\n\tThe Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new post-retirement framework under the National Pension System (NPS), allowing subscribers to receive periodic payouts from their retirement corpus while keeping a portion of their money invested for potential market-linked growth.<\/p>\n
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\n\tIn a circular dated May 15, 2026, the regulator launched Retirement Income Schemes (RIS) and drawdown options aimed at improving \u201ccashflow predictability during the retirement phase and corpus longevity of the subscriber\u201d. The move marks a significant shift in how NPS retirees can access their pension savings after retirement.<\/p>\n
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\n\tUntil now, most NPS subscribers at retirement could withdraw up to 60 per cent of their corpus tax-free and were required to use at least 40 per cent to purchase an annuity. The lump sum portion was usually taken out at one go. Under the new framework, retirees can instead choose phased withdrawals from the lump sum component, somewhat similar to a systematic withdrawal plan (SWP) in mutual funds.<\/p>\n
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\n\tThe regulator said the new structure has been designed to help retirees manage regular income needs without exhausting their corpus too quickly.<\/p>\n
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\n\tWhat changes for NPS subscribers<\/p>\n
\n\tThe biggest change is the introduction of a drawdown facility from the withdrawable portion of the retirement corpus.<\/p>\n
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\n\tSubscribers can now opt for periodic payouts \u2014 monthly, quarterly, or annually from the lump sum amount retained under NPS. These withdrawals will run alongside the mandatory annuity income already required under the pension system.<\/p>\n
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\n\tPFRDA clarified in the circular that the new facility \u201cshall have no impact on the mandatory annuitisation requirement of 20 per cent or 40 per cent of the corpus\u201d. This means the compulsory pension purchase requirement remains unchanged.<\/p>\n
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\n\tThe regulator also cautioned subscribers that there is \u201cno guarantee or assurance of fixed payout\u201d under the drawdown framework because the money will continue to remain exposed to market-linked investments.<\/p>\n
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\n\tWhat is the new Retirement Income Scheme<\/p>\n
\n\tThe Retirement Income Scheme, or RIS, is a dedicated post-retirement investment option under NPS.<\/p>\n
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\n\tUnder this structure, the subscriber\u2019s remaining corpus after annuity purchase can stay invested instead of being withdrawn immediately. The regulator believes this may help retirees earn better long-term returns and maintain inflation-adjusted cashflows during retirement.<\/p>\n
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\n\tPFRDA said the RIS would follow an annual glide path model under a scheme called \u201cRIS Steady\u201d.<\/p>\n
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\n\tUnder this option, equity exposure will gradually decline with age. The equity allocation will reduce from 35 per cent at age 60 to 10 per cent by age 75, and remain at that level until age 85.<\/p>\n
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\n\tAccording to the circular, this glide path is aimed at balancing growth and risk during retirement years.<\/p>\n
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\n\tThe regulator noted that \u201cgliding path equity participation may ensure a higher growth of the corpus\u201d even as retirees continue to receive periodic payouts.<\/p>\n
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\n\tHow the drawdown option will work<\/p>\n
\n\tSubscribers opting for drawdown can choose one of two payout methods:<\/p>\n
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\n\t\tSystematic Payout Rate (SPR)
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\n\t\tSystematic Unit Redemption (SUR)
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\n\tUnder SPR, payouts will depend on the subscriber\u2019s current age and selected drawdown end age. The payout percentage will adjust over time to ensure the corpus lasts through the selected retirement period.<\/p>\n
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\n\tThe second method, SUR, works through redemption of a fixed number of units periodically.<\/p>\n
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\n\tPFRDA illustrated the concept with an example of a subscriber retiring at age 60 with an Rs 80 lakh corpus under drawdown.<\/p>\n
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\n\tAssuming a net asset value (NAV) of Rs 10, the subscriber would hold 8 lakh units. If the drawdown period is fixed at 25 years with monthly payouts, the number of units redeemed every month would be calculated as:<\/p>\n
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\n\t\u201cTotal number of units at start \/ drawdown period \u00d7 payout frequency\u201d.<\/p>\n
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\n\tIn the illustration shared by the regulator, this translates to 2,666.67 units redeemed every month.<\/p>\n
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\n\tThe actual payout amount, however, will vary depending on market-linked NAV movements.<\/p>\n
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\n\tWhy this matters for retirees<\/p>\n
\n\tThe new framework reflects a growing concern among policymakers that retirees may either spend their retirement corpus too quickly or lock excessive amounts into low-yield annuity products.<\/p>\n
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\n\tTraditional annuities offered under NPS often provide fixed pension income but relatively modest returns. By allowing phased withdrawals and continued market participation, PFRDA is attempting to create a more flexible retirement income structure.<\/p>\n
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\n\tFor retirees, the model may offer three potential benefits:<\/p>\n
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\n\t\tMore predictable cashflows after retirement
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\n\t\tBetter inflation protection through market participation
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\n\t\tLonger sustainability of retirement savings
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\n\tHowever, the structure also introduces market risk into the retirement phase. Since the corpus remains invested, payouts may fluctuate depending on investment performance.<\/p>\n
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\n\tSubscribers choosing the drawdown facility will also be allowed to continue with their existing pension fund manager or switch once every two financial years.<\/p>\n
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\n\tThe schemes will be available up to the age of 85 years or any lower age chosen by the subscriber at the time of exit from NPS.<\/p>\n
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\n\tWith rising life expectancy and increasing retirement costs, the regulator\u2019s latest move signals a gradual shift from one-time retirement withdrawals towards a more structured income-oriented pension model.<\/p>\n","protected":false},"excerpt":{"rendered":"
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