The Pension Fund Regulatory and Development Authority (PFRDA) is planning a new feature under the National Pension System (NPS) to provide guaranteed monthly payouts after retirement.
This move aims to make NPS more attractive and reliable for subscribers.
Currently, NPS is a market-linked investment scheme, where returns depend on market performance.
Upon retirement, subscribers can withdraw 40% of their corpus to buy an annuity, while the remaining 60% can be taken as a lump sum.
What is the Assured Payout Option?
The proposed assured payout would give retirees a regular monthly income, similar to schemes like Atal Pension Yojana (APY), Unified Pension Scheme (UPS), and Employee Provident Fund (EPF).
This provides financial security and reduces the risk of outliving retirement savings.
To work on this, PFRDA has formed a 15-member high-level committee.
The panel is chaired by Dr M S Sahoo, former chairperson of the Insolvency and Bankruptcy Board of India (IBBI), and includes experts in law, finance, actuarial science, insurance, capital markets, and academia.
Rohitaashv Sinha, Partner at King Stubb & Kasiva, told Moneycontrol that forming this committee is a forward-looking step.
If implemented with clear legal rules, transparent disclosures, and prudent solvency norms, the assured payout can protect subscribers from longevity risk while maintaining market discipline.
Objectives of the Assured Payout Committee
The committee has been tasked with designing a framework for the assured payout option, with key areas including:
Framework Development: Drafting rules for guaranteed payouts, based on options discussed in PFRDA’s September 30, 2025 consultation paper.
Smooth Transition: Ensuring subscribers move easily from the accumulation phase (building savings) to the decumulation phase (receiving payouts).
Market-Based Assurance: Exploring legal and market mechanisms to provide enforceable payout guarantees.
Operational Design: Setting rules on lock-in periods, withdrawal limits, pricing, and service fees.
Risk and Legal Oversight: Defining capital and solvency requirements and reviewing tax treatment of payouts without exiting NPS.
Consumer Protection: Creating standard disclosures to avoid mis-selling and clearly explaining assured and market-linked returns.
This proposed assured payout option under NPS could provide retirees with steady, predictable income while keeping their investments linked to market performance.
If implemented effectively, it may significantly enhance the appeal of NPS as a retirement solution in India.
