NPS Exit & Withdrawal Rules 2025: PFRDA Removes 5-Year Lock-in, Eases Norms

 

NPS Exit & Withdrawal Rules 2025: PFRDA Removes 5-Year Lock-in, Eases Norms

The Pension Fund Regulatory and Development Authority (PFRDA) has notified the PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025, introducing significant changes to exit and withdrawal norms for NPS subscribers. The amendments are aimed at enhancing flexibility, improving liquidity at exit, and addressing practical concerns faced by subscribers, particularly in the non-government sector.

Extended Investment Tenure up to Age 85

As per the amended regulations, an NPS subscriber is now permitted to remain invested in the system up to the age of 85 years, unless an exit option is exercised earlier. This provision allows subscribers to continue wealth accumulation for a longer period based on individual retirement planning needs.

Revised Normal Exit Conditions

Normal exit under NPS is now permitted upon:

• Completion of 15 years of subscription, or

• Attaining the age of 60 years, or

• Superannuation or retirement,
  whichever occurs earlier.

These revised conditions apply to non-government sector subscribers under the Common Scheme and Multiple Scheme Framework.

Rationalised Lump Sum and Annuity Requirements

The amended regulations revise the annuitisation requirements based on the total accumulated pension corpus:

• Corpus exceeding ₹12 lakh

  • Minimum 20% of the corpus must be utilised for purchasing an annuity

  • Up to 80% may be withdrawn as a lump sum

• Corpus up to ₹8 lakh

  • The entire amount may be withdrawn as a lump sum

• Corpus between ₹8 lakh and ₹12 lakh

  • Lump sum withdrawal allowed up to ₹6 lakh

  • The remaining amount must be utilised for purchasing an annuity with a minimum tenure of six years

These provisions aim to provide greater liquidity while ensuring a steady post-retirement income stream.

Removal of Mandatory Five-Year Lock-in for Non-Government Subscribers

The amendment removes the mandatory five-year lock-in period for non-government NPS subscribers. This change provides increased flexibility for individuals who may need to exit the system due to changing financial or personal circumstances.

Premature Exit Provisions

In case of premature exit:

• At least 80% of the accumulated corpus must be utilised for annuity purchase

• The remaining balance may be withdrawn as a lump sum

• If the total corpus is less than ₹5 lakh, the subscriber may withdraw the entire amount as a lump sum

For subscribers who are physically incapacitated or disabled (75% or more), premature exit is allowed subject to submission of a medical certificate issued by a government-authorised medical officer.

Special Exit Scenarios Covered

The amended regulations also address specific situations:

• Death of subscriber before annuity purchase or lump sum withdrawal: Entire accumulated pension wealth shall be paid to the nominee(s) or legal heir(s)

• Renunciation of Indian citizenship: Subscriber may exit NPS and withdraw the entire accumulated corpus in a lump sum

• Missing subscriber presumed dead: Nominee(s) or legal heir(s) will receive 20% of the corpus as interim relief, with the balance paid upon legal determination as per the Bharatiya Sakshya Adhiniyam, 2023

Government Subscribers: No Change in Lock-in

For government sector NPS subscribers, the five-year lock-in requirement continues to apply. Normal exit is permitted after attaining 60 years of age:

• If the corpus is up to ₹5 lakh, 100% withdrawal is permitted

• If the corpus exceeds ₹5 lakh, 40% must be annuitised, and the remaining amount may be withdrawn as a lump sum

Conclusion

The PFRDA (Exits and Withdrawals under NPS) Amendment Regulations, 2025 mark a decisive step towards making the National Pension System more flexible and subscriber-friendly. By easing exit norms, revising annuity requirements, and removing lock-in constraints for non-government subscribers, the amendments align the NPS framework with evolving retirement planning needs while maintaining the core objective of long-term income security.

Frequently Asked Questions (FAQs)

1. Has the 5-year lock-in been removed for NPS?

Yes, the mandatory five-year lock-in has been removed only for non-government NPS subscribers. Government subscribers must still comply with the lock-in requirement.

2. How much lump sum can I withdraw from NPS at retirement?

• Up to 80% if the corpus exceeds ₹12 lakh

• 100% if the corpus is up to ₹8 lakh

• Up to ₹6 lakh if the corpus is between ₹8–12 lakh

3. Is annuity mandatory under the new NPS rules?

Yes, annuity is mandatory in certain cases:

• Minimum 20% annuitisation if corpus exceeds ₹12 lakh

• Mandatory annuity for the balance if corpus is between ₹8–12 lakh

4. What is the maximum age till which I can stay invested in NPS?

Subscribers can remain invested in NPS up to 85 years of age, unless they choose to exit earlier.

5. What happens to the NPS corpus if the subscriber dies?

The entire accumulated pension wealth is paid to the nominee(s) or legal heir(s).

6. Can I exit NPS if I renounce Indian citizenship?

Yes, the amended regulations allow complete exit and 100% lump sum withdrawal upon renunciation of citizenship.