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The National Pension System (NPS) has undergone major reforms, offering significant relief and flexibility to millions of subscribers across India. The Pension Fund Regulatory and Development Authority (PFRDA) has officially notified these changes on December 16, 2025. The revised rules primarily benefit non-government NPS subscribers, though several provisions also apply to government employees. The latest update allows subscribers to remain invested in NPS until the age of 85 and, in certain cases, withdraw up to 100% of their retirement corpus as a lump sum at exit.

These changes are expected to enhance the attractiveness of NPS as a long-term retirement planning tool by giving investors greater control over their own savings.

What Is NPS and Who Can Invest?

Launched in 2004, the National Pension System was initially available only to government employees. In 2009, it was opened to all citizens, including private-sector employees, self-employed individuals, and Non-Resident Indians (NRIs).

NPS operates through two types of accounts:

• Tier-I Account: A mandatory retirement account with withdrawal restrictions

• Tier-II Account: A voluntary savings account with flexible withdrawals

The recent rule changes mainly focus on Tier-I accounts, which are designed for retirement savings.

Stay Invested in NPS Until 85 Years

One of the most important updates is the extension of the maximum age limit. Under the new rules, both government and non-government subscribers can continue their NPS investments until the age of 85 years, unless they choose to exit earlier.

Earlier, most subscribers exited NPS at 60 or shortly thereafter. The extended age limit allows individuals to keep their retirement corpus invested for a longer period, potentially benefiting from market-linked returns well into old age.

Lump-Sum Withdrawal Rules Simplified

The most impactful change relates to how much money subscribers can withdraw at the time of exit.

If Total NPS Corpus Is More Than ₹12 Lakh

• Subscribers can withdraw up to 80% of the total corpus as a lump sum

• The remaining 20% must be used to purchase an annuity, which provides a monthly pension

Earlier, subscribers were required to allocate 40% of their corpus to annuity purchases. This mandatory portion has now been reduced to 20%, significantly increasing liquidity at retirement.

If Total NPS Corpus Is Between ₹8 Lakh and ₹12 Lakh

• Subscribers can withdraw up to ₹6 lakh as a lump sum

• The remaining amount can be used to buy an annuity or withdrawn gradually through Systematic Withdrawal Plans (SWP) over a minimum period of six years

This offers flexibility for retirees who may not want to lock their money entirely into pension products.

If Total NPS Corpus Is Less Than ₹8 Lakh

• Subscribers can withdraw 100% of the corpus as a lump sum

• In this case, purchasing an annuity is optional, not mandatory

Previously, this full withdrawal limit applied only up to ₹5 lakh. Raising the threshold to ₹8 lakh provides additional relief to small investors.

Exit Conditions Explained

For non-government subscribers, normal exit is allowed when:

• The subscriber completes 15 years of NPS contributions, or

• Reaches 60 years of age, or

• Attains the retirement age specified in employment terms

Whichever condition is met first will apply. Government employees, however, must still follow a mandatory five-year lock-in period before any exit.

Why These Changes Matter

Financial experts believe these reforms make NPS more investor-friendly and practical. With reduced annuity obligations and higher lump-sum withdrawal limits, subscribers gain greater freedom to manage their retirement funds according to personal needs such as healthcare, housing, or debt repayment.

The ability to stay invested until 85 years also supports longer life expectancy trends and allows retirees to continue wealth creation for a longer period.

Key Takeaways from the New NPS Rules

• Subscribers can stay invested in NPS until 85 years of age

• Up to 80% lump-sum withdrawal allowed if corpus exceeds ₹12 lakh

• 100% withdrawal permitted if corpus is below ₹8 lakh

• Mandatory annuity portion reduced from 40% to 20%

• Greater flexibility through systematic withdrawals

With these reforms, NPS emerges as a more flexible, modern, and investor-centric retirement solution, making it a stronger choice for long-term financial planning in India.