The Pension Fund Regulatory and Development Authority (PFRDA) has recently introduced significant changes to the National Pension System (NPS) regulations, impacting both government and non-government subscribers. These amendments, which took effect immediately upon publication in the official gazette on December 12, 2025, aim to provide greater flexibility, clarity, and enhanced benefits to NPS subscribers. The PFRDA (Exits and Withdrawals under the NPS) Amendment Regulations, 2025, bring considerable modifications to exit and withdrawal rules, lock-in periods, and entry conditions.

Exit and Withdrawal Rules

For Government Sector Subscribers:

• Extended Exit Age: Government employees can now remain invested in NPS until the age of 85, increased from the previous limit of 75. This allows subscribers to defer annuity purchases and lump-sum withdrawals based on their retirement planning needs.
• Annuity Purchase: A minimum of 40% of the accumulated pension wealth (APW) must be used to purchase an annuity upon retirement. The balance can be taken as a lump sum, systematic lump-sum withdrawal, systematic unit redemption, or any other PFRDA-approved option.
• Corpus Size Relaxation: If the accumulated wealth is ₹8 lakh or less, 100% lump sum withdrawal is permitted.
• Systematic Unit Redemption (SUR): NPS introduces SUR, enabling government subscribers to redeem a fixed number of investment units periodically.

For Non-Government Sector Subscribers:

• Exit after 15 Years/Age 60: Subscribers can exit after 15 years of subscription, at age 60, or upon employer-mandated retirement. A minimum 20% of the corpus must be used for annuity purchase, with the balance available as a lump sum or systematic lump-sum withdrawal.
• Voluntary Exit: If a subscriber opts for voluntary exit before eligibility, 80% of the corpus must be used for annuity. Withdrawal relaxation is available if the corpus is ₹5 lakh or less, allowing 100% withdrawal.
• Death of Subscriber: In the event of the subscriber's death, the nominee or legal heirs receive 100% payout and may choose annuity or systematic lump-sum withdrawal if desired.
• Physical Disability: Exit due to disability exceeding 75% is treated on par with superannuation, subject to medical certification.

Common Changes for Both Sectors:

• Increased Withdrawal Limit: Non-government subscribers with a corpus exceeding ₹12 lakh can now withdraw up to 80% as a lump sum, with only 20% required for annuitization.
• Corpus between ₹8-12 Lakh: Subscribers have the option to withdraw up to ₹6 lakh immediately and use Systematic Unit Redemption (SUR) for the rest over at least 6 years.
• Systematic Lump Sum Withdrawal (SLW): Alongside SUR, SLW allows subscribers to receive the non-lump-sum portion of their corpus as regular payouts over a period.

Lock-In Period and Entry

• Lock-in Period: The mandatory five-year lock-in period for non-government NPS subscribers has been removed. However, government employees continue to have a five-year lock-in period.
• Entry Age: The maximum age to join NPS has been increased to 70 years.

Other Key Amendments

• Partial Withdrawals: Subscribers can now make partial withdrawals up to four times before age 60, with a minimum gap of four years between withdrawals. After turning 60, partial withdrawals are allowed with a minimum gap of three years between successive withdrawals.
• Reasons for Withdrawal: Beyond education, marriage and home purchase, withdrawals are now permitted for loan settlement, medical treatment, skill development, startups or home improvement.
• Loan Facility: NPS accounts can be pledged to obtain loans from regulated financial institutions, with a lien restricted to up to 25% of the subscriber's own contribution.
• Citizenship Renunciation: If an NPS subscriber renounces Indian citizenship, they can close their account and withdraw the entire corpus as a lump sum.
• Missing Subscribers: The revised rules introduce a provision for cases where a subscriber is presumed missing, allowing up to 20% of the accumulated corpus to be paid out to nominees early, with the remaining amount settled upon legal declaration of death.
• Scheme A Transition: Subscribers invested in Scheme A (focused on alternative assets) must switch to Scheme C (corporate bonds) or Scheme E (equity) by December 25, 2025.
• Equity Allocation: Private, corporate, and self-employed subscribers can allocate up to 100% of contributions to equities under the Multiple Scheme Framework (MSF).
• Tax Benefits: The Union Budget 2025 extended tax benefits to NPS Vatsalya contributions, allowing parents to claim up to ₹50,000 deduction under Section 80CCD(1B) in addition to ₹1.5 lakh under Section 80C.

These changes reflect an effort to modernize the NPS, making it more flexible and aligned with the evolving needs of subscribers. The increased withdrawal limits, the removal of the lock-in period for non-government employees, and the extension of the investment horizon to age 85 are particularly significant. By providing a wider range of withdrawal options and streamlining the exit process, PFRDA aims to encourage greater participation in the NPS and ensure a more secure retirement for all subscribers.