The Pension Fund Regulatory and Development Authority (PFRDA) has introduced new retirement income options under the National Pension System (NPS), giving subscribers more flexibility in how they receive money after retirement.
The new Retirement Income System (RIS) and drawdown options are designed to help retirees receive regular payouts while keeping part of their pension money invested for future growth.
The move is expected to benefit both government and private sector NPS subscribers looking for a more flexible retirement plan.
What Is the New Retirement Income System (RIS)?
Under the new system, retirees will not have to withdraw their entire pension corpus at once or immediately lock a large amount into annuity plans.
Instead, subscribers can choose phased withdrawals from their pension savings after retirement.
This means retirees can receive money regularly:
Monthly
Quarterly
Annually
The payouts can continue until the age of 85 or for a duration selected by the subscriber at the time of exiting NPS.
Importantly, the new system does not affect the mandatory annuity requirement under NPS.
Subscribers will still need to use 20% or 40% of the corpus for annuity purchase, depending on the category rules.
How the Investment Will Continue After Retirement
One of the key features of RIS is that a portion of the retirement corpus will continue to remain invested even after retirement.
Under the new structure:
Equity exposure will gradually reduce from 35% at age 60
It will slowly fall to 10% by age 75
The 10% allocation will continue till age 85
This approach is aimed at balancing regular income with long-term growth potential.
Two Drawdown Options Available
Subscribers can choose from two payout methods at the time of closing their NPS account.
Systematic Payout Rate (SPR)
This will be the default option.
Under SPR, subscribers receive periodic payouts from their retirement corpus while the remaining amount continues to stay invested.
Systematic Unit Redemption (SUR)
In this option, equal units are redeemed periodically to provide payouts to the retiree.
Once a subscriber selects a drawdown option, fresh contributions to the pension account will stop.
What Happens to the Remaining Money?
If a subscriber passes away during the payout period, the remaining balance in the account will be paid according to PFRDA rules after adjusting scheduled payouts.
Under the SPR option, some residual corpus may still remain at the end of the payout period.
Subscribers can then choose to:
Withdraw the remaining amount as a lump sum
Use it to purchase an annuity for additional pension income
Why This Change Matters
The new system gives retirees greater control over their pension savings and income planning.
Instead of locking most of the money into fixed annuity products immediately after retirement, subscribers now have the flexibility to withdraw funds gradually while still allowing part of the corpus to grow.
For many NPS investors, especially those looking for regular income along with better long-term returns, the new retirement payout options could make post-retirement financial planning more flexible and practical.
