The Pension Fund Regulatory and Development Authority (PFRDA) has announced major changes to the National Pension System (NPS) exit rules, giving investors greater flexibility and access to more money at retirement.
Key Changes
-
Reduced Annuity Requirement:
-
Previously, non-government NPS subscribers had to invest 40% of their corpus in annuity at retirement.
-
Under the new rules, this has been reduced to only 20%, allowing subscribers to withdraw 80% of their corpus either as a lump sum or in installments.
-
-
Full Withdrawal Allowed Up to ₹8 Lakh:
-
Subscribers with a total corpus of ₹8 lakh or less can withdraw the entire amount without purchasing any annuity.
-
If the corpus is between ₹8 lakh and ₹12 lakh, a maximum of ₹6 lakh can be withdrawn as lump sum, with the remainder paid as regular annuity.
-
This change benefits small investors and those who have been in NPS for a long time.
-
-
Eligibility:
-
Applicable to non-government investors who have completed at least 15 years in NPS or have retired/attained 60 years of age.
-
Subscribers can also defer annuity purchase or withdrawals up to 85 years of age by applying to the NPS trust or authorized institutions.
-
-
Early Exit Rules Remain Strict:
-
Subscribers leaving NPS before completing 15 years or before age 60 must still invest 80% of the corpus in annuity.
-
Exception: If the total corpus is ₹5 lakh or less, the entire amount can be withdrawn.
-
-
Government Employees:
-
Must invest 40% in annuity at exit, but can stay invested in NPS up to age 85.
-
Impact on Retirement Planning
-
More lump sum cash in hand at retirement for non-government subscribers.
-
Greater flexibility in financial planning and managing retirement expenses.
-
Encourages long-term savings while offering options for phased withdrawals.
Bottom Line: The new rules make NPS withdrawals more flexible and investor-friendly, especially for small and long-term subscribers, ensuring higher liquidity at retirement without compromising annuity benefits.
