What is the New NPS RIS Scheme? Learn How Its SPR and SUR Formulas Work

NPS Retirement Income Scheme: Receive a Regular Pension Until Age 85 with the New NPS RIS Scheme. Discover the Rules Governing its SPR and SUR Withdrawal Formulas—Designed to Eliminate All Your Financial Worries in Old Age.

NPS Retirement Income Scheme: The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new option under the National Pension System (NPS) called the Retirement Income Scheme (RIS). Previously, upon retirement, it was mandatory to utilize 40% of one's accumulated corpus to purchase an annuity (monthly pension); however, under the new regulations, purchasing an annuity with just 20% of the corpus is now sufficient for many subscribers. You can deposit the remaining 80% of your funds into this new RIS scheme and opt to receive payouts on a monthly, quarterly, or annual basis, according to your preference. This scheme is open to both government and private sector employees, and its benefits can be availed until the age of 85.

What is 'RIS Steady,' and Where Will Your Money Be Invested?

To ensure the complete safety and growth of your funds within this scheme, an automatic investment mechanism known as 'RIS Steady' is employed. Under this mechanism, the level of investment risk (Equity Exposure) is systematically reduced as the subscriber ages:

At Age 60: 35% of your funds will be invested in Equities (the stock market), 10% in Corporate Bonds, and 55% in Government Bonds.
Up to Age 75: The allocation to the stock market will gradually decrease each year until it reaches just 10%; meanwhile, the allocation to Corporate Bonds will rise to 20%, and the allocation to secure Government Bonds will increase to 70%.
From Age 75 to 85: This specific asset allocation (10% Equity, 20% Corporate Bonds, 70% Government Bonds) will remain completely static, ensuring that your pension remains shielded from any market volatility or fluctuations.

Option 1: How Will Your Pension Increase Annually Using the SPR Formula?

The Systematic Payout Rate (SPR) is the default option for this scheme. Under this option, the percentage of your pension payout increases as you age. This rate is reset annually on your birthday.

The formula for this is:

SPR = 1 / (85 – Your Current Age) × 100%
At age 60: You will receive an annual payout of 4% of your remaining corpus.
At age 70: This rate will increase to 6.67%. Suppose your remaining fund at this age stands at ₹1 crore; you would then receive ₹6,67,000 annually. If you opt for quarterly payments, you will receive ₹1,66,667 every three months; if you choose monthly payments, you will receive ₹55,556.
At age 80: The payout rate will reach 20%.

In the final year, specifically at age 84, The rate will reach a full 100%.

Option 2: What is the advantage of ‘Equal Units’ under the SUR?

If you prefer not to have a payout percentage that increases annually, you may opt for the Systematic Unit Redemption (SUR) method instead. Under this option, your total fund is converted into units—similar to those in a mutual fund—which are then distributed into equal installments over the entire withdrawal period (e.g., 25 years).

Let’s understand this with an example:

Suppose you have a fund of ₹80 lakhs at age 60, and the value of a single unit (NAV) is ₹10; this means you hold a total of 800,000 units. To facilitate monthly withdrawals over a period of 25 years, your units will be divided into 25 × 12 = 300 installments. Consequently, 2,666.67 units will be redeemed (sold) every month.

Market Impact: Under this option, if the market rises and the NAV climbs above ₹10, you will receive a higher payout amount. Conversely, if the market declines and the NAV falls below ₹10, the amount of your monthly pension will also decrease.