Exit regulation amendments: PFRDA allows loans against pension savings

Partial withdrawal norms for NPS accounts rationalised; annuity mandate at retirement relaxed for smaller balances

The Pension Fund Regulatory and Development Authority (PFRDA) has made multiple changes under its exit regulations of the National Pension System (NPS). It has allowed subscribers to seek financial assistance against their pension corpus, as part of the PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025.

 

Under the revised stipulation, an NPS subscriber may avail financial assistance from a regulated financial institution. The lender is permitted to mark a lien or charge on the individual pension account.

 

However, such lien or charge will be restricted to up to 25 per cent of the subscriber’s own contribution, in line with the existing limits applicable to partial withdrawals. 

Currently, the regulations provide that any assignment, pledge or charge on NPS benefits is void, except in cases explicitly permitted by the NPS Trust.

 

The proposed amendment relaxes this restriction, enabling limited use of the pension corpus as collateral while ensuring safeguards on withdrawal limits.

 

The regulator has clarified that separate detailed guidelines will be issued to operationalise this facility, including procedures and conditions for lenders, intermediaries and record-keeping agencies.

 

In gazetted notification, PFRDA has also rationalised the permitted purposes for partial withdrawal from the NPS.

 

The existing provision allowing partial withdrawal for the purchase or construction of a house — provided the subscriber does not already own a house other than ancestral property — has been retained. It has now been explicitly clarified as a one-time withdrawal.

 

Further, the scope of withdrawals for medical needs has been significantly widened.

 

The earlier restriction to a specified list of critical illnesses has been replaced by a broader allowance for medical treatment or hospitalisation of the subscriber, spouse, children or parents, without prescribing any specific disease list.

 

At the same time, purposes such as “skill development, re-skilling or self-development activities, as well as establishing a start-up or own venture, have been removed from the eligible list,” said the notification.

 

However, the new purpose has been added, permitting partial withdrawal for the settlement of a financial obligation.

 

“The new purpose added settlement of a financial obligation of the subscriber taken from a regulated financial institution against lien/charge on NPS account,” said the notification.

 

The amendments also applicable to the multiple scheme framework (MSF) have been formally incorporated into the regulations governing the non-government sector, aligning them with the All Citizen Model.

 

The earlier five-year minimum subscription (lock-in) period prescribed under the All Citizen Model has been removed for both common schemes and MSF.

 

For normal exit, the vesting period has been revised to 15 years or any higher period specified under a scheme, or till the subscriber attains 60 years of age, whichever is earlier. It replaces the earlier requirement of vesting till 60.

 

In terms of withdrawal structure, non-government subscribers are now permitted to withdraw up to 80 per cent of the corpus as lump sum, with a minimum 20 per cent mandatorily allocated to annuity. This is against the earlier limit of 60 per cent lump sum and at least 40 per cent annuitisation.

 

For subscribers with a total corpus of up to ₹12 lakh, differentiated options have been introduced.

 

Where the corpus is up to ₹8 lakh, subscribers may opt for 100 per cent lump sum, systematic lump sum withdrawal (SLW), systematic withdrawal request (SUR), or other approved options. Where the corpus exceeds ₹8 lakh but is up to ₹12 lakh, withdrawal of up to ₹6 lakh as lump sum is permitted.

 

The balance is required to be invested in SUR for a minimum period of six years, in annuity, or other approved instruments.

 

For any corpus amount, including those up to ₹12 lakh, the general rule of up to 80 per cent lump sum and at least 20 per cent annuity continues to apply. 

Rule changes

• The lender is permitted to mark a lien on the individual pension account, to be restricted to up to 25% of the subscriber’s own contribution
• It has been clarified that the partial withdrawal for the purchase or construction of residential house will be on one-time basis
• Scope of withdrawals for medical needs has been significantly widened
• Purposes such as skill development or re-skilling have been removed from the eligible list