The National Pension System is a good retirement product that has become better over the years. However, some people still refrained from investing due to low liquidity and flexibility. The money remained locked till retirement, and after that, the subscriber had to compulsory invest a minimum of 40% of the accumulated amount in an annuity. However, in December 2025, the PFRDA announced some sweeping changes that has made NPS a far more compelling investment product for retirement. In this article, we will examine the NPS withdrawal and exit regulations and how they have made NPS a better investment product.
NPS withdrawal and exit regulations
On 12 December 2025, the PFRDA notified the Pension Fund Regulatory and Development Authority (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025.
Here are the salient features of these regulations:
1. Exit from NPS: A non-government sector subscriber can continue to be a part of the NPS till the age of 85 years, unless they exercise the exit option. A subscriber is eligible to exit from the NPS after completing at least 15 years, or attaining the age of 60 years, or upon superannuation or retirement. The subscriber can withdraw up to 80% of the accumulated amount. At least 20% of the accumulated amount must be mandatorily used for purchasing an annuity. However, the above withdrawal rules are subject to the following.
- Accumulated Pension Wealth (APW) less than ₹8 lakh: If the Accumulated Pension Wealth (APW) of the subscriber is less than ₹8 lakh, they have two options. The subscriber can withdraw the entire amount (100%) as a lump sum. The other option is to withdraw up to 80% of the APW as a lump sum. At least 20% of the APW must be used to purchase an annuity.
- Accumulated Pension Wealth (APW) more than ₹8 lakh but less than ₹12 lakh: If the APW of the subscriber is more than ₹8 lakhs but less than ₹12 lakhs, they have two options. The subscriber can withdraw up to ₹6 lakh as a lump sum. The balance of the APW must be utilised to avail periodic payouts in the form of systematic unit redemptions for at least 6 years. The other option is to withdraw up to 80% of the APW as a lump sum. At least 20% of the APW must be used to purchase an annuity.
- Accumulated Pension Wealth (APW) more than ₹12 lakh: If the APW of the subscriber is more than ₹12 lakh, they can withdraw up to 80% of the APW. At least 20% of the APW must be mandatorily used for purchasing an annuity.
The subscriber can defer the annuity purchase or lump sum withdrawal amount till the age of 85 by submitting a request to the NPS Trust or any intermediary. During this period, the subscriber shall have an option to exit at any time. If the subscriber has deferred the annuity purchase or lump sum amount withdrawal, and dies, the APW shall be paid to the nominee(s) or the legal heir(s), as the case may be.
2. Voluntary exit: In the earlier section, we discussed how a subscriber is eligible to exit from the NPS after completing at least 15 years, or attaining the age of 60, or upon superannuation or retirement. However, a subscriber can voluntarily opt to exit the NPS before being eligible as specified above. In such a scenario, at least 80% of the APW will be mandatorily used for purchasing an annuity. The balance APW will be paid to the subscriber in a lump sum.
In the event of voluntary exit, if the APW is less than or equal to ₹5 lakh, the subscriber will have the option to withdraw the entire APW in a lump sum.
3. Subscriber’s death: If a subscriber dies before exiting the NPS, the entire APW will be paid in a lump sum to the nominee(s) or legal heir(s). Instead of taking a lump sum, the nominee(s) or legal heir(s) have the option to avail an annuity.
4. Exit of a subscriber joining NPS on or after attaining the age of 65: An individual can subscribe to the NPS on or after attaining the age of 65 years but before attaining the age of 85 years. For such subscribers, upon exit, at least 20% of accumulated pension wealth must be mandatorily used for purchasing an annuity. The subscriber can withdraw the balance of the accumulated pension wealth in a lump sum.
If the subscriber’s accumulated pension wealth is equal to or less than Rs. 12 lakhs, they have the option to withdraw the entire accumulated pension wealth in a lump sum. If the subscriber dies, the entire accumulated pension wealth will be paid to the nominee(s) or legal heir(s).
5. Partial withdrawals: A subscriber can make up to four partial withdrawals before reaching the age of 60 years or prior to superannuation or retirement, whichever is later. There must be a minimum interval of 4 years between successive withdrawals.
A subscriber who remains in the NPS beyond the age of 60 years or beyond superannuation or retirement, whichever is later, can make partial withdrawals with a minimum interval of 3 years between successive withdrawals.
6. Loan against NPS: A subscriber can make an assignment or pledge in favour of a regulated financial institution for receiving a loan against up to 25% of their NPS contributions. The lender can mark a lien on the subscriber’s NPS account to the extent permitted for providing a loan against its security.
How has the NPS become more subscriber-friendly?
Earlier, subscribers could withdraw up to 60% of their accumulated amount as a lump sum. Now, a subscriber (non-Government sector) can withdraw up to 80% of the accumulated amount as a lump sum.
A subscriber can stay invested in the NPS longer, till age 85 years, compared to the earlier age of 75 years. They can make up to 4 partial withdrawals compared to 3 earlier. A subscriber can exit the NPS after completing 15 years or on after the age of 60 years or retirement. During times of financial emergency, a subscriber can take a loan against their NPS accumulated amount or make a partial withdrawal, subject to specified limits.
With the recent changes, the NPS has become more liquid and flexible. Thus, the NPS has become more subscriber-friendly.