What new NPS norms say: 80% higher lump sum withdrawal for non-govt subscribers, exit age raised to 85

The latest Pension Fund Regulatory and Development Authority (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025, notified on December 12, also allow subscribers to take financial assistance or loan from a regulated financial institution against the NPS corpus, under some conditions. Here is what to know.

New withdrawal norms

The new withdrawal norms reduce the share of the mandatory annuity portion, easing the lumpsum payouts to NPS subscribers.

The new norms state that non-government subscribers can withdraw 80 per cent of the corpus as lumpsum amount, with only 20 per cent portion required for mandatory annuity as against 40 per cent at present. The current 60:40 ratio continues for lump sum and annuity for government subscribers at the time of the exit of the scheme.

Non-government subscribers can withdraw 80 per cent amount as lump sum or through the systematic lumpsum withdrawal process or systematic unit redemption for at least six years. For accumulated pension wealth (APW) up to Rs 8 lakh, non-government subscribers can withdraw 100 per cent of their NPS corpus or have the option to withdraw 80 per cent as lumpsum and 20 per cent as annuity that will provide regular pension payouts.

This is for cases where subscribers have been part of NPS for 15 years or more, or on attaining 60 years, or superannuation or upon physical incapacitation.

If the corpus is over Rs 8 lakh but less than Rs 12 lakh, subscribers can withdraw Rs 6 lakh as lumpsum and have the balance APW after lumpsum as the annuity. Or, they can opt for the 80:20 ratio for lump sum and annuity. For corpus over Rs 12 lakh, subscribers can withdraw upto 80 per cent and have to mandatorily keep 20 per cent for annuity.

Voluntary exit, death cases

Upon voluntary exit, for APW up to Rs 5 lakh, non-government subscribers have the option to withdraw 100 per cent as lumpsum. If not, they can withdraw 20 per cent as lump sum but would be mandatorily required to keep 80 per cent as annuity. For corpus over Rs 5 lakh, non-government subscribers can opt to withdraw up to 20 per cent as lump sum and keep 80 per cent as annuity.

In case of death of a non-government subscriber, irrespective of the corpus, 100 per cent lump sum or 100 per cent annuity is allowed. In case of death of a government subscriber, for APW less than Rs 8 lakh, 100 per cent lumpsum withdrawal is allowed or alternatively, upto 20 per cent is allowed as lumpsum and 80 per cent as annuity.

For APW ranging between Rs 8 lakh to Rs 12 lakh, upto Rs 6 lakh can be withdrawn as lump sum and rest can be systematically withdrawn through periodic payouts with zero annuity. Or the balance can be annuity with no systematic withdrawals in between. They also have the option of up to 20 per cent is allowed as lumpsum and 80 per cent as annuity. For APW over Rs 12 lakh, the same 20:80 ratio for lumpsum and annuity is allowed.

Financial assistance, partial withdrawals

The new NPS norms allow subscribers to take financial assistance or loan from a regulated financial institution against the corpus, not exceeding 25 per cent of the subscriber’s contributions, which is the existing limit for partial withdrawals.

At present, no loan could be taken against NPS corpus but partial withdrawals were allowed for higher education, marriage of children, purchase or construction of residential house or flat, or for treatment of illnesses such as cancer, kidney failure, heart valve surgery, stroke, coma or paralysis, among others. The NPS allows partial withdrawal for house construction in the name of the subscriber or in joint ownership with the spouse, provided there is no other house ownership other than ancestral house.

While retaining all these conditions, the new NPS norms have specified partial withdrawal for house construction as a “one-time withdrawal”. For medical segment for partial withdrawal, the list of specified illnesses has now been replaced by a broader category of medical treatment or hospitalisation of self or legally wedded spouse, children, including legally adopted children or parents.

Lock-in period, legal heirs

The new NPS norms do not prescribe a standalone 5-year lock-in for private subscribers. With the latest round of changes, exits will be allowed as per eligibility conditions and annuity requirements, not a fixed lock-in clock. This is a move towards making NPS as a more liquid financial instrument.

The amendments also clarify death and missing subscriber scenarios. Nominees or legal heirs are entitled to interim relief of 20 per cent of the corpus when a subscriber is declared missing, with final settlement after legal presumption of death. “…the nominee(s) or the legal heir(s), as the case may be, of the subscriber identified as missing, shall be entitled to be paid twenty percent of the accumulated pension wealth as an interim relief in lump sum and the balance eighty percent shall remain invested and be paid upon determination of such subscriber as missing and presumed dead as per the provisions of the Bharatiya Sakshya Adhiniyam, 2023,” the notification said.