The National Pension System (NPS) has seen major withdrawal rule changes after the Pension Fund Regulatory and Development Authority (PFRDA) revised the exit and withdrawal norms, late last year. The new rules, effective into 2026, give subscribers more flexibilityin terms of how and when they can withdraw their savings.
Here’s a look at the new rules on how NPS withdrawals work before retirement and after retirement:
Individuals working in the corporate sector:
- The minimum 5-year (lock-in) period has been removed.
- The vesting period, earlier fixed until the age of 60, has now been shortened to 15 years or until age 60—whichever is earlier.
- Upon normal exit, corporate sector employees can withdraw upto 80% amount as a lump sum and use at least 20 per cent of the APW to buy an annuity. Earlier, they could only witdraw 60% of APW as lump sum
Corpus based withdrawal:
- If the APW is under ₹8 lakh, the subscriber can withdraw the entire amount in a lump sum upon normal exit.
- In case, if the APW is between ₹8 lakh and ₹12 lakh, he/she has the option to withdraw up to ₹6 lakh as a lump sum, and the remaining amount as systematic unit redemption (SUR) for at least six years or for an annuity.
- If corpus is above R12 lakh, the general 80/20 rule applies
Premature withdrawal
Individuals working in the government sector:
The government employees who exit prematurely must use 80 per cent of the APW to buy an annuity, and the remaining can be withdrawn as a lump sum or SLW or SUR.
Individuals working in the corporate sector:
- Up to 20% of the total pension corpus can be withdrawn as a lump sum.
- At least 80% of the corpus must be used to purchase an annuity, which will provide a regular pension.
(Premature withdrawal rules remain same as earlier)
Corpus based withdrawal
For both the sectors, in case the total APW is ₹5 lakh or less, full withdrawal in lump sum is permitted.
