New NPS Rules: Exit age increased, higher 100% corpus withdrawal slab & other key changes for government subscribers

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced some major updates for both government and non-government NPS subscribers concerning accumulation, growth and withdrawals. The revised rules, under PFRDA Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025, are designed to offer subscribers more options when it comes to withdrawing their funds.

For government NPS subscribers, some key changes include raising the NPS exit age from 75 years to 85 years, implementing Systematic Unit Redemption (SUR), and increasing the limit for 100% withdrawal to Rs 8 lakh from Rs 5 lakh. Let’s break down the important NPS rule changes for government employees and their potential effects.

Age for NPS exit increased from 75 years to 85 years

Once they reach retirement or superannuation age, government subscriber can now stay within NPS till 85 years of age. At 85, they must purchase an annuity with at least 40% of their retirement savings. They can withdraw rest of the retirement corpus as lump sum or through SUR. However, the requirement to purchase a 40% annuity and the option for 60% lump sum or SUR withdrawal come with specific conditions.

Also Read: Revised NPS rules: 10 key changes you must know about NPS accumulation, growth and withdrawals

Earlier, government employees could stay within NPS until they were 75 years old.

Being able to invest until 85 helps build a larger longer-term corpus, says Anita Basrur, Partner, Sudit K. Parekh & Co. LLP.

When they retire or are discharged from service, government NPS subscribers can now withdraw 100% of their retirement corpus if it is up to Rs 8 lakh. The earlier limit was up to Rs 5 lakh.

“Government employees covered by NPS now have easy withdrawal norms at retirement, especially if their retirement corpus is relatively small,” says Vaibhav Bhardwaj, partner at Khaitan & Co, adding that for corpuses between Rs 8 lakh and Rs 12 lakh, up to Rs 6 lakh can be taken as a lump sum, with the balance subject to annuity or systematic unit redemption over at least six years.

Also Read: NPS tax rules: Will 80% lump sum withdrawal from retirement corpus be tax free?

Systematic unit redemption plan

For the first time, NPS has introduced the concept of Systematic Unit Redemption, allowing a government subscriber to redeem a fixed number of investment units periodically. They can use this withdrawal option under two conditions:

a) Upon retirement and discharge from service and when their accumulated retirement corpus at the time of exit is between Rs 8 lakh and Rs 12 lakh. In this case, the government subscriber can withdraw up to Rs 6 lakh as lump sum and the rest in the form of SUR. In this option, purchasing annuity is not applicable.

b) Upon death of the subscriber, when his corpus is more than Rs 8 lakh and up to Rs 12 lakh. In this case, they can withdraw up to Rs 6 lakh as a lump sum and the rest as SUR.

Basrur says SUR allows guaranteed pension benefits to government NPS subscribers and help mitigate longevity risk.

Also Read: Will Old Pension Scheme return? Finance ministry clarifies stand on NPS, UPS

New corpus slabs introduced for withdrawals

The government has introduced two new withdrawal slabs – up to Rs 8 lakh and another for above Rs 8 lakh up to Rs 12 lakh – to streamline the corpus withdrawal process. Within these two slabs, government NPS subscribers have various options for withdrawing their corpus.

Upon retirement or discharge from service, if their corpus is up to Rs 8 lakh, they can withdraw 100% of their corpus. However, they can also withdraw up to 60% of their corpus as a lump sum and withdraw the rest through SUR.

Also Read: Major NPS rule change: 80% withdrawal from retirement corpus allowed at exit, 100% in some cases

Upon retirement or discharge from service, if their corpus is more than Rs 8 lakh and up to Rs 12 lakh, they have three withdrawal options.

1. They can withdraw up to Rs 6 lakh as lump sum, and the remaining through SUR. The option to purchase an annuity will not be applicable to them under this condition.
2. They can withdraw up to Rs 6 lakh as lump sum, and from the remaining amount, they can purchase an annuity.
3. They can withdraw up to 60% of the corpus in lump sum and purchase an annuity from at least 40% of the corpus.

Exit in case of a missing and presumed dead NPS subscriber

The government has also clarified rules related to pensions given to legal heirs in case the NPS subscriber goes missing or is presumed to be dead. According to the new rule, the nominee(s) or the legal heir(s) of the NPS subscriber identified as missing will be entitled to 20% of the accumulated pension wealth as an interim relief in a lump sum. The balance 80% will remain invested and be paid upon the determination of such subscriber as missing and presumed dead as per the provisions of the Bharatiya Sakshya Adhiniyam, 2023.