For years the rule for leaving the National Pension System at retirement was simple: at least 40% of your corpus had to buy an annuity (a lifelong pension), and you could take the rest as cash. In December 2025, PFRDA notified the Exits and Withdrawals under NPS (Amendment) Regulations, 2025, which changed this for subscribers outside government.
What Changed
| Rule at normal exit | Before | Now (non-government) |
|---|
| Minimum used to buy an annuity | 40% | 20% |
| Maximum lump sum | 60% | 80% |
| Corpus that can be withdrawn fully | Up to ₹5 lakh | Up to ₹8 lakh |
"Normal exit" means reaching 60, retiring, or completing 15 years in NPS. The new limits apply to subscribers under the All Citizen model and corporate NPS. Central and state government employees still need to use at least 40% of the corpus for an annuity.
What It Means in Rupees
Take a corpus of ₹50 lakh at 60, and assume an annuity rate of 6% a year:
- Old 40% rule: ₹20 lakh buys the annuity, paying about ₹10,000 a month, and ₹30 lakh comes as a lump sum.
- New 20% minimum: ₹10 lakh buys the annuity, paying about ₹5,000 a month, and ₹40 lakh comes as a lump sum.
With a corpus of ₹7 lakh, you no longer have to buy any annuity at all. The whole amount can be withdrawn, because it is below the ₹8 lakh limit.
Should You Take the Full 80%?
The 20% figure is a minimum, not a target. You can still put 40%, 60% or even all of your corpus into an annuity. Which is better depends on what else you have:
- An annuity pays for life and you cannot outlive it, but the payout is fixed and usually not linked to inflation. Once bought, it generally cannot be cashed in.
- A larger lump sum gives flexibility to repay a home loan, help children or invest in other instruments, but you carry the risk of spending it too fast or investing it poorly.
- If you have no other pension, such as EPS or a government pension, a bigger annuity is the safer base for monthly expenses.
You also do not have to take the lump sum all at once. The rules allow it to be withdrawn in instalments, which can suit people who want a steady income from the non-annuity part as well.
Before You Decide
Premature exit before 60 follows different, stricter rules, and the tax treatment of withdrawals is set by income tax law rather than by PFRDA, so check both before you plan around a particular figure. The official rules are published on the PFRDA and NPS Trust websites.
To see how your monthly contributions grow and how different annuity percentages change your pension and lump sum, try our NPS calculator below.