The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new post-retirement framework under the National Pension System (NPS), allowing subscribers to receive periodic payouts from their retirement corpus while keeping a portion of their money invested for potential market-linked growth.
In a circular dated May 15, 2026, the regulator launched Retirement Income Schemes (RIS) and drawdown options aimed at improving “cashflow predictability during the retirement phase and corpus longevity of the subscriber”. The move marks a significant shift in how NPS retirees can access their pension savings after retirement.
Until now, most NPS subscribers at retirement could withdraw up to 60 per cent of their corpus tax-free and were required to use at least 40 per cent to purchase an annuity. The lump sum portion was usually taken out at one go. Under the new framework, retirees can instead choose phased withdrawals from the lump sum component, somewhat similar to a systematic withdrawal plan (SWP) in mutual funds.
The regulator said the new structure has been designed to help retirees manage regular income needs without exhausting their corpus too quickly.
What changes for NPS subscribers
The biggest change is the introduction of a drawdown facility from the withdrawable portion of the retirement corpus.
Subscribers can now opt for periodic payouts — monthly, quarterly, or annually from the lump sum amount retained under NPS. These withdrawals will run alongside the mandatory annuity income already required under the pension system.
PFRDA clarified in the circular that the new facility “shall have no impact on the mandatory annuitisation requirement of 20 per cent or 40 per cent of the corpus”. This means the compulsory pension purchase requirement remains unchanged.
The regulator also cautioned subscribers that there is “no guarantee or assurance of fixed payout” under the drawdown framework because the money will continue to remain exposed to market-linked investments.
What is the new Retirement Income Scheme
The Retirement Income Scheme, or RIS, is a dedicated post-retirement investment option under NPS.
Under this structure, the subscriber’s remaining corpus after annuity purchase can stay invested instead of being withdrawn immediately. The regulator believes this may help retirees earn better long-term returns and maintain inflation-adjusted cashflows during retirement.
PFRDA said the RIS would follow an annual glide path model under a scheme called “RIS Steady”.
Under this option, equity exposure will gradually decline with age. The equity allocation will reduce from 35 per cent at age 60 to 10 per cent by age 75, and remain at that level until age 85.
According to the circular, this glide path is aimed at balancing growth and risk during retirement years.
The regulator noted that “gliding path equity participation may ensure a higher growth of the corpus” even as retirees continue to receive periodic payouts.
How the drawdown option will work
Subscribers opting for drawdown can choose one of two payout methods:
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Systematic Payout Rate (SPR) -
Systematic Unit Redemption (SUR)
Under SPR, payouts will depend on the subscriber’s current age and selected drawdown end age. The payout percentage will adjust over time to ensure the corpus lasts through the selected retirement period.
The second method, SUR, works through redemption of a fixed number of units periodically.
PFRDA illustrated the concept with an example of a subscriber retiring at age 60 with an Rs 80 lakh corpus under drawdown.
Assuming a net asset value (NAV) of Rs 10, the subscriber would hold 8 lakh units. If the drawdown period is fixed at 25 years with monthly payouts, the number of units redeemed every month would be calculated as:
“Total number of units at start / drawdown period × payout frequency”.
In the illustration shared by the regulator, this translates to 2,666.67 units redeemed every month.
The actual payout amount, however, will vary depending on market-linked NAV movements.
Why this matters for retirees
The new framework reflects a growing concern among policymakers that retirees may either spend their retirement corpus too quickly or lock excessive amounts into low-yield annuity products.
Traditional annuities offered under NPS often provide fixed pension income but relatively modest returns. By allowing phased withdrawals and continued market participation, PFRDA is attempting to create a more flexible retirement income structure.
For retirees, the model may offer three potential benefits:
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More predictable cashflows after retirement -
Better inflation protection through market participation -
Longer sustainability of retirement savings
However, the structure also introduces market risk into the retirement phase. Since the corpus remains invested, payouts may fluctuate depending on investment performance.
Subscribers choosing the drawdown facility will also be allowed to continue with their existing pension fund manager or switch once every two financial years.
The schemes will be available up to the age of 85 years or any lower age chosen by the subscriber at the time of exit from NPS.
With rising life expectancy and increasing retirement costs, the regulator’s latest move signals a gradual shift from one-time retirement withdrawals towards a more structured income-oriented pension model.
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