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PFRDA revamping National Pension System with flexible schemes, 100% equity option, easier exits, higher withdrawal limits, and extended joining age.
NPS subscribers will be able to invest in more than one scheme per tier, giving them wider choices.
The National Pension System (NPS) is set for a major revamp after the Pension Fund Regulatory and Development Authority (PFRDA) unveiled a new scheme framework on September 16. The proposal, which is aimed at making the retirement savings plan more flexible and attractive, includes sweeping changes in investment choices, exit rules, and withdrawal options.
What’s New?
- Multiple Schemes: Pension fund managers (PFMs) can now launch more than one tailored scheme, compared to just one earlier.
- 100% Equity Option: PFMs will be allowed to offer schemes with full equity exposure (versus the earlier 75% cap), from October 1, 2025.
- Multiple Investments: Subscribers will be able to invest in more than one scheme per tier, giving them wider choices.
- Common Schemes: The existing NPS schemes will be referred to as ‘common schemes’.
Early Exit Gets Easier
One of the biggest changes is around early exit rules.
- Under the new Multiple Scheme Framework (MSF), the minimum vesting period has been reduced to 15 years. For instance, if someone starts investing at 30 and exits at 45 with a corpus of Rs 50 lakh:
- In the current common scheme, 80% must go into an annuity and only 20% can be withdrawn as a lump sum.
- In the new MSF, only 40% needs to go into an annuity, while 60% can be taken as a lump sum.
This provides much more liquidity and flexibility to investors.
Proposed Big Changes
The Pension Fund Regulatory and Development Authority’s (PFRDA) discussion also suggests several other key tweaks:
- Normal Exit: Currently, 60% of the corpus can be withdrawn as a lump sum, with 40% going into annuities. The new proposal flips this — 80% lump sum, 20% annuity.
- Small Corpus Exit: The withdrawal limit may rise from Rs 5 lakh to Rs 12 lakh.
- Premature Withdrawal: The cap may be raised from Rs 2.5 lakh to Rs 4 lakh.
- Joining Age: Entry age could be extended up to 70 years, with continuation allowed till 85 years.
- Partial Withdrawal: Instead of being capped at 25%, withdrawals could be based on the corpus available at the time of request.
- Frequency: Withdrawals may be allowed up to 6 times before retirement, versus only 3 times currently.
- Loan Facility: Loans against NPS, which are currently not allowed, could become permissible.
Why It Matters
These changes are designed to make NPS more appealing by giving investors higher flexibility and more control over their retirement money. The option of 100% equity investment could attract younger savers seeking higher long-term returns, while relaxed exit rules and partial withdrawal options will help those looking for liquidity.
Taxability
While the new rules are generous, investors should note that under the 80% lump sum withdrawal, only 60% is tax-free. The remaining 20% will be taxed as per the applicable slab.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to personal finance, markets, economy and companies. Having over a decade of experience in financial journalism, Haris h… Read More
September 27, 2025, 09:14 IST
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