5 important NPS exit and withdrawal changes for non-Govt subscribers proposed by PFRDA

Exit and withdrawals from the National Pension System (NPS) are soon going to become more attractive and flexible for non-Government subscribers.

The Pension Fund Regulatory and Development Authority (PFRDA) recently published an "Exposure Draft" on amendments to Pension Fund Regulatory and Development Authority (Exits and Withdrawals under the National Pension System) Regulations, 2015.

The Exposure Draft has proposed the following five important changes for non-Government subscribers:

Please note that the proposals have not yet been implemented. Currently, they are open for public comments till October 17, 2025, after which the regulator may officially notify these changes.

1. Exit allowed after 15 years till 85 years of age

Subscribers will be allowed to exit after 15 years or on retirement. However, they will also have an option to continue their NPS account till 85 years.

"A subscriber shall have the choice to exit from a scheme upon having subscribed thereto for such period as provided under such scheme which shall not be less than fifteen years or upon having attained the age of sixty years or upon superannuation or retirement, as the case may be until attaining the age of eighty-five years," the draft said.

2. Up to 80% lump sum withdrawal on exit

The regulator has proposed to increase the lump withdrawal limit to 80% from 60% of the total corpus. Subscribers will need to buy annuity plans with the remaining 20% of their accumulated amount.

"... at least twenty percent out of the accumulated pension wealth of such subscriber shall be mandatorily utilized for purchase of an annuity providing for a monthly or any other periodical pension and the balance of the accumulated pension wealth, shall be paid to the subscriber in lumpsum or he shall have a choice to collect such remaining pension wealth in accordance with any other payouts, approved by the Authority from time to time, in the interest of the subscriber," the regulator said.

3. 50% lump sum withdrawal if total corpus is below ₹12 lakh

In case the subscriber's total accumulated wealth under NPS is less than ₹12 lakh, then the subscriber will be allowed to withdraw 50% of the corpus as a lump sum. The remaining corpus can be withdrawn systematically over five years. They will also be allowed to purchase an annuity with the balance 50% or a mix of both.

"Provided that where the accumulated pension wealth of the subscriber is equal to or less than a sum of twelve lakh rupees or any other limit determined by the authority, the subscriber shall have an option to withdraw an amount not exceeding six lakh rupees or fifty percent of accumulated pension wealth whichever is higher and with respect to the balance amount, the subscriber shall avail periodic payouts in the form of systematic unit redemption or such other options, as may be permitted by the Authority, for at least a minimum period of five years, or purchase an annuity for such amount or a mix of both," PFRDA said.

4. Only 20% lump sum withdrawal in case of voluntary exit

The regulator said that if a subscriber has neither attained the age of 60 years nor retired as per the terms and conditions of employment prior to the expiry of vesting period of the scheme, and voluntarily opts to exit from NPS, then at least 80% of the accumulated pension wealth shall be mandatorily utilised for purchase of annuity.

The balance of the accumulated pension wealth shall be paid to the subscriber in lump sum or in accordance with other options specified by the Authority from time to time.

5. Full withdrawal on voluntary exit if the corpus is below ₹4 lakh

In case of voluntary exit, if the accumulated pension wealth in the individual pension account of the subscriber is equal to or less than ₹4 lakh, or a limit determined by the Authority, such subscriber shall have the option to withdraw the entire accumulated pension wealth without being required to purchase any annuity.