There is welcome news for those investing in the National Pension System (NPS). In December 2025, the Pension Fund Regulatory and Development Authority (PFRDA) introduced significant changes to the withdrawal rules. Under certain conditions, subscribers can now withdraw 100% of their accumulated corpus. The earlier regulations were more restrictive, but the revised rules offer greater ease, particularly for those with smaller balances. The changes are especially beneficial for non-government subscribers.
At retirement, on reaching the age of 60 or later, if the total corpus in an NPS account is Rs 8 lakh or less, the subscriber may withdraw the entire amount as a lump sum. There is no obligation to purchase an annuity. Previously, this limit was Rs 5 lakh, but it has now been increased to Rs 8 lakh. If the corpus exceeds Rs 8 lakh but is up to Rs 12 lakh, a larger lump sum may be withdrawn, subject to certain conditions. Where the corpus exceeds Rs 12 lakh, up to 80% can be taken as a lump sum, while at least 20% must be invested in an annuity. These revised norms provide greater flexibility at retirement.
The rules differ slightly in the case of premature exit, meaning withdrawal before maturity. If the mandatory five-year lock-in period has been completed and the corpus is Rs 5 lakh or less, the entire amount may be withdrawn as a lump sum. If the corpus exceeds Rs 5 lakh, up to 20% may be taken as a lump sum, and the remaining 80% must be used to purchase an annuity. While these provisions largely existed earlier, the increase in limits for smaller corpus amounts offers additional relief.
In the unfortunate event of a subscriber’s death, the nominee or legal heir is entitled to receive 100% of the corpus as a lump sum, irrespective of the amount. There is no requirement to purchase an annuity. This provision has always applied and continues unchanged, ensuring immediate financial support to the family.
Individuals who enrol in NPS before the age of 60 may opt for a normal exit at 60. Those joining after 60 are permitted to exit after three years. The maximum exit age has now been extended to 85, allowing subscribers to continue investing and withdrawing until that age, a positive step for those with longer life expectancy.
Overall, the revised rules simplify NPS withdrawals. Subscribers with smaller funds can now access their entire savings, while those with larger corpuses enjoy increased flexibility in lump sum withdrawals. Lump sum withdrawals qualify for tax benefits, provided the rules are followed, whereas the monthly pension received through an annuity remains taxable.
Through these reforms, the PFRDA aims to ensure financial security after retirement while granting subscribers greater autonomy to plan according to their needs. The new rules have been effective since December 2025. NPS investors are advised to review their corpus and plan their retirement strategy accordingly.
With these changes, NPS has become more flexible and accessible as a retirement savings instrument. Those with smaller balances can now withdraw their funds without undue constraints, a reassuring development for Indians planning their financial future. Understanding the revised rules will help ensure a secure and comfortable retirement.
