The Pension Fund Regulatory and Development Authority (PFRDA) has made important changes to the National Pension System (NPS).
These new rules give more freedom to NPS subscribers at the time of retirement.
Under the revised rules, non-government employees can now withdraw up to 80% of their NPS corpus at exit.
In some cases, even 100% withdrawal is allowed.
These changes were officially notified on December 16, 2025.
NPS is available to government employees, private sector employees, and even NRIs.
The aim of these changes is to make retirement planning more flexible and beneficial.
What Is NPS and Who Can Invest?
NPS was launched in 2004 for government employees and was later opened to everyone in 2009.
There are two types of NPS accounts:
Tier-I Account: Mandatory retirement account with withdrawal limits
Tier-II Account: Voluntary account with flexible withdrawals
Any salaried individual can invest in NPS.
Under the new rules, subscribers can now stay invested in NPS up to the age of 85, unless they choose to exit earlier.
New Exit Rules for Private Sector Employees
If a private sector employee has completed 15 years in NPS or has reached the age of 60 or retirement age, they can exit NPS under these conditions:
At least 80% of the total fund can be withdrawn as a lump sum
The remaining amount will be paid as a monthly pension
However, the exact withdrawal option depends on the size of the total pension fund.
Withdrawal Rules Based on NPS Corpus Amount
If the total fund is up to ₹8 lakh
The subscriber can withdraw 100% of the amount in one go.
Pension becomes optional in this case.
If the fund is more than ₹8 lakh but less than ₹12 lakh
Maximum lump sum withdrawal: ₹6 lakh
Remaining amount can be:
Used to buy a pension plan, or
Withdrawn gradually through Systematic Withdrawal for at least 6 years
If the fund is more than ₹12 lakh
At least 20% must be used to buy an annuity (pension plan)
The remaining 80% can be withdrawn at once
Earlier, subscribers had to invest 40% of the corpus in an annuity.
This requirement has now been reduced to 20%, which is a major relief.
Why This Change Matters
These new rules give NPS subscribers more control over their retirement money.
Lower mandatory pension investment means higher cash availability at retirement.
For private sector employees especially, this update makes NPS a more attractive and flexible retirement option.
If you are investing in NPS or planning to, these changes can significantly impact your retirement planning.
