New Delhi: The Pension Fund Regulatory and Development Authority (PFRDA) has introduced sweeping changes to the National Pension System (NPS), making it significantly more flexible for non-government subscribers. The regulator has removed the mandatory five-year lock-in period and simplified exit norms, giving investors easier access to their retirement savings.
Under the revised framework, non-government NPS subscribers can now exit the scheme without waiting for five years, a move aimed at improving liquidity and increasing the appeal of NPS among younger and private-sector workers.
Higher Lump-Sum Withdrawal at Exit
The updated rules allow subscribers with a total NPS corpus of more than Rs 12 lakh to withdraw up to 80 percent of their savings as a lump sum, while only 20 percent needs to be invested in an annuity. This marks a major shift from earlier norms that required a larger portion to be annuitised.
For subscribers with a corpus of Rs 8 lakh or less, the entire amount can be withdrawn at once. Those with savings between Rs 8 lakh and Rs 12 lakh can withdraw up to Rs 6 lakh immediately, with the remaining amount mandatorily used to purchase an annuity for a minimum period of six years.
Extended Investment Window
PFRDA has also allowed NPS subscribers to continue investing up to the age of 85, unless they choose to exit earlier. A normal exit is now permitted after 15 years of subscription or upon reaching 60 years of age, retirement, or superannuation—whichever occurs first.
Government Employees: Rules Remain Largely Unchanged
The relaxed norms apply primarily to non-government NPS subscribers. For government employees, the existing five-year lock-in remains in place. At exit after 60 years, subscribers with a corpus below Rs 5 lakh can withdraw the full amount, while those with higher savings must annuitise at least 40 percent of the corpus.
Why It Matters
The changes are expected to make NPS more investor-friendly, balancing retirement security with flexibility. By easing exit restrictions and increasing lump-sum access, PFRDA aims to boost participation in the pension system while addressing long-standing concerns around liquidity.
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