PFRDA Introduces Major Reforms to National Pension System (NPS)

In a major reform of the national pension system (NPS) , the pension regulator has allowed lump sum payout to non-government sector subscribers to 80% and reduced annuitisation to 20% of their corpus at the time of exit from the scheme. Under the PFRDA (Exits and Withdrawals under NPS) Amendment Regulations, 2025, the regulations no longer prescribe a standalone “5-year lock-in” for private subscribers. Instead, exits are now governed by eligibility conditions and annuitisation requirements, not a fixed lock-in clock. In premature exit before eligibility, at least 80% of the corpus must be annuitised; only 20% can be withdrawn as lump sum. If the corpus is ₹5 lakh or less, in which case 100% withdrawal is permitted. Another key change is the formal recognition of deferment, allowing subscribers to postpone lump-sum withdrawal or annuity purchase up to the age of 85. This gives retirees greater control over the timing of exits, especially in periods of market volatility. For government and non-government subscribers, full lump-sum withdrawal is now permitted if the accumulated pension wealth is up to Rs 8 lakh at superannuation. Where the corpus exceeds Rs 8 lakh but is below Rs 12 lakh, subscribers may withdraw up to Rs 6 lakh as a lump sum, with the balance deployed through structured withdrawals or annuities. Above Rs 12 lakh, at least 40% (government) or 20% (non-government) must be annuitized, according to new norms. The amendments also clarify death and missing subscriber scenarios. Nominees or legal heirs are entitled to interim relief of 20% of the corpus when a subscriber is declared missing, with final settlement after legal presumption of death. Other notable changes include higher withdrawal limits under NPS -Lite, clearer treatment of multiple pension accounts, and alignment of exit provisions across government, corporate and all-citizen models.