The Government, through the Pension Fund Regulatory and Development Authority (Exits and Withdrawals under NPS) Amendment Regulations, 2025, has comprehensively liberalised National Pension System (NPS) exit rules across the All-Citizen, Corporate Sector, and Government employee models. Key reforms include removal of the five-year lock-in for premature exit under the All-Citizen Model, elimination of the three-year vesting requirement for subscribers joining after age 60, and permission to exit before 60 after completing 15 years in NPS. Exit options are now corpus-linked: up to ₹8 lakh allows flexible lump-sum or staggered withdrawals with limited annuity; ₹8–12 lakh enables a ₹6 lakh lump-sum with phased withdrawals over at least six years without mandatory annuity; and above ₹12 lakh permits up to 80% lump-sum/SLW with 20% annuity. Premature exit rules are eased by raising the full-withdrawal threshold to ₹5 lakh. Nominees can opt for staggered withdrawals. Government employees retain the 60:40 lump-sum/annuity split, while most flexibilities align with other models.
1. The Government, vide notification dated 16 December 2025, has rolled out major updates to the National Pension System through the PFRDA (Exits and Withdrawals under NPS) Amendment Regulations, 2025.
There are differences in the rules applicable to subscribers under the All-Citizen Model, the Corporate Sector Model, and to Government employees under NPS. Let us understand each of these three models in a simple manner.
2. Rules Specific to the All-Citizen Model. The All-Citizen Model of NPS is available to any Indian citizen aged 18 to 70 years, including self-employed individuals, freelancers, and those whose employers do not offer the Corporate NPS facility
(a) Restriction for the minimum lock-in period of 5 years for premature exit ( irrespective of age at the time of joining ) has been removed.
(b) The minimum vesting period of three years for final exit for those joining NPS after the age of 60 has been removed.
(c ) Subscriber can now exit NPS before attaining the age of 60, provided they have completed 15 years in NPS.
3. Common Rules applicable for Corporate Sector & All- Citizen Model : Under the Corporate Sector Model of NPS, the account is opened through the employer, and both the employee and the employer may contribute to it. This model primarily applies to employees of organisations that have registered with PFRDA as corporate entities
(a) Corpus is less than or equal to Rs. 8 lakhs: The subscriber may either take the full amount at once or withdraw up to 80% in a lump sum or in stages through SLW ( Systematic Lumpsum Withdrawal), while investing the balance 20% in an annuity.
(b) Corpus is more than Rs. 8 lakhs but less than or equal to Rs. 12 lakhs: The subscriber may withdraw Rs.6 lakh as a lump sum. The balance amount must be withdrawn through Systematic Lump-sum Withdrawal (SLW) or Systematic Unit Redemption (SUR) over a minimum period of six years. Under this option, annuity purchase is not mandatory.
Illustration Ms. Neha opts to exit NPS in December 2025 with an accumulated corpus of ₹10 lakh, within the range of ₹8 lakh to ₹12 lakh. She withdraws ₹6 lakh as a lump sum at the time of exit. The remaining ₹4 lakh is withdrawn through Systematic Lump-sum Withdrawal (SLW) / Systematic Unit Redemption (SUR) over a minimum period of six years, i.e., from January 2026 to December 2031. This translates to an average annual withdrawal of approximately ₹66,000, subject to market performance. Under this option, annuity purchase is not mandatory.
Alternatively, Neha may opt for the regular exit route, under which she can withdraw ₹8 lakh (80%) as a lump sum, while the remaining ₹2 lakh (at least 20%) must be used to purchase an annuity.
(c) Corpus is more than Rs 12 lakhs: For subscribers whose NPS corpus at the time of exit is ₹12 lakh or above, the exit rule is straightforward. Up to 80% of the accumulated corpus may be withdrawn either as a lump sum or through Systematic Lump-sum Withdrawal (SLW) / Systematic Unit Redemption (SUR). In comparison, the remaining 20% must be used to purchase an annuity
4. Premature Exit from NPS
(a) The accumulated corpus at the time of premature exit exceeds ₹5 lakh; the existing provisions remain unchanged. In such cases, the subscriber may withdraw up to 20% as a lump sum, while the remaining 80% must be utilised to purchase an annuity.
(b) Significant relaxation has been provided to subscribers whose NPS corpus at the time of premature exit is ₹5 lakh or less. Earlier, this threshold was ₹2.5 lakh.
Under the revised framework, such subscribers now have the option to withdraw the entire corpus, either as a lump sum or through Systematic Lump-sum Withdrawal (SLW) or Systematic Unit Redemption (SUR). Alternatively, they may still opt for the structured route of 20% lump sum and 80% annuity.
5. Staggered Withdrawal Option for Nominees on the Death of a Subscriber: In the unfortunate event of the death of an NPS subscriber, the accumulated corpus is payable to the nominee or legal heir, as applicable. Previously, the nominee was required to withdraw the entire corpus in one lump sum.
With effect from 1 October 2025, this position has been significantly relaxed. The nominee or legal heir is now permitted to opt for Systematic Lump-sum Withdrawal (SLW) / Systematic Unit Redemption (SUR), thereby allowing the corpus to be withdrawn in a staggered manner over a period of time, instead of a one-time withdrawal.
6. Amendments Specific to the Government Employees .
(a) Government employees include Central Government and State Government employees who joined service on or after 1 January 2004 and are covered under the NPS framework.
(b) The exit structure of 60% lump sum and 40% annuity remain unchanged for Government employees. Except for this difference, all other exit-related provisions are broadly similar to those applicable under the All-Citizen Model.
(c) Accordingly, wherever the revised rules provide for an 80% lump sum and 20% annuity for All Citizen subscribers, the corresponding requirement for Government employees will remain 60% lump sum and 40% annuity.
7. Common Points Applicable Across All NPS Models
(a) The exit and withdrawal options under NPS are primarily linked to the size of the accumulated corpus.
(b) Subscribers have the option to choose between lump-sum withdrawal, staggered withdrawal (SLW/SUR), and annuity, subject to applicable limits.
(c ) Continuation in NPS up to 85 years of age is permitted across models, unless specifically restricted.
(d) Nominee / legal heir provisions have been simplified and made more flexible.
(e) Subscribers may avail financial assistance by way of partial withdrawal, subject to prescribed conditions.
(f) Up to 25% of the subscriber’s own contribution can be withdrawn for specified purposes.
(g) Partial withdrawals are permitted multiple times, subject to the applicable rules on frequency and conditions.
(i) Such withdrawals do not require closure of the NPS account and do not affect long-term participation
8. Conclusion: The 2025 amendments have transformed NPS exit rules into flexible, choice-driven options, making the scheme far more practical for subscribers across all models.
Disclaimer: The article is for educational purposes only.
The author can be approached at caanitabhadra@gmail.com
(Republished with amendments)
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