The pension regulator PFRDA has notified the National Pension System Exits and Withdrawals Amendment Regulations, 2025, effective from 2025. The changes apply to non government NPS subscribers, including those under the All Citizen Model and Corporate NPS.
The biggest shift is this.
At exit, subscribers can now withdraw up to 80 percent of their accumulated pension wealth as a lump sum. Only 20 percent is mandatorily earmarked for annuity purchase in specified cases. Until now, that compulsory annuity portion was typically 40 percent.
But the rule is not flat. It depends on how large your retirement corpus is, and how you exit NPS.
Normal exit or superannuation
This covers subscribers completing at least 15 years in NPS, attaining 60 years of age, or exiting between 60 and 85.
• If accumulated pension wealth is up to ₹8 lakh, you can withdraw 100 percent as lump sum. No annuity is required, though you may voluntarily use 20 percent for annuity if you wish.
• If the corpus is above ₹8 lakh and up to ₹12 lakh, you may withdraw up to ₹6 lakh or up to 80 percent, whichever is lower. The balance can be used for annuity or withdrawn through systematic unit redemption for at least six years.
• If the corpus exceeds ₹12 lakh, at least 20 percent must be used to buy an annuity, while up to 80 percent can be withdrawn as lump sum.
Exit due to physical incapacitation
The same thresholds apply.
Up to ₹8 lakh allows full withdrawal.
Between ₹8 lakh and ₹12 lakh allows partial lump sum with the balance annuitised or withdrawn gradually.
Above ₹12 lakh requires a minimum 20 percent annuity purchase.
Voluntary exit before superannuation
This remains stricter.
If accumulated pension wealth is up to ₹5 lakh, full withdrawal is allowed.
Above ₹5 lakh, only 20 percent can be withdrawn as lump sum, and at least 80 percent must go into annuity.
Exit on death
In case of death, up to 100 percent of the NPS corpus can be withdrawn by the nominee or legal heir. There is no mandatory annuity requirement.
Subscribers who joined NPS after 60 years of age
If the accumulated corpus is up to ₹12 lakh, the entire amount can be withdrawn as lump sum.
If it is above ₹12 lakh, at least 20 percent must be annuitised, with the remaining 80 percent available for withdrawal.
In case of death of such subscribers, 100 percent withdrawal is permitted.
The intent behind the 2025 amendment is clear. By cutting the mandatory annuity requirement from 40 percent to 20 percent, the regulator has shifted NPS closer to a choice driven retirement product, rather than a forced pension structure. Subscribers now have far greater control over liquidity, withdrawal timing, and post retirement planning.
For non government NPS investors, this is the most consequential exit reform in years.