When the NPS regulator PFRDA introduced on twelfth Dec 2025 that the necessary annuity requirement for non-government subscribers had been decreased from 40% to twenty%, I additionally assumed that the minimal 15-year lock-in interval utilized to all such subscribers.
Since our article – NPS reduces annuity requirement to twenty% – do you have to open an NPS account? – A number of readers had expressed doubt about whether or not the 15-year exit rule applies to company NPS subscribers.
They’re proper. I missed an vital clause within the round linked above.
The round stated “Non-Authorities Sector Subscriber” means any subscriber underneath the Nationwide Pension System aside from a Authorities sector subscriber”
It then went on to say
“4. Exit from the Nationwide Pension System for non-government sector subscribers. – (a) the place a subscriber workouts the selection of exit upon having subscribed to the Nationwide Pension System for a interval not lower than fifteen years or such different increased interval stipulated in accordance with the provisions of such scheme, or upon attaining the age of sixty years; or upon superannuation or retirement in accordance with the phrases and circumstances relevant to such subscriber by advantage of his employment, then at the very least twenty p.c of the collected pension wealth of such subscriber shall be mandatorily utilized for buy of annuity offering
for a month-to-month or another periodical pension, and the stability of the collected pension wealth shall be paid to the subscriber in a lump sum or by means of periodic payouts within the type of systematic lump sum withdrawal, systematic unit redemption or in accordance with different choices authorised by the Authority.
So I assumed the 15-year exit applies to company NPS as nicely. Nevertheless, proper at first of the round, there’s a clause that claims
““Exit” for the aim of those rules shall imply the next:
ii) having subscribed to a pension scheme for a interval of not lower than fifteen years or such different increased interval stipulated in accordance with provisions of such scheme, however shall not apply to a scheme subscribed to on account of employment of any nature
This means that, whereas the 20% minimal annuity rule applies to company NPS, the exit clause stays as earlier than: retirement or superannuation.
To simplify, if the collected corpus is larger than Rs. 12 lakhs, as much as 80% of the corpus may be withdrawn* and 20% annuitised, supplied
- The federal government or company subscriber reaches retirement age
- All-citizen mannequin subscribers keep within the scheme for at the very least 15 years.
- Or upon bodily incapacitation as per regulation 4(1)(d)
* For withdrawal choices, see NPS reduces annuity requirement to twenty% – do you have to open an NPS account?
Now a very powerful query is: can I’ve company NPS for a number of years, then swap to the all-citizens mannequin (after quitting), after which exit after 15Y? For instance, keep salaried for 14Y, swap to the all-citizens mannequin for a 12 months, and exit.
My understanding (I might be unsuitable, or future circulars might change this) is that this looks as if a legitimate technique. Howeve one mustn’t financial institution on this whereas selecting NPS.
Primarily based on this revised understanding, we suggest selecting NPS provided that you want to be a company worker all of your working life.
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