Pension fund regulator PFRDA has announced a landmark decision regarding the National Pension System (NPS), a decision that is a significant boon for private sector employees and ordinary citizens alike. Under the new rules, the mandatory five-year lock-in period for non-government subscribers has been eliminated.
In addition, you will now be able to withdraw 80% of your total deposit in one lump sum at the time of retirement. With the implementation of the PFRDA (Exit and Withdrawal) Amendment Regulations, 2025, NPS has become more flexible and beneficial than ever before. In this article, we will explore in detail how these changes will impact your financial situation and future planning.
What has changed for the private sector
The government’s goal is to make NPS more attractive to the general public so that people do not hesitate to invest for their old age. Following the new amendments, private sector subscribers will now have greater control over their funds. Previously, the lock-in period required a minimum of five years after opening an account; this requirement has been completely removed.
Furthermore, the age limit for maintaining investments has been raised from 75 to 85, allowing even older investors to grow their funds over a longer period. Approximately 17.5 million non-government employees in India are covered by this scheme, and these new rules will directly benefit them.
No more money worries after retirement
The most revolutionary change in the NPS exit rules is the ‘exit ratio’. Under the old rules, when a subscriber retired, they had to invest at least 40% of their total deposit to purchase an annuity. An annuity is the portion that the government retains in the pension plan to provide a monthly pension. This meant you could only withdraw 60% of your funds as a lump sum.
But now, the PFRDA has increased this limit to 80%. Now, individuals in the private sector can withdraw 80% of their total savings directly into their bank account, leaving only 20% for a pension. This is ideal for those who want to build a house, repay debt, or invest in a major project soon after retirement.
100% Withdrawal in Special Circumstances
The new rules also specify certain circumstances where you can withdraw all your funds at once. If an investor decides to renounce Indian citizenship and settle abroad, they can withdraw their entire NPS corpus at once. Similarly, if the investor dies, the entire corpus will go to their nominee or legal heir. If an investor goes missing and is presumed dead, an initial 20% of the corpus will be immediately disbursed to their family as interim relief.
Funds of ₹8 lakh to ₹12 lakh
The rules have also been significantly simplified for subscribers whose total NPS funds are between ₹8 lakh and ₹12 lakh. Such investors can now withdraw up to ₹6 lakh directly without any hassle. However, they must keep the remaining amount invested in a pension scheme for at least 6 years to ensure a stable monthly income in the future. This rule is designed to provide financial stability to small and medium-sized investors.
Will government employees benefit
It is important to note that all these significant changes apply only to the private and non-government sectors. The rules for government employees remain as strict and rigid as before. They still have a five-year lock-in period, and they must continue to contribute 40% of their contribution to an annuity even after retirement (age 60). Government employees can withdraw 100% of their funds only if their total corpus is less than ₹5 lakh.