Government employees' NPS withdrawal rules 2025: What changes in exit age, annuity and lump-sum payouts explained in 5 points

1. Exit age extended

As PFRDA explains: “A government sector subscriber… shall continue to remain within the National Pension System till the age of eighty-five years until the choice of exit is exercised.”

This gives employees the flexibility to delay annuity purchase or lump-sum withdrawals depending on their retirement planning needs.

2. Retirement/Superannuation

For employees retiring at the normal age, the rules define how much can be withdrawn and how much must be annuitised:

• APW up to ₹8 lakh: Full withdrawal allowed; buying an annuity is optional.

• APW above ₹8 lakh and up to ₹12 lakh: Up to ₹6 lakh can be withdrawn as a lump sum. The remaining balance can be taken through systematic payouts over time or invested in an annuity.

• APW above ₹12 lakh: Maximum 60% withdrawal, and at least 40% must be used to buy an annuity.

• Employees can choose between lump sum, systematic lump sum withdrawal, or systematic unit redemption, depending on their needs and future cash flow requirements.

3. Resignation or removal from service

The rules are stricter for employees who resign, are removed, or dismissed:

• 80% of the APW must go into an annuity, leaving only 20% available for lump sum withdrawal.

Exception: If the APW is ₹5 lakh or less, full withdrawal is allowed, even in cases of resignation or dismissal.

This ensures that employees exiting prematurely still have a stable pension income for the long term.

4. Death of the subscriber

In the unfortunate event of a subscriber’s death before retirement, the regulations ensure that family members and nominees are financially protected:

• Up to ₹8 lakh APW: Nominees/legal heirs can withdraw the full amount.

• APW between ₹8–12 lakh: Up to ₹6 lakh can be withdrawn; the rest goes into systematic payouts or annuity.

• APW above ₹12 lakh: At least 80% must be annuitised, with only 20% payable as a lump sum.

The default annuity ensures lifelong pension coverage for the spouse, and then, if needed, coverage can extend to parents, children, or other legal heirs.

5. Deferred exit options

Subscribers now have the flexibility to defer annuity purchase or lump-sum withdrawal until age 85. PFRDA notes: “Where a subscriber, having deferred the purchase of annuity, dies before such annuity purchase, the default annuity shall mandatorily be purchased by family member(s).”

Exit Scenarios and Utilization of Accumulated Pension Wealth (APW)

This allows retirees to stay invested longer and plan withdrawals according to personal or family financial needs.

• Exit Age Extended: Stay invested in NPS up to 85 years.

• Mandatory Annuity: Minimum 40% of APW must go into annuity at retirement; 80% if exiting prematurely.

• Lump Sum Flexibility: Smaller corpus (≤ ₹8 lakh) can be fully withdrawn.

• Systematic Payout Option: Partial withdrawals can be spread over years through systematic unit redemption.

• Family Protection: In case of death, the default annuity ensures a lifelong pension for the spouse/parents, with the remaining corpus paid to legal heirs.

What's new for non-government subscribers?