NPS changes 2025: 80% withdrawal, more lump sum, less annuity, exit relief

Being able to invest until 85 helps build a larger longer-term corpus

The Pension Fund Regulatory and Development Authority (PFRDA) notified more amendments to the PFRDA (Exits and Withdrawals) Regulations, 2015  applicable largely to the voluntary non-government sector (All Citizen Model and Corporate Model). The changes sharply increase lump-sum withdrawal limits, loosen vesting requirements, expand partial-withdrawal options and significantly extend the entry and exit age. 

  If your total NPS corpus is ₹8 lakh or less, you can now withdraw it entirely. Between ₹8–12 lakh, you can withdraw up to ₹6 lakh. And above ₹12 lakh, the cap is set at 80% (or 60% if you’re a government employee).  

The compulsory annuity requirement has been reduced from 40% to 20%. The remaining amount stays with the retiree, who can decide how best to use it.

 

Individuals joining NPS after age 60 will no longer face a vesting period and will also be eligible for up to 80% lump-sum withdrawal at exit.

 

For non-government NPS subscribers whose total pension savings exceed the threshold of ₹12 lakh, the new rules require at least 20% of the pension wealth to be used to purchase an annuity, which guarantees a regular monthly pension income.

 

The remaining (up to 80%) can be withdrawn as a lump sum, or through structured withdrawals, like a systematic unit withdrawal plan, giving retirees flexibility in how they access their funds. 

For the first time, NPS has introduced Systematic Unit Redemption, allowing a government subscriber to redeem a fixed number of investment units periodically. They can use this withdrawal option under two conditions:

 

a) Upon retirement and discharge from service and when their accumulated retirement corpus at the time of exit is between Rs 8 lakh and Rs 12 lakh. In this case, the government subscriber can withdraw up to Rs 6 lakh as lump sum and the rest in the form of SUR. In this option, purchasing annuity is not applicable.

 

b) Upon death of the subscriber, when his corpus is more than Rs 8 lakh and up to Rs 12 lakh. In this case, they can withdraw up to Rs 6 lakh as a lump sum and the rest as SUR  Retirees can now choose to take money out gradually through market-based withdrawals instead of deciding between a lump sum and annuities.  

"The PFRDA’s 2025 amendments to the NPS Exit and Withdrawal Regulations signal a clear shift towards greater subscriber autonomy while preserving the core objective of retirement security. By removing rigid lock-in and vesting requirements for non-government subscribers and increasing permissible lump sum withdrawals to 80%, the regulator has aligned the NPS framework with the realities of a mobile and voluntary workforce. 

The introduction of phased withdrawal mechanisms such as Systematic Lumpsum and Systematic Unit Withdrawals modernises exit options and allows retirees to manage longevity and reinvestment risks more effectively. Equally significant is the limited permission to create liens on pension accounts in favour of regulated lenders, which enhances liquidity access but will require careful regulatory safeguards to prevent dilution of retirement protections," said Vipin Upadhyay, Partner, King Stubb & Kasiva, Advocates and Attorneys.

   

"The new schemes have a minimum vesting period of 15 years. This means if you start investing at 30, you can exit at 45, instead of waiting until 60. This change makes the NPS more appealing for those who want long-term savings but don’t want to be locked in all the way till retirement," said Harshita Singh of Value Research. 

 

Pension funds now have the flexibility to tailor schemes by the age and occupation of subscribers. For instance, they can customise the new schemes for self-employed professionals, gig-economy workers or corporate employees.  "PFRDA has dismantled the 5-year lock-in for private-sector NPS, cut vesting to 15 years and lets subscribers take 80 % cash on exit double the old limit.  Anyone with ≤ ₹ 8 lakh can pocket the entire pot, while partial withdrawals are now four-times-a-lifetime and medical needs are no longer tied to a fixed disease list.  Entry age is stretched to 85 and accounts continue automatically after 60, signalling a clear push to make NPS more liquid, inclusive and retiree-friendly," said Rahul Sundaram, Partner, IndiaLaw LLP. 

What has changed:

 

1. Higher freedom at exit: Lump-sum limit raised from 60% to 80%

 

For both All Citizen Model and Corporate subscribers, the permissible lump sum on normal exit has been raised from 60% to 80%, lowering the mandatory annuity portion to 20%.

 

2. Large corpus slabs expanded — 100% withdrawal possible up to ₹8 lakh (vs ₹5 lakh earlier)

 

For non-government subscribers:

 

Corpus ≤ ₹8 lakh: Now eligible for 100% lump sum, or Systematic Lumpsum Withdrawal (SLW), or Systematic Unit Withdrawal (SUR).

 

Earlier threshold was ₹5 lakh.

 

3. No more 5-year lock-in for All Citizen Model

 

The previous mandatory 5-year minimum subscription before becoming eligible for premature exit has been removed.

 

Anyone joining the “All Citizen Model” earlier had to stay invested for at least 5 years before they could exit prematurely.

 

Implication:

 

Total flexibility — you can exit anytime.

 

4. Vesting period eased — normal exit allowed after 15 years (not compulsorily at 60)

 

The All Citizen Model can now exit normally after:

 

15 years, or

60 years, whichever is earlier.

 

5. Individuals joining after 60 get full flexibility

 

Earlier, joining after 60 required a 3-year vesting period before normal exit.

 

Now: No vesting requirement.

They can withdraw:

 

Up to 80% lump sum, and For corpus up to ₹12 lakh → 100% withdrawal option permitted.

 

6. exit age increased to 85 years

 

This is one of the most consequential changes:

 

Previous maximum exit age: 70

 

New limit: 85

 

7. More partial withdrawals — up to 4 times before 60

 

Subscribers can now withdraw:

 

4 times before age 60 With a 4-year interval between withdrawals

 

Earlier: Only 3 withdrawals allowed; no specified interval.

Post-60, intervals reduce to 3 years between withdrawals.

 

8. Broadening of purposes for partial withdrawal

 

The list has been liberalised:

 

Medical treatment allowed without restriction to a specific list of illnesses

One-time withdrawal for purchase/construction of a house clarified

 

FAQS:

What is the biggest change in the new NPS rules?

 

The biggest change is greater flexibility. Earlier, NPS had strict lock-ins and mandatory annuity requirements. Now, rules allow earlier normal exit, higher lump-sum withdrawals, bigger full-withdrawal slabs, and more payout options like SLW/SUR.

 

LOCK-IN & VESTING PERIOD

 Is the 5-year minimum lock-in for All Citizen Model still required?

 

No. The 5-year lock-in is completely removed. You can now make a premature exit without first completing 5 years.

 

 What is the new vesting period for normal exit in All Citizen Model?

 

Earlier: Exit allowed only at age 60.

Now: Normal exit allowed after completing 15 years OR reaching 60—whichever is earlier.

 

Examples:

 

Join at 30 → normal exit allowed at 45

Join at 50 → normal exit allowed at 60

 

Is the vesting period for Corporate Sector changed?

 

The vesting period remains the same:

Exit allowed at retirement/superannuation age.

 

LUMP-SUM VS ANNUITY SPLIT

How much lump-sum can I withdraw at normal exit now?

 

Earlier: Up to 60% lump-sum, min 40% annuity.

Now: Up to 80% lump-sum, min 20% annuity.

 

 What if my corpus at normal exit is small?

Earlier rule:

 

100% withdrawal allowed only if corpus ≤ ₹5 lakh.

 

New rule:

 

The system is now more flexible:

 

a) If your corpus ≤ ₹8 lakh

 

You may choose ANY of these options:

 

• 100% lump-sum, OR
• SLW (Systematic Lumpsum Withdrawal), OR
• SUR (Systematic Unit Redemption), OR
• Up to 80% lump-sum + at least 20% annuity

 

This is a major relaxation.

 

b) If corpus is > ₹8 lakh and ≤ ₹12 lakh

 

Options:

 

Withdraw ₹6 lakh as lump-sum and take the remaining via SUR (min 6 years), OR

Buy annuity for the remaining amount, OR

Withdraw up to 80% and buy at least 20% annuity

 

c) If corpus > ₹12 lakh

 

Up to 80% lump-sum, at least 20% annuity is compulsory.

 

PREMATURE EXIT

7) What happens if I exit prematurely?

 

The earlier requirement remains the same:

 

• Up to 20% lump-sum,
• At least 80% annuity.
• This has not changed.

 

8) Can I take full withdrawal on premature exit?

Earlier:

 

Only if corpus ≤ ₹2.5 lakh.

 

New rule:

 

If corpus ≤ ₹5 lakh →

100% lump-sum, OR

 

SLW, OR

SUR, OR

Up to 20% lump-sum + 80% annuity

If corpus > ₹5 lakh →

Same old rule applies: 20% lump-sum + 80% annuity

This doubles the full-withdrawal limit for premature exit.

 

EXIT DUE TO DEATH

9) What do nominees receive if the subscriber dies?

 

Earlier:

 

100% lump-sum

OR annuity (optional)

 

Now:

Nominee can choose:

 

100% lump-sum, OR

Annuity, OR

SLW, OR

SUR

So nominees now have four payout options.

 

SLW & SUR OPTIONS

10) What are SLW and SUR?

 

They are new structured ways to receive NPS money:

 

SLW – Systematic Lumpsum Withdrawal

You withdraw a fixed amount periodically.

SUR – Systematic Unit Redemption

You redeem units periodically (similar to SWP in mutual funds).

 

These are available for:

 

corpus ≤ ₹8 lakh (normal exit)

corpus ≤ ₹5 lakh (premature exit)

partial corpus between ₹8–12 lakh (normal exit)