The National Pension System (NPS) has been largely used for tax savings. In 2025, a sweeping set of reforms by the Pension Fund Regulatory and Development Authority (PFRDA) has been announced to make NPS more
attractive, flexible, and investor-friendly.
Here’s a simple breakdown of what has changed.
Higher lump-sum withdrawals at retirement
One of the most significant changes is the higher cash withdrawal limit. Non-government subscribers with an NPS corpus of more than Rs 12 lakh can now withdraw up to 80% of their savings as a lump sum, with only 20% mandatorily allocated to an annuity. Earlier, 40% had to be annuitised, a provision that often reduced post-retirement returns.
New withdrawal slabs for smaller NPS corpus
PFRDA has introduced a new withdrawal framework based on corpus size, offering greater flexibility to investors with lower balances.
Subscribers with a corpus below Rs 8 lakh can withdraw 100% of the amount as a lump sum. Those with a corpus between Rs 8 lakh and Rs 12 lakh can choose between phased withdrawals using Systematic Unit Redemption (SUR), partial lump-sum withdrawal combined with annuity purchase, or higher lump-sum withdrawal depending on subscriber category.
Systematic Unit Redemption (SUR) introduced
A key structural reform is the introduction of Systematic Unit Redemption, which allows subscribers to withdraw their NPS corpus gradually over a minimum period of six years. This enables a steady post-retirement income stream without locking funds into an annuity.
Investment age limit extended to 85 years
Subscribers can now remain invested in NPS until 85 years of age, up from the earlier limit of 75. This benefits investors who want to delay withdrawals or continue compounding their retirement corpus beyond the traditional retirement age of 60.
More flexibility in partial withdrawals
Before turning 60, NPS subscribers can now make up to four partial withdrawals, compared with three earlier, with a minimum gap of four years. Withdrawals of up to 25% of own contributions are allowed for specified purposes such as education, marriage, home purchase and medical emergencies.
After 60, subscribers who continue investing can make partial withdrawals with a minimum gap of three years between transactions.
Multiple schemes under one NPS account
Non-government subscribers can now hold multiple schemes under a single PRAN, allowing them to diversify across fund managers and investment strategies without opening separate accounts.
100% equity option for long-term investors
From October 2025, private, corporate and self-employed subscribers can invest up to 100% in equities under the Multiple Scheme Framework, up from the earlier cap of 75%. This option is designed for younger investors with long time horizons who can tolerate higher volatility.
Switching between MSF schemes, however, is restricted for the first 15 years or until age 60.
NPS can now invest in gold, REITs and IPOs
NPS equity schemes are now permitted to invest in gold and silver ETFs, REITs, equity AIFs and IPOs. The combined exposure to these assets is capped at 5% of the equity allocation, offering diversification without excessive risk.
Scheme A discontinued: What subscribers must do
Subscribers invested in Scheme A, which focused on alternative assets such as infrastructure, must switch to Scheme C or Scheme E by December 25, 2025. The scheme is being phased out due to low participation and liquidity challenges.
Other investor-friendly changes
Several additional reforms have further improved NPS attractiveness. These include removal of the five-year lock-in for non-government subscribers, permission to pledge NPS corpus to obtain loans (up to 25% of own contributions), and enhanced tax benefits for NPS Vatsalya contributions under Section 80CCD(1B).
Clearer exit and family protection rules
Exit rules have also been streamlined. Subscribers who renounce Indian citizenship can withdraw their entire corpus. In the event of death, nominees or legal heirs receive 100% of the corpus if no annuity has been purchased. Interim relief provisions have also been introduced for cases where a subscriber is legally declared missing.
