercised earlier.
• Normal exit is allowed after 15 years of subscription or at age 60, superannuation, or retirement, whichever is earlier.
• For corpus above ₹12 lakh, 20% must be annuitised, while the remaining 80% can be withdrawn as a lump sum.
• Entire corpus can be withdrawn if total savings do not exceed ₹8 lakh.
• For corpus between ₹8 lakh and ₹12 lakh, up to ₹6 lakh may be withdrawn upfront, with the balance invested in a minimum six-year annuity.
• In the event of a subscriber’s death before annuity purchase or lump-sum withdrawal, the accumulated pension wealth will be paid to nominees or legal heirs.
• Subscribers renouncing Indian citizenship may exit NPS and withdraw the full accumulated corpus in a lump sum.
• If a subscriber is missing and presumed dead, nominees or legal heirs will receive 20% of the corpus as interim relief, with the remaining amount paid after formal determination in line with the Bharatiya Sakshya Adhiniyam, 2023.

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

Premature Exit Provisions

• On premature exit, at least 80% of the corpus must be used to purchase an annuity, with the remaining amount paid as a lump sum.
• If the accumulated pension wealth is less than ₹5 lakh, the entire amount may be withdrawn at once.
• Subscribers seeking premature exit due to physical incapacitation or disability (75% or more) must submit medical certification from a government-authorised doctor or surgeon.

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.