Non-government NPS subscribers can now withdraw up to 80% of their retirement corpus as a lump sum on exit—and in some cases up to 100%. That change gives more flexibility, but it also makes planning for a steady post‑retirement income more important. Here’s a clear breakdown of how benefits are paid and what to watch for.
Who this affects
This applies to non-government (private/other) NPS subscribers who hold Tier I accounts. The new allowance means a larger portion of the accumulated corpus may be taken out as a one‑time lump sum at exit. Certain situations may permit a full (100%) withdrawal.
How payouts are normally structured
- Lump sum withdrawal: Subscribers can withdraw a significant portion of their corpus as a single payment on exit—up to 80% in general and up to 100% in specific cases.
- Annuity purchase: When the entire corpus is not withdrawn, the remaining amount is used to buy an annuity from an empanelled insurer. The annuity provides a regular pension payment for life or a fixed term, depending on the plan chosen.
- Monthly pension: The annuity portion translates into a regular income stream. The exact pension depends on the annuity rate, the amount invested in the annuity, age at purchase, and the annuity option selected.
- Premature exit and Tier II accounts: Rules differ for premature exits and for Tier II (voluntary) accounts. Tier II balances are generally more flexible and often fully withdrawable, while premature exit from Tier I may have its own conditions.
- Death benefits: In the event of the subscriber’s death, the corpus and any accumulated returns are typically paid to nominees or legal heirs as per the scheme rules.
Steps to claim your benefits
- Log in to your NPS account or contact your Point of Presence (PoP) or Central Recordkeeping Agency (CRA).
- Submit an exit request with the required documents and specify whether you want a lump sum and/or to purchase an annuity.
- Choose an annuity provider and product if you are using part of the corpus to secure a pension.
- Complete KYC and other formalities; receive the lump sum and start annuity payments as applicable.
Tax and planning considerations
- Tax treatment: Tax rules on lump sums and annuities can change. Check current tax laws or consult a tax advisor before making a decision.
- Income security: A larger lump sum gives liquidity but reduces guaranteed monthly income. Consider longevity risk and living expenses when deciding how much to annuitize.
- Compare annuity options: Annuity rates and features vary across providers—shop around for the best mix of payout rate and features (inflation protection, spouse benefits, etc.).
The expanded withdrawal flexibility makes NPS more adaptable to individual needs. Balance the desire for immediate cash with the need for a stable retirement income—and get professional advice if you’re unsure which option fits your long‑term plan.