The Pension Fund Regulatory and Development Authority (PFRDA) has further separated the treatment of government and non-government subscribers with the latest changes to NPS exit and withdrawal rules.
Under the Pension Fund Regulatory and Development Authority (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025, the pension fund watchdog has clearly demarcated the rules for both sets of employees, removing confusion around what applies to whom.
Here is a simple comparison of how the rules now differ for government and private sector NPS subscribers.
Exit age and deferment options
Both government and private NPS subscribers can exit the scheme at 60 years of age. Under the new rules, both categories are also allowed to defer withdrawal and annuity purchase up to 85 years, offering flexibility to those who wish to stay invested longer.
Full withdrawal limit at retirement
For both government and private subscribers, 100% withdrawal is allowed if the NPS corpus is up to Rs 8 lakh.
This higher threshold compared to earlier rules benefits retirees with smaller retirement savings and reduces forced annuity purchases.
Annuity requirement: the key difference
The biggest difference between government and private NPS lies in the mandatory annuity requirement.
Government subscribers generally need to use 40% of their NPS corpus to buy an annuity if the corpus exceeds the threshold of Rs 12 lakh. In contrast, private sector subscribers are required to annuitise only 20%, allowing them to withdraw a much larger portion of their savings.
Lump sum withdrawal flexibility
Due to the lower annuity requirement:
Government NPS subscribers can typically withdraw up to 60% of their corpus
Private NPS subscribers can withdraw up to 80% of their corpus
This makes private NPS significantly more flexible at retirement.
New Rs 8–12 lakh slab applies to both
Both government and private subscribers fall under the new Rs 8 lakh to Rs 12 lakh slab.
Subscribers in this range can withdraw up to Rs 6 lakh upfront, with the remaining amount paid through annuity or systematic withdrawals. This slab-based system brings clarity and uniformity.
Death and family protection rules
In case of death before exit:
Private NPS subscribers: 100% of the corpus is paid to nominees or legal heirs
Government NPS subscribers: annuity requirements apply depending on corpus size
For missing subscribers, both categories now allow 20% interim relief to families.
Partial withdrawals and loans
Both government and private NPS subscribers are now treated equally when it comes to:
Partial withdrawals (up to 25% of self-contribution)
Loans against NPS with lien marking
These features make NPS more flexible during the subscriber’s working life.
Summing up…
The 2025 NPS amendments tilt the balance clearly in favour of private sector subscribers, who gain higher lump-sum access and lower annuity compulsion. Government employees benefit mainly from the higher full-withdrawal limit and clearer exit slabs.
Overall, the revised rules make NPS exits more transparent, predictable and subscriber-friendly across categories.