In a major relief for non-government NPS subscribers, the government has allowed them to withdraw up to 80% of their retirement corpus as a lump sum if their accumulated pension wealth (APW) at the time of exit exceeds Rs 12 lakh, with the remaining 20% to be invested in an annuity. Earlier, National Pension System (NPS) subscribers were allowed to withdraw only 60% of the retirement corpus, while the remaining amount had to be invested in an annuity scheme.
100% corpus withdrawal allowed in certain cases
However, in certain cases—such as when the total retirement corpus is up to Rs 8 lakh—the subscriber will have the option to withdraw the entire 100% amount or can withdraw 80% as a lump sum and invest the remaining 20% in an annuity, similar to the rules applicable to those with a corpus exceeding Rs 12 lakh, according to the PFRDA (Exits and Withdrawals under the National Pension System) Amendment Regulations, 2025 notification issued on December 16.
However, if the retirement corpus is between Rs 8 lakh and Rs 12 lakh, the subscriber can withdraw up to Rs 6 lakh as a lump sum and the remaining to be deployed in an annuity scheme.
NPS lock-in period rules seem revised
The notification does not clearly state whether the five-year lock-in period has been formally removed. However, it appears that the mandatory five-year lock-in no longer applies to non-government NPS subscribers.
For government employees covered under NPS, the five-year lock-in period continues to apply for any exit. A normal exit is allowed after the age of 60. If the total pension corpus is less than Rs 5 lakh, the subscriber can withdraw the entire amount. However, if the accumulated corpus exceeds Rs 5 lakh, 40% must be invested in an annuity, while the remaining amount can be withdrawn as a lump sum.
Summing up…
Earlier, non-government NPS subscribers had to use 40% of their pension corpus to buy an annuity at the time of exit.
The new rules reduce this mandatory annuity portion to 20%, giving subscribers much greater flexibility. With up to 80% of the corpus now available for withdrawal, non-government subscribers can decide for themselves how best to use their retirement savings.