THE NPS MAKEOVER AND WHAT IT MEANS FOR LONG-TERM RETIREMENT SECURITY

A longstanding demand—to reduce the mandatory annuitization under the National Pension System (NPS)—has finally been addressed.

- MRIN AGARWAL

The Pension Fund Regulatory and Development Authority (PFRDA) has announced changes to the rules governing normal exit from NPS. Subscribers can now withdraw 100% of their accumulated corpus if it is up to ₹8 lakh, and up to 80% as a lump sum (with only 20% annuitized) if the corpus exceeds ₹12 lakh. Crucially, the minimum lock-in period has also been eased—reduced to 15 years or until the subscriber attains 60 years of age, whichever is earlier.

It has been an eventful year for NPS. Reforms include the introduction of the multiple scheme framework and the inclusion of gold and silver exchange-traded funds (ETFs) among investment options. NPS now offers flexibility to choose different fund managers across asset classes, the ability to switch schemes without triggering tax, access to new schemes with up to 100% equity exposure, a reduced mandatory annuitization of just 20%, and more favourable withdrawal rules for early retirement.

Even lump-sum withdrawals can be structured through a systematic withdrawal plan, ensuring regular monthly inflows. In effect, NPS now offers a comprehensive retirement solution—what remains is for individuals to adopt it. Common pushbacks against NPS centre on inadequate savings, prioritising short-term goals, the long-term lock-in, and an unconscious belief that individuals can generate better returns on their own.