In a significant move aimed at providing greater control over retirement savings, India's pension regulator has substantially relaxed the rules for exiting and withdrawing funds from the National Pension System (NPS). The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a series of amendments that extend the investment horizon and offer enhanced flexibility, particularly for non-government subscribers.
Key Changes in Exit and Withdrawal Norms
The most notable change is the increase in the permissible lump-sum withdrawal at the time of exit for non-government NPS subscribers. They can now withdraw up to 80% of their accumulated pension wealth, a significant jump from the previous cap of 60%. Consequently, the mandatory portion that must be used to purchase an annuity, which provides a regular pension income, has been reduced to just 20%.
These revisions are part of the Pension Fund Regulatory and Development Authority (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025, dated December 12, 2025. The new framework will come into force once it is published in the official Gazette.
Enhanced Liquidity and Loan Access
In a landmark shift, PFRDA has now allowed NPS subscribers to pledge their pension corpus as collateral to secure loans from regulated financial institutions. This provision is designed to offer much-needed liquidity during financial emergencies without forcing individuals to exit the pension scheme prematurely. The regulator will prescribe the limits within which such loans can be availed.
Furthermore, the rules for partial withdrawals during the subscription period have been eased. The number of allowed partial withdrawals has been increased from three to four, with a mandatory cooling-off period of four years between each withdrawal. After turning 60, subscribers can make partial withdrawals up to three times, with a minimum gap of three years between each instance.
For smaller pension pots, the rules are more liberal. If the total accumulated corpus at exit is less than Rs 8 lakh for non-government subscribers, they have the option to withdraw the entire amount as a lump sum or opt for systematic periodic payouts.
Exit Age Extended to 85 Years
One of the most impactful reforms is the extension of the maximum age for staying invested in the NPS. For non-government subscribers, the exit age has been raised from 70 years to 85 years. Government sector subscribers, who were previously required to exit by 75, can now also remain invested until they turn 85, unless they choose to exit earlier under the prescribed conditions.
The exit rules for government employees opting for a normal exit remain unchanged: 60% of the corpus can be withdrawn, and 40% must be annuitized. However, in cases of premature exit due to resignation, removal, or dismissal, 80% of the accumulated wealth must be used to buy an annuity, with only the remaining 20% available as a lump sum.
A uniform rule across all categories states that if the total pension wealth is Rs 5 lakh or less, the entire amount can be withdrawn as a lump sum, irrespective of the reason for exit.
Empowering Subscribers for Better Retirement Planning
By reducing the compulsory annuity purchase and expanding both withdrawal and investment horizons, PFRDA aims to hand over greater autonomy to individuals in managing their retirement savings. The revised framework acknowledges the evolving needs of subscribers and seeks to provide a more flexible and subscriber-friendly pension ecosystem in India.
The combined effect of these changes—higher lump-sum withdrawals, loan-against-corpus facility, and a longer investment window—is expected to make the NPS a more attractive and versatile tool for long-term retirement planning, offering a better balance between security, liquidity, and growth.
