Government Subscribers Can Withdraw 80% of Corpus From National Pension Scheme — New Rules Explained

Major changes have been made to the National Pension Scheme (NPS) withdrawal rules, offering greater flexibility to subscribers. Non-government employees can now withdraw a larger portion of their accumulated retirement savings as a lump sum.

The Pension Fund Regulatory and Development Authority (PFRDA) has amended regulations, allowing eligible NPS members to withdraw up to 80% of their retirement funds as a lump sum upon exiting the scheme, according to the Economic Times. These revised rules apply to subscribers under the All Citizen Model and Corporate NPS, providing significant relief to those in the non-government sector who previously had to allocate a larger share of their savings to annuity purchases. The new regulations were officially announced on December 16, under the amended PFRDA (Exits and Withdrawals under the NPS) Regulations, 2025.

**Key Changes to Annuity Requirements**

The updated rules reduce the mandatory annuity purchase requirement for non-government subscribers to a minimum of 20% of their total pension wealth in specific scenarios. Annuities provide a steady income stream post-retirement. The remaining portion of the retirement fund can be taken as a lump sum or through a systematic withdrawal plan. Previously, non-government NPS subscribers were required to use at least 40% of their corpus to purchase an annuity upon exiting the scheme. This revised annuity requirement is applicable for normal exits at age 60, exits after meeting the minimum subscription period, and exits between the ages of 60 and 85. For subscribers whose total pension wealth exceeds certain thresholds, a minimum of 20% must be allocated to annuity purchases, while the remaining amount, up to 80%, can be withdrawn.

**Corpus Thresholds Explained**

The amended regulations outline specific withdrawal rules based on the total value of the retirement corpus:

• Up to Rs 8 lakh:** Subscribers have the option to withdraw the entire amount as a lump sum. Purchasing an annuity is optional, up to a maximum of 20%.
• Between Rs 8 lakh and Rs 12 lakh:** Lump sum withdrawals are capped at Rs 6 lakh. The remaining balance can be used for annuity purchases or systematic withdrawals over a period of up to six years.
• Above Rs 12 lakh:** Subscribers must use at least 20% of their corpus to purchase an annuity. The remaining amount, up to 80%, can be withdrawn as a lump sum.

By decreasing the mandatory annuity component from 40% to 20%, the PFRDA is giving non-government NPS subscribers more control over their retirement savings. This change increases liquidity upon exiting the scheme and provides retirees with greater flexibility in managing their post-retirement income, while still ensuring a guaranteed minimum pension through annuity purchases.