Private Employees May Withdraw Up to 80% of NPS Corpus: PFRDA Proposes Major Rule Changes

The Pension Fund Regulatory and Development Authority (PFRDA) has proposed significant changes to the National Pension System (NPS) rules for private-sector employees. The new rules aim to give subscribers greater control over their funds, more flexibility in withdrawals, and increased investment options. The draft proposals are open for public feedback until October 17, 2025.

Key Proposed Changes

1. 80% Lump-Sum Withdrawal
Currently, private-sector NPS subscribers can withdraw 60% of their corpus as a lump sum at retirement (60 years), with the remaining 40% mandatorily invested in an annuity. Under the new proposal, 80% of the corpus can be withdrawn immediately, and only 20% would need to be invested in an annuity, giving subscribers easier access to their savings.

2. Exit After 15 Years
Previously, NPS exit rules required long-term waiting. The proposal allows private employees to exit the NPS after 15 years, offering greater flexibility for those who want earlier access to their funds.

3. More Frequent Partial Withdrawals
Currently, subscribers can make three partial withdrawals during the vesting period. PFRDA proposes to increase this to six withdrawals, covering needs such as medical, education, or other emergencies.

4. Higher Age Limit
The age to join NPS will increase from 70 to 75 years, and the exit age from 75 to 85 years, enabling longer investment periods and higher returns.

5. Increased Equity Exposure
Private-sector subscribers may now invest up to 100% of their NPS corpus in equities, allowing potentially higher returns based on individual risk preferences.

Additional Highlights

• Mandatory annuity reduced: From 40% to 20% of corpus.

• Tax benefits: In a ₹1 crore corpus, ₹60 lakh will be tax-free, ₹20 lakh taxed, and ₹20 lakh invested in annuity.

• Partial withdrawal reset: Previous withdrawals will no longer affect future withdrawal calculations.

These proposals are part of PFRDA’s ongoing efforts to enhance subscriber benefits and flexibility. Subscribers and stakeholders can provide suggestions on these changes until October 17, 2025.