NPS Rule Change Brings Big Relief: Subscribers Can Now Withdraw Up to 80% of Their Retirement Corpus

The National Pension System (NPS) has become more attractive for individual investors with a major rule change announced by the Pension Fund Regulatory and Development Authority (PFRDA). On December 16, 2025, the regulator introduced significant amendments aimed specifically at non-government NPS subscribers, giving them far greater flexibility and control over their retirement savings.

Experts believe these changes could boost the popularity of NPS, as subscribers will now have more freedom to access their own money at the time of retirement.

Earlier Rule vs New Rule: What Has Changed?

Until now, NPS subscribers were allowed to withdraw only 60% of their accumulated corpus as a lump sum upon turning 60 years old or at retirement. The remaining 40% was mandatory to be used for purchasing an annuity, which provides a regular pension income.

Under the revised rules, this structure has been significantly relaxed.

Key Change: 80% Lump Sum Withdrawal Allowed

According to the new PFRDA guidelines applicable under the Common Scheme (CS) and Multiple Scheme Framework (MSF):

• If a subscriber’s total NPS corpus exceeds ₹12 lakh, they can now withdraw up to 80% of the amount as a lump sum.

• The remaining 20% must be used to buy an annuity, ensuring some regular pension income post-retirement.

This is a major shift from the earlier requirement and gives retirees much more liquidity at a crucial stage of life.

More Control Over Retirement Money

Financial experts say this change empowers subscribers by allowing them to use a larger portion of their retirement savings according to their personal needs. Whether it is medical expenses, clearing loans, supporting family, or investing elsewhere, retirees now have greater flexibility in financial planning.

The new rules also provide relief to those with smaller NPS savings.

Full Withdrawal for Smaller Corpus

• If the total NPS corpus is less than ₹8 lakh, the subscriber can withdraw 100% of the amount at exit.

• Earlier, this full-withdrawal limit was capped at ₹5 lakh, which has now been increased substantially.

Partial Rules for Mid-Sized Corpus

• If the total corpus falls between ₹8 lakh and ₹12 lakh, subscribers can withdraw up to ₹6 lakh as a lump sum.

• The remaining amount must be used to purchase an annuity with a minimum tenure of six years.

Investment Age Limit Extended to 85 Years

Another important reform is the extension of the maximum age limit for continuing NPS investments. Earlier, subscribers had limited flexibility in how long they could remain invested. Now:

• NPS subscribers can continue investing up to the age of 85 years.

• This allows retirees who are still earning or managing finances actively to keep their money invested for longer, potentially improving long-term returns.

Simplified Exit Conditions for Non-Government Subscribers

The PFRDA has also eased exit-related restrictions:

• Normal exit is now allowed after completing 15 years of subscription, or upon reaching 60 years of age, or at retirement—whichever occurs first.

• The mandatory five-year lock-in period has been removed for non-government subscribers, offering additional flexibility.

However, for government employees, the five-year lock-in rule remains mandatory for any type of exit.

Higher Full Withdrawal Limit for Government Employees

Government employees have also benefited from a key revision:

• If, at retirement or at the age of 60, the total NPS corpus is below ₹8 lakh, they are allowed to withdraw the entire amount.

• Earlier, this threshold was set at ₹5 lakh, which limited liquidity for many retirees.

Why This NPS Rule Change Matters

Experts believe these reforms make NPS more aligned with real-life retirement needs. Mandatory annuity purchases were often criticized for offering relatively low returns and limited flexibility. By reducing the compulsory annuity portion and increasing lump-sum access, the PFRDA has addressed a long-standing concern among subscribers.

Key benefits include:

• Greater financial freedom at retirement

• Improved liquidity

• Flexibility in retirement planning

• Enhanced attractiveness of NPS compared to other long-term savings options

Summary of Major NPS Rule Changes

• Subscribers can stay invested in NPS up to 85 years of age

• Exit allowed after 15 years of subscription, or at 60 years, or on retirement

• Up to 80% lump sum withdrawal if corpus exceeds ₹12 lakh

• 100% withdrawal allowed if corpus is below ₹8 lakh

• ₹6 lakh lump sum withdrawal allowed if corpus is between ₹8–12 lakh

• Reduced annuity requirement offers better flexibility

Overall, these reforms mark one of the most subscriber-friendly updates in the history of NPS. With increased control over retirement savings and relaxed exit rules, the scheme is now better positioned to meet the evolving financial needs of India’s growing retirement population.