The Pension Fund Regulatory and Development Authority has revised the National Pension System exit framework for non-government subscribers. If your retirement corpus exceeds Rs 12 lakh, you can now withdraw up to 80 percent as a lump sum and use only 20 percent to buy an annuity. Earlier, both government and non-government subscribers were effectively bound by a 60:40 lump sum-annuity split. Government employees continue under the older rule, while corporate subscribers and other non-government members get the higher lump sum option.
The new slabs you should map to your own corpus
The revised structure is not a single rule for everyone. It depends on the corpus at exit. If the corpus is Rs 8 lakh or less, a non-government subscriber can withdraw the entire amount. If it is between Rs 8 lakh and Rs 12 lakh, withdrawals are capped at Rs 6 lakh and the balance must be annuitised. If it exceeds Rs 12 lakh, the subscriber can choose the 80:20 split. For corporate subscribers, this makes it important to estimate your likely corpus size well before retirement, because the difference between Rs 11.5 lakh and Rs 12.5 lakh changes the shape of your exit.
Why this matters for corporate subscribers
For years, the least liked part of NPS for corporate subscribers has been mandatory annuitisation. Annuities often feel restrictive because once you purchase one, the capital is locked and the income may not keep pace with inflation. The new rule reduces that forced annuity portion and gives retirees more room to decide how they want to generate income. This makes NPS more usable as a retirement pillar rather than just a tax-saving product that comes with strings attached.
The new risk: Flexibility without a plan
More control at retirement is helpful only if you know what you will do with it. A larger lump sum can tempt people into two opposite mistakes. One is going too conservative, parking the money in low-yield options and losing purchasing power over time. The other is chasing returns, taking on equity or credit risk that is unsuitable for retirement cash flows. Annuities, for all their flaws, do solve one problem: longevity risk. With a lower mandatory annuity share, corporate subscribers need to actively decide how much guaranteed income they want and how they will build the rest of the income stream.
Tax and timing points to keep in mind
The tax treatment of NPS exit remains broadly the same: lump sum withdrawals within the permitted limits are tax exempt at exit, while annuity income is taxed as per your slab in the year you receive it. Another useful change is that subscribers can now remain invested until age 85, unless they choose to exit earlier. This gives you more flexibility on timing, which can matter if markets are volatile or if you plan a phased retirement rather than a clean stop.
What you should do next if you are in corporate
NPS First, estimate your likely corpus at retirement and identify which slab you are headed toward. Second, revisit whether you were planning to buy a large annuity simply because the rules forced it. Third, build a simple post-exit deployment plan for the lump sum, focused on three priorities: regular cash flow, inflation protection, and avoiding forced selling in bad markets. Even a basic framework is better than making decisions after the money hits your account.
FAQs
Does the new 80 percent withdrawal option apply to existing corporate NPS subscribers?
Yes. The revised limits apply at the time of exit. Existing non-government subscribers can use the higher lump sum option if their corpus exceeds ₹12 lakh when they retire.
Does this apply to premature exits from NPS?
No. The higher lump sum option applies to normal exits after completing 15 years of subscription or on attaining the eligible exit age. Premature exit rules remain more restrictive.
Should corporate subscribers avoid annuities altogether now?
Not necessarily. The change reduces the compulsory portion, but annuities can still provide stable, guaranteed income. The real benefit is choice: you can limit annuity purchase to what you actually need rather than what the rules previously forced.
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