PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025

Source: IE

Subject: Economy

Context: The Pension Fund Regulatory and Development Authority has notified the NPS Exit & Withdrawal (Amendment) Regulations, 2025, increasing lump sum withdrawal to 80% for non-government subscribers and allowing exit deferment up to 85 years, significantly enhancing flexibility and liquidity in NPS.

About PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025:

What it is?

• A set of amended regulations governing withdrawal, exit, deferment, annuity requirements, loans, and death-related settlements under the National Pension System (NPS).

Key features:

• Higher lump sum withdrawal: Non-government subscribers: Up to 80% lump sum, mandatory annuity reduced to 20% (earlier 40%). Government subscribers: Existing 60:40 (lump sum : annuity) continues.

• Non-government subscribers: Up to 80% lump sum, mandatory annuity reduced to 20% (earlier 40%).

• Government subscribers: Existing 60:40 (lump sum : annuity) continues.

• Enhanced exit deferment: Subscribers can defer lump sum withdrawal or annuity purchase up to age 85 (earlier 75).

• Corpus-based flexibility (non-govt): Accumulated Pension Wealth ≤ ₹8 lakh: 100% lump sum allowed. ₹8–12 lakh: Options of ₹6 lakh lump sum or 80:20 split. ₹12 lakh: Up to 80% lump sum, 20% annuity mandatory.

• Accumulated Pension Wealth ≤ ₹8 lakh: 100% lump sum allowed.

• ₹8–12 lakh: Options of ₹6 lakh lump sum or 80:20 split.

• ₹12 lakh: Up to 80% lump sum, 20% annuity mandatory.

• Voluntary exit norms: Accumulated Pension Wealth ≤ ₹5 lakh: 100% lump sum permitted; otherwise 20:80 applies.

• Accumulated Pension Wealth ≤ ₹5 lakh: 100% lump sum permitted; otherwise 20:80 applies.

• Death cases: 100% lump sum or 100% annuity allowed for non-govt subscribers irrespective of corpus.

• 100% lump sum or 100% annuity allowed for non-govt subscribers irrespective of corpus.

• Loans against NPS: Permits loans from regulated institutions up to 25% of own contributions.

• Permits loans from regulated institutions up to 25% of own contributions.

• Partial withdrawals clarified: House construction allowed as one-time withdrawal. Medical withdrawals broadened to any medical treatment/hospitalisation of self/family.

• House construction allowed as one-time withdrawal.

• Medical withdrawals broadened to any medical treatment/hospitalisation of self/family.

• No fixed 5-year lock-in: Exits governed by eligibility and annuity rules, improving liquidity.

• Exits governed by eligibility and annuity rules, improving liquidity.

• Missing subscriber provision: 20% interim relief to nominees; balance settled after legal presumption of death (as per Bharatiya Sakshya Adhiniyam, 2023).

• 20% interim relief to nominees; balance settled after legal presumption of death (as per Bharatiya Sakshya Adhiniyam, 2023).

About National Pension System (NPS):

• What it is? A market-linked, defined contribution pension scheme aimed at providing retirement income through systematic savings.

• A market-linked, defined contribution pension scheme aimed at providing retirement income through systematic savings.

• Launched in: 2004 (initially for government employees; later expanded)

• Regulatory authority:

• Regulated and administered by Pension Fund Regulatory and Development Authority under the PFRDA Act, 2013.

• Key features:

• Voluntary, portable, flexible retirement savings scheme. Eligible subscribers: Central & State Government employees (as opted), corporate employees, and all citizens (18–70 years) including NRIs. Account structure: Tier I: Mandatory retirement account (restricted withdrawals). Tier II: Voluntary savings account (free withdrawals; requires active Tier I). Tax efficiency: Contributions eligible for tax benefits; Seva Nidhi / withdrawals subject to prevailing tax rules.

• Voluntary, portable, flexible retirement savings scheme.

• Eligible subscribers: Central & State Government employees (as opted), corporate employees, and all citizens (18–70 years) including NRIs.

• Central & State Government employees (as opted), corporate employees, and all citizens (18–70 years) including NRIs.

• Account structure: Tier I: Mandatory retirement account (restricted withdrawals). Tier II: Voluntary savings account (free withdrawals; requires active Tier I).

• Tier I: Mandatory retirement account (restricted withdrawals).

• Tier II: Voluntary savings account (free withdrawals; requires active Tier I).

• Tax efficiency: Contributions eligible for tax benefits; Seva Nidhi / withdrawals subject to prevailing tax rules.

• Contributions eligible for tax benefits; Seva Nidhi / withdrawals subject to prevailing tax rules.