In a significant reform aimed at enhancing retirement flexibility, the Pension Fund Regulatory and Development Authority (PFRDA) has announced important changes to the National Pension System (NPS). Under the revised norms, non-government (private sector) NPS subscribers can now withdraw up to 80 per cent of their accumulated pension corpus, a notable increase from the previous cap of 60 per cent.
This decision marks a pivotal shift in India’s pension framework, granting private subscribers greater control over their retirement savings.
Previously, both government and non-government NPS subscribers were limited to withdrawing only 60 per cent of their corpus, with the remaining 40 per cent mandatorily invested in an annuity. The recent changes apply solely to non-government subscribers, while government employees will continue to follow the existing 60:40 structure.
Under the new framework, if a non-government subscriber’s accumulated corpus exceeds ₹12 lakh, they can withdraw up to 80 per cent as a lump sum, with only 20 per cent necessitating investment in an annuity.
The PFRDA notification clearly outlines withdrawal options based on the total accumulated pension wealth:
This tiered approach ensures financial flexibility while maintaining long-term income security.
The revised withdrawal norms apply to non-government NPS subscribers, including private sector employees, self-employed individuals, and others enrolled voluntarily. There are no changes for government employees, whose withdrawal limit remains capped at 60 per cent, with 40 per cent compulsory annuitisation.
The PFRDA has also introduced more flexibility in the exit timeline. Subscribers are now permitted to remain invested in NPS until the age of 85, unless they decide to exit earlier. A normal exit is allowed after:
This change allows subscribers to align NPS withdrawals with their personal retirement plans.
The notification also clarifies provisions for unfortunate contingencies. If a subscriber dies before annuity purchase or lump-sum withdrawal, the entire accumulated pension wealth will be disbursed to the nominee or legal heirs. If the subscriber is missing and presumed dead, 20 per cent of the corpus will be released as interim relief to the nominees or legal heirs. The remaining amount will be paid once the subscriber is officially declared missing or presumed dead, as per the Bharatiya Sakshya Adhiniyam, 2023.
In the event of renouncing Indian citizenship, the subscriber is permitted to close the NPS account and withdraw the entire corpus in a lump sum. For premature exit, at least 80 per cent of the corpus must be used to purchase an annuity, with only 20 per cent available as a lump sum. However, if the total pension wealth is below ₹5 lakh, the entire amount can be withdrawn. Subscribers who are physically incapacitated or disabled (75 per cent or more) can opt for exit by providing a medical certificate from a government doctor or surgeon.
Q1. What are the new withdrawal limits for non-government NPS subscribers?
Answer: Non-government NPS subscribers can now withdraw up to 80% of their accumulated pension corpus, an increase from the previous limit of 60%.
Q2. Are government employees affected by the new NPS rules?
Answer: No, government employees will continue to follow the existing withdrawal structure of 60% withdrawal and 40% investment in an annuity.
Q3. What happens to a subscriber's corpus in case of death?
Answer: If a subscriber dies before annuity purchase or lump-sum withdrawal, the entire accumulated pension wealth is paid to their nominee or legal heirs.
Q4. Can subscribers remain invested in NPS until a specific age?
Answer: Yes, subscribers can remain invested in NPS until the age of 85 unless they choose to exit earlier.
Q5. What are the rules for premature exit from NPS?
Answer: For premature exit, at least 80% of the corpus must be used to purchase an annuity, with the option to withdraw 20% as a lump sum.
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