NPS New Rules: Taking a major step, PFRDA (Pension Fund Regulatory and Development Authority) has introduced a number of changes for the National Pension System
(NPS) subscribers from government, non-government under the Common Scheme (CS) and Multiple Scheme Framework (MSF). NPS is a market-linked defined contribution scheme that helps you save for your retirement. The scheme is simple, voluntary, portable and flexible. It is one of the most efficient ways of boosting your retirement income and saving tax. It allows you to plan for a financially secure retirement with systematic savings in a planned way. In this article, we explore 10 key changes to the NPS that the pension authority has introduced today through the PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025.
NPS New Rules: 10 key changes subscribers must know
1. NPS age limit extended to 85 years
In a major move, the government has raised the maximum age limit for staying in the NPS from 75 years to 85 years. This change applies to both government and non-government subscribers.
2. Annuity purchase requirement reduced to 20%
On superannuation and in certain other cases, non-government sector subscribers can now buy an annuity using just 20% of their total corpus, also called Accumulated Pension Wealth (APW). Earlier, subscribers were required to use 40% of their corpus to purchase an annuity if their total savings exceeded Rs 5 lakh at retirement.
3. Higher lump sum withdrawal at retirement
At the time of retirement, NPS subscribers can now withdraw up to 80% of their total corpus as a lump sum. Only 20% of the corpus needs to be used for purchasing an annuity, giving subscribers greater flexibility and higher cash availability at exit.
4. No mandatory 5-year lock-in for non-government subscribers
The PFRDA has removed the compulsory five-year lock-in period for non-government NPS subscribers, giving them greater flexibility to exit or withdraw from the scheme based on their financial needs.
5. Simplified exit norms under new framework
NPS exit rules have been made easier under the Common Scheme and Multiple Scheme Framework, allowing subscribers a smoother and more flexible withdrawal process across different schemes.
6. Mid-range corpus withdrawal rule explained
For NPS subscribers with a corpus between Rs 12 lakh and Rs 28 lakh, withdrawals are allowed up to Rs 26 lakh as a lump sum, while the remaining amount must be used to purchase an annuity, ensuring a balance between immediate access and regular pension income.
7. Government NPS Subscribers: Status Quo maintained
For government NPS subscribers, the existing rules remain unchanged. The mandatory five-year lock-in period continues, and pension-related exit and withdrawal provisions will apply as before.
8. Who benefits from new rules?
The recent changes to the NPS primarily benefit non-government subscribers. These new provisions give them greater flexibility in withdrawals, higher lump-sum access, and extended participation in the scheme.
9. Boost to retirement flexibility
The PFRDA has introduced these changes to make the NPS more attractive and flexible for investors, allowing greater control over withdrawals, extended participation, and improved retirement planning options.
10. Exit due to death
For non-government NPS subscribers under the Common Scheme (CS) and Multiple Scheme Framework (MSF), 100% lump-sum withdrawal remains permitted. Additionally, the nominee or legal heir now has the option to choose a Systematic Lump Withdrawal (SLW), Systematic Unit Withdrawal (SUR), annuity, or other PFRDA-approved options, providing more flexibility in managing the deceased subscriber’s corpus.
