New Delhi: In a big move aimed at making retirement planning more flexible, the Pension Fund Regulatory and Development Authority (PFRDA) has announced several important changes to the National Pension System (NPS). These updates will impact government employees, private sector subscribers as well as those enrolled under NPS-Lite and NPS-Lite Swavalamban. From lowering the mandatory annuity purchase limit to allowing subscribers to continue in NPS till the age of 85, the new rules are designed to give investors more control over their pension savings.
Here’s a simple breakdown of the key changes introduced for government employees under the Pension Fund Regulatory and Development Authority’s Exits and Withdrawals under the National Pension System Amendment Regulations, 2025.
NPS recognised as asset; loans now permitted against it
Under the amended rules, government employees are now formally allowed to take loans from regulated financial institutions by marking a lien or charge on their NPS account. This is a significant step, as it recognises NPS not just as a retirement savings tool but also as a financial asset.
Partial NPS withdrawals during service continue as before
Government employees will continue to have the option of making partial withdrawals from their NPS accounts while in service. They can withdraw up to 25 per cent of their own contributions, for a maximum of four times during their service tenure, subject to prescribed conditions and minimum gap requirements. This facility allows employees to meet important financial needs without having to exit the NPS.
NPS exit and withdrawal rules to be applied account-wise
The updated regulations make it clear that exit and withdrawal rules under NPS will be applied separately to each individual pension account. This is particularly important for government employees who may have changed roles, moved across cadres, or ended up with more than one NPS account due to administrative reasons. Under the new clarification, every NPS account will now be settled independently as per the applicable rules.
Government employees can now delay NPS exit
Government employees now have a clear option to postpone their exit from the National Pension System. Under the revised rules, they can defer both lump-sum withdrawal and annuity purchase, and continue staying invested in NPS until the age of 85. This move is especially helpful for retirees who do not need funds immediately or prefer to keep their savings invested to benefit from market-linked returns.
Govt employees can now fully withdraw higher NPS corpus
One of the biggest reliefs for government employees is the increase in the full withdrawal limit under NPS. Earlier, subscribers were allowed to withdraw the entire corpus only if it did not exceed Rs 5 lakh at the time of retirement. This limit has been raised to Rs 8 lakh with the new rules in place. Simply put, if a government employee retires with an NPS corpus of Rs 8 lakh or less, they can now withdraw the full amount without being required to buy an annuity. For employees in the lower and middle pay brackets, this change eases a major worry and makes retirement withdrawals much simpler.
New rules for mid-range NPS corpus holders
The revised NPS rules have also introduced a new slab for employees whose retirement corpus is between Rs 8 lakh and Rs 12 lakh. Under this structure, subscribers can withdraw up to Rs 6 lakh as a lump sum while the remaining amount will need to be used for annuity purchase or through systematic withdrawal options. Earlier, employees in this category had limited flexibility but the new slab-based approach makes the withdrawal process clearer and more balanced.
Annuity requirement continues for larger NPS savings
For government employees retiring with a higher NPS corpus, the existing annuity rules remain unchanged. In most cases, at least 40 per cent of the total corpus must still be used to purchase an annuity, while the remaining 60 per cent can be withdrawn either as a lump sum or in a phased manner.
However, with the increase in the full-withdrawal limit, employees with smaller NPS savings will no longer be compelled to buy an annuity, offering greater flexibility at retirement.
NPS rules in case of death before retirement
If a government NPS subscriber passes away before retirement, the exit and annuity rules depend on the size of the accumulated corpus. For smaller amounts, nominees are allowed to withdraw the entire corpus. However, in cases where the NPS savings are higher, a portion of the amount may be used to purchase an annuity for eligible family members. The regulations also specify a default annuity structure to ensure steady income support for the spouse and dependent family members.
Simplified exit norms for resignation and early retirement cases
The new notification also brings more clarity on NPS exit rules in situations such as resignation, removal or dismissal from service, as well as premature retirement due to health or disability. In these cases, a higher annuity requirement generally around 80 per cent of the corpus will continue to apply unless the total NPS savings fall below the prescribed limit. This approach helps ensure regular pension income, while still allowing limited withdrawals where permitted under the rules.
Financial relief for families of missing government employees
For the first time, the NPS rules clearly cover situations where a government employee goes missing and is later presumed dead. In such cases, up to 20% of the NPS corpus can be released as interim financial relief to the family. The remaining amount will be settled after a legal declaration, in line with prescribed norms. This provision is aimed at providing timely financial support to families during periods of prolonged uncertainty.
Overall, the 2025 amendment signals a clear shift towards giving NPS subscribers greater flexibility and control. With higher lump-sum withdrawals and more options at exit, retirement planning under NPS is now better aligned with individual needs rather than following a rigid, one-size-fits-all structure.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: ZEE News
