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PFRDA launches new Retirement Income Schemes under NPS, offering flexible drawdown options and periodic payouts up to age 85 while preserving mandatory annuitization
PFRDA Allows Monthly, Quarterly Income Payouts For NPS Subscribers
The Pension Fund Regulatory and Development System (PFRDA) has introduced new retirement schemes (RIS) and drawdown options under the National Pension System (NPS), providing subscribers with more flexible periodic payout options during their decumulation phase while continuing to support corpus appreciation.
It offers a regular income after retirement to subscribers, while keeping part of the money invested for growth. It also reduces the burden to lock large amounts into annuity plans immediately.
How Will It Work?
Under the RIS, subscribers are provided the flexibility to select a phased withdrawal of their designated pension corpus through any drawdown option. These withdrawals will not have impact on the mandatory annuitization requirement of 20% or 40% of the corpus, ensuring that the minimum statutory requirement for a life-long pension remains intact.
These drawdown options will be available to government and non-government subscribers (NGS) under NPS.
The subscribers will be allowed to receive payouts on a periodical basis viz. monthly, quarterly or annually, for a period up to 85 years of age or as per the choice exercised by the subscriber, at the time of their exit from NPS.
What Are Features of RIS and Drawdown Options?
Under the RIS, there would be a continuous decline in equity exposure from 35 per cent at the age of 60 to a floor of 10 per cent at the age of 75, which will be held constant thereafter until age 85.
The subscribers will receive periodic payouts from the lumpsum portion of their accumulated pension wealth through the following drawdown options. The choice of the drawdown option will be made by the subscriber at the time of closure of a pension account after which fresh contributions will stop.
Subscribers may opt for any one of the following options for the drawdown:
a) Systematic Payout Rate (SPR) (Default)
b) Systematic Unit Redemption- SUR-Equal Units
If a subscriber using the drawdown facility passes away during the payout phase, the remaining balance in their account, after accounting for any scheduled payments already made, will be paid in accordance with the PFRDA.
Under the SPR option of systematic income drawdown, there may be certain residual corpus left from the component utilized for obtaining the payouts at the end of the drawdown period.
The subscriber will have the choice to:
a) Withdraw entire residual corpus as lump sum.
b) Combine the residual corpus with the annuity component (if deferred) to purchase an annuity in line with the PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025, as amended from time to time.
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