PFRDA Lowers Mandatory Annuity to 20% for Non-Gov NPS Subscribers

The PFRDA has amended the National Pension System (NPS) regulations for non-government subscribers, reducing the mandatory annuity purchase from 40% to 20%. This change allows these subscribers to withdraw up to 80% of their accumulated pension corpus as a lump sum at exit, enhancing financial flexibility and control over pension wealth usage. Government sector subscribers remain subject to the 40% annuity requirement. The revised framework sets specific corpus thresholds to permit full or partial lump sum withdrawals. Subscribers with a corpus up to Rs 8 lakh can withdraw 100%, while those with a corpus between Rs 8 lakh and Rs 12 lakh may withdraw up to Rs 6 lakh as a lump sum, with the balance subject to annuity or structured withdrawals. Those exceeding Rs 12 lakh must comply with the 20% annuity rule, allowing up to 80% lump sum withdrawal. Tax implications accompany the increased withdrawal limit: while 60% of the NPS corpus withdrawn as a lump sum remains tax-exempt, the additional 20% withdrawal under the new rule is taxable per prevailing income tax slabs. This regulatory update impacts pension fund management, retirement planning, and taxation strategies for non-government NPS participants.