By IndiaHub 
Below are some of the major updates of 2025 rolled out by the Pension Fund Regulatory and Development Authority (PFRDA) that make NPS more flexible, attractive, and better aligned with what people need for retirement.
Increased withdrawal limit: More cash, less lock-in
Non-government subscribers with a corpus exceeding Rs 12 lakh can now withdraw as much as 80% of their savings in a lump sum, with only 20% required to be annuitised. Earlier, you could only take out 60% as cash, while 40% had to go into buying an annuity.
“Increasing the cash exit limit from 60 percent to 80 percent is one of the most practical changes in the 2025 NPS exit framework,” explains Chakravarthy V., Co-founder and Executive Director, Prime Wealth Finserv.
“Earlier, non-government subscribers had to annuitise 40 percent of their corpus, which often felt restrictive because retail annuity rates are typically modest after tax. Today, the 80 percent cash option gives you far more control over lump sum use,” he adds.
New withdrawal slab and 100% access for smaller corpus
Additionally, the government has also introduced a completely new withdrawal framework based on your corpus size:
- If your corpus is less than Rs 8 lakh: You can withdraw 100% as a lump sum and is especially helpful for people with smaller savings who need full access to their money.
- If your corpus is between Rs 8 lakh and Rs 12 lakh: You now have three options:
- Withdraw up to Rs 6 lakh immediately and use Systematic Unit Redemption (SUR) for the rest over at least 6 years
- Withdraw up to Rs 6 lakh and buy an annuity with the remaining amount.
- For non-government subscribers: Withdraw 80% as lump sum and buy annuity with at least 20%.
- For government subscribers: Withdraw 60% as lump sum and buy annuity with at least 40%.
“Under the updated NPS exit rules, the way you take money at retirement now depends on the size of your total pension corpus,” explains Chakravarthy. “Small savers get full liquidity, mid-size savers get a blend of cash and structured payouts, and large corpora retain an income floor through annuity or systematic draws. This gives retirees more control over how and when they access their money.
Also Read: Major NPS rule change: 80% withdrawal from retirement corpus allowed at exit, 100% in some cases
Systematic Unit Redemption (SUR): New withdrawal method
PFRDA has introduced Systematic Unit Redemption, allowing subscribers to withdraw their corpus in a phased manner instead of a single lump sum. You can now withdraw units gradually over at least six years.
“Instead of taking a single lump sum, SUR lets you redeem a fixed number of units every month or quarter, creating a steady cash flow. This is different from simply asking for a rupee amount each time: SUR spreads exits across multiple NAV cycles automatically, which reduces the risk of selling everything on one day at a low price.” says Chakravarthy.
Increased age limit: Stay invested until 85
The maximum age to remain invested in NPS has been raised to 85 years, up from 75. This is a game-changer for people who want to keep their money growing or don’t need immediate withdrawals at 60.
“Extending the NPS age limit to 85 reflects the reality of how retirement is changing in India. Many professionals, consultants, and business owners now continue earning well into their 60s and 70s, either through choice or necessity. By allowing subscribers to remain invested longer, NPS supports continued, low-cost retirement accumulation instead of forcing an early exit.” Atish Jain, CEO at Choice Connect, points out.
More flexible partial withdrawals
Before turning 60: You can now make partial withdrawals up to four times (increased from three), with a minimum gap of four years between withdrawals. You can withdraw up to 25% of your contributions for specific needs like education, marriage, buying a home, or medical emergencies.
After turning 60: If you choose to stay invested beyond retirement age, you can make partial withdrawals with a minimum gap of three years between successive withdrawals.
“Enhanced pre- and post-retirement withdrawal flexibility addresses one of the long-standing concerns around NPS – limited access during key life stages,” notes Jain. “Structured withdrawal options, including phased redemptions post-retirement, make NPS easier to integrate into broader financial planning.”
Also Read: EPF vs PPF vs NPS: Which retirement investment works best for you?
Multiple schemes under one account
Non-government subscribers can now hold and manage multiple schemes under a single PRAN (Permanent Retirement Account Number). This means you can split your money across different fund managers or investment strategies within your NPS account.
But more choice brings more complexity, as your broader portfolio might have similar exposures or hidden concentration risks and NPS doesn’t provide tools to monitor this holistically, says Chakravarthy.
Jain suggests keeping it simple, “Typically, two to three schemes – such as a higher-equity option combined with a balanced or conservative strategy – are sufficient. Rebalancing once a year, or during major life-stage changes, is generally adequate.”
100% Equity Option: High Risk, High Reward
From October 2025, private, corporate, and self-employed subscribers can allocate up to 100% of contributions to equities under the Multiple Scheme Framework (MSF), previously capped at 75%.
Note that switching between MSF schemes is restricted for the first 15 years or until age 60, though you can switch back to common schemes anytime.
This option suits one type of investor: someone early in their career who’s confident in long-term equity growth, explains Chakravarthy. For investors in their 30s or early 40s with 20+ years until retirement, this enables uninterrupted equity exposure. “Historically, Indian equities have delivered 10–12% returns over 15-year periods – so the time frame makes sense,” he adds.
As retirement nears, though, risk must decrease. Chakravarthy suggests “a phased transition – say shifting 10–15% from equity to debt or government securities every 2–3 years starting at age 50. NPS allows one switch per year, which is sufficient if you plan. The key is not just locking into equity early, but also exiting it smartly at the right time.”
Now invest in gold, REITs, and more
New rules now allow NPS equity funds to invest in gold and silver ETFs, REITs, equity AIFs, and even participate in IPOs. The combined investment in gold and silver ETFs, along with Real Estate Investment Trust (REIT) units and equity-focused Alternative Investment Funds (AIFs), is capped at 5% of the overall equity allocation.
“These assets respond differently to economic shifts. Gold ETFs typically rise during inflation or geopolitical turmoil. REITs generate income from commercial real estate, which doesn’t always track stock markets. AIFs may offer private equity or structured credit exposure outside listed markets.” says Chakravarthy.
Still, he urges caution that diversification here is limited, “Not just because of the 5% cap, but also due to liquidity and transparency issues, especially with AIFs.”
Also Read: Revised NPS rules: 10 key changes you must know about NPS accumulation, growth and withdrawals
What happened to scheme A?
If you were invested in Scheme A (which focused on alternative assets like infrastructure), you need to take action. The regulator has asked subscribers of Scheme A (Tier 1) to switch to Scheme C (corporate bonds) or Scheme E (equity) by December 25, 2025.
This was done as Infrastructure bonds were difficult to sell, and few subscribers opted for the scheme led to less money flowing in and less diversification.
“If your retirement is 10–15 years away, equity can still play a significant role. Scheme E gives you market-linked returns but comes with volatility. If you’re closer to retirement or risk-averse, Scheme C is a better fit – offering more stable returns (typically 6.5–8.5%) from AAA-rated or high-quality corporate debt.”
Other significant updates that have made NPS more attractive to investors include:
- Removal of 5-year lock-in: PFRDA has removed the mandatory five-year lock-in period for non-government NPS subscribers.
- Loan facility against NPS corpus: NPS accounts can now be pledged to obtain loans from regulated financial institutions, with lien restricted to up to 25% of the subscriber’s own contribution.
- NPS Vatsalya tax benefits: The Union Budget 2025 extended tax benefits to NPS Vatsalya contributions – parents can claim up to Rs 50,000 deduction under Section 80CCD(1B) in addition to Rs 1.5 lakh under Section 80C.
- Citizenship renunciation exit provision: If an NPS subscriber renounces Indian citizenship, they can close their account and withdraw the entire corpus as lump sum.
- Family Protection Provisions:
- If a subscriber passes away before purchasing an annuity or withdrawing funds, the nominee or legal heir receives 100% of the corpus, with no annuity obligation.
- If a subscriber is declared legally dead after being reported missing, the nominee receives 20% of the corpus immediately as interim relief. The balance is released when the subscriber is officially declared missing and presumed dead under the Bharatiya Sakshya Adhiniyam, 2023.
The 2025 NPS changes represent a fundamental shift from a one-size-fits-all system to a more flexible retirement framework. You now have more control over how much cash you can withdraw, more time to stay invested, more investment options, and better ways to access your money gradually.
For most people, the answer to whether NPS has become better is yes – but only if you use these new features wisely. As Jain puts it: “NPS should form the foundation of retirement planning, but it cannot substitute for accessible savings, adequate insurance, or goal-specific investments.”
With that balanced approach, the 2025 changes make NPS a significantly more attractive and practical tool for building your retirement corpus.