NPS New Rule: Withdrawal from NPS has become easier, now you can withdraw 80% of the money at once.
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NPS Rule Changes: The Pension Fund Regulatory and Development Authority (PFRDA) has made significant changes to the rules of the National Pension System (NPS). The PFRDA has simplified NPS for both the private sector and the general public. The five-year lock-in period for non-government (private) subscribers has been removed. The lump sum withdrawal amount has been increased. The Pension Fund Regulatory and Development Authority (PFRDA) has notified the PFRDA (Exits and Withdrawals under the National Pension System) Amendment Regulations 2025.
The limit for maintaining NPS investments has also been increased. This is intended to provide greater flexibility to non-government sector subscribers. Under this, non-government NPS subscribers will now be able to withdraw up to 80% of their savings in a lump sum at the time of retirement. The new rules also provide for a systematic withdrawal plan. Additionally, government and non-government employees will now be able to remain NPS subscribers until the age of 85, instead of 75. There are approximately 17.5 million non-government employees enrolled in the NPS scheme in the country.
The 5-year lock-in has been completely abolished.
The biggest relief for non-government sector investors is that the mandatory 5-year lock-in has now been removed. This will benefit those who wish to exit the NPS mid-term for any reason. However, this lock-in will still apply for government employees.
Users will receive more money.
The most significant change in NPS exit rules is the withdrawal ratio. Technically, this is known as the exit ratio. Previously, when a subscriber retired or exited the scheme, they had to invest at least 40% of their corpus to purchase an annuity. Annuity is the amount that provides a monthly pension. Previously, subscribers could only withdraw 60% of their corpus in a lump sum.
Full withdrawal possible under special circumstances
The new rules also provide relief for certain situations. If an investor renounces Indian citizenship, they can withdraw the entire NPS corpus in one lump sum. Upon the investor’s death, the accumulated funds will be given to the nominee or legal heir. If the investor goes missing and is presumed dead, the first 20 percent of the corpus will be given as interim relief.
Simplified rules for those with ₹8 lakh to ₹12 lakh
Rules have also been simplified for those with NPS funds exceeding ₹8 lakh and up to ₹12 lakh. Such users can withdraw up to ₹6 lakh directly. The remaining funds will need to be invested in a pension scheme for at least six years to ensure a monthly income.
Have rules changed for government employees?
It should be noted that the rules for government employees have not been changed. These rules primarily apply to the non-government sector (private and private citizens). This means that these changes will not affect government employees investing in NPS. A five-year lock-in period will be mandatory for them. Upon exit after age 60, if the fund exceeds ₹5 lakh, 40% of the amount will go into annuity and 60% will be cashed out. Government employees can withdraw 100% of their funds only if their total fund balance is less than ₹5 lakh.
This change is very beneficial for those who want to use their retirement money to build a house or invest in something important. A larger lump sum will simplify financial planning and empower individuals to make their own decisions about their future. NPS has now become more flexible and user-friendly than before.
