Major NPS Changes in December 2025: What It Means for Your Retirement
December has brought some really interesting changes to how Indians can save for retirement. PFRDA, the body that regulates pensions, has rolled out several amendments that give you more control over your money. Whether you're already contributing to the National Pension System or thinking about starting, here's what's different now.
Key Changes to NPS Exit and Withdrawal Rules
Here's a comprehensive comparison of what has changed in the PFRDA regulations:
| Particulars | Existing guidelines | Revised guidelines |
|---|---|---|
| Entry and Exit Age | ||
| Entry and Exit Age | Maximum entry age up to 70 years; exit age up to 75 years. | Entry and exit age increased to 85 years. |
| Definition of Accumulated Pension Wealth | ||
| Accumulated Pension Wealth | Means the monetary value of the pension investments accumulated in the Permanent Retirement Account of a subscriber under the National Pension System. | Means the monetary value of investments that have accumulated in each individual pension account of a subscriber under the National Pension System. |
| Exit in case of more than one individual pension account | ||
| Exit in case of more than one individual pension account | - | Subscriber with more than one individual pension account → Exit and closure of each individual pension account shall be separate. |
| Non-Government Sector - Common Schemes (CS) & Multiple Scheme Framework (MSF) | ||
| MSF | - | Exit provisions of MSF incorporated into regulations under non-government sector, as applicable for All Citizen Model. |
| Lock-in period | All Citizen Model: Minimum subscription (Lock-in) period → 5 years | All Citizen Model (CS & MSF): 5-year minimum subscription (lock-in) period removed |
| Normal Exit | All Citizen Model: Vesting period → Till 60 years of age to be eligible for normal exit | All Citizen Model (CS & MSF): Vesting period → 15 years or any higher period stipulated under a scheme; or till 60 years of age (whichever is earlier). |
| Non-Government: 60% lumpsum; 40% annuity | Non-Government (CS & MSF): 80% lumpsum; 20% annuity | |
| Non-Government: 100% lumpsum if corpus ≤ ₹5 lakh. | Non-Government (CS & MSF): For corpus up to ₹12 lakh: a) ≤ ₹8 lakh → 100% lumpsum. b) > ₹8 lakh ≤ ₹12 lakh: i) Up to ₹6 lakh → As lumpsum. ii) Balance → SUR (min. 6 years) or annuity or other permitted payout. For any corpus → 80% lumpsum & 20% annuity applies. |
|
| Premature Exit | Non-Government: 20% lumpsum; 80% annuity | Non-Government (CS & MSF): 20% lumpsum; 80% annuity; (Remains same) |
| Non-Government: 100% lumpsum if corpus ≤ ₹2.5 lakh. | Non-Government (CS & MSF): Limit revised to ≤ ₹5 lakh | |
| Exit due to Death | Non-Government: 100% lumpsum | Non-Government (CS & MSF): 100% lumpsum; (Remains same) |
| Non-Government: 100% lumpsum permitted. Option for annuity, if desired. | Non-Government (CS & MSF): 100% lumpsum permitted; (Remains
same) Additionally, option for availing SUR (min. 6 years) or annuity or other permitted payout. |
|
| Automatic continuation | ||
| Automatic continuation | Subscriber to intimate 15 days prior to 60 / superannuation for continuation (Govt) or deferment of annuity and/or lumpsum (Govt & Non-Govt). | 15-day prior intimation requirement removed across sectors. |
| Individuals joining after age of 60 years | ||
| Normal Exit | Vesting period → 3 years to be eligible for normal exit | Vesting Period removed |
| 60% lumpsum; 40% annuity | 80% lumpsum; 20% annuity | |
| 100% lumpsum if corpus ≤ ₹5 lakh. | Limit revised to ≤ ₹12 lakh | |
| Premature Exit | 20% lumpsum; 80% annuity | Not Applicable (as vesting period has been removed) |
| Exit due to Death | 100% lumpsum | 100% lumpsum; (Remains same) |
| Partial Withdrawal (All sectors) | ||
| Limit for Partial withdrawal | Available after subscribing to minimum of 3 years. | Remains same. |
| Up to 25% of own contribution | Remains same. | |
| For subsequent partial withdrawals, only incremental own contributions made from the date of the previous partial withdrawal are considered for calculation. | Remains same. | |
| Frequency of Partial Withdrawal | During the tenure of subscription (i.e. before exit) → a) Frequency: 3 times. b) Interval not stipulated between two withdrawals |
i) Before 60 years age / superannuation (whichever later): a) Frequency: 4 times b) Interval: 4 years between two PWs. ii) Post 60 years age / superannuation (whichever later): a) Frequency: NA b) Interval: 3 years between two PWs of an amount not exceeding 25% of: i) Contribution, in case of only one contribution stream. ii) Own contribution, in case of more than one contribution stream. |
| Purpose of Partial Withdrawal | Purchase or construction of a residential house permitted if subscriber does not already own a house (other than ancestral property). | No change, but additionally clarified it as a one-time withdrawal. |
| Treatment of specified illness limited to a comprehensive list of specified critical illnesses (for subscriber / spouse / children / parents). | Broadened to medical treatment/hospitalization without a specified list (for subscriber/spouse/children/parents). | |
| Skill development, re-skilling, self-development activities (for subscriber). | Removed | |
| Establishing a start-up or own venture (for subscriber). | Removed | |
| New purpose | New purpose added: Settlement of a financial obligation of the subscriber taken from a regulated financial institution against lien/charge on NPS account. | |
What's Happening with Scheme A?
If you're invested in NPS Scheme A (Alternative Investment Fund), there's an important deadline. PFRDA is merging Scheme A with Schemes C (Corporate Bonds) and E (Equity).
You have until December 25, 2025, to switch your money from Scheme A to other asset classes without paying any extra charges. After that, the merger will happen automatically. The merger gives your money access to larger, more diversified portfolios.
Tax Advantages Still Make NPS Attractive
Let's talk about the tax benefit of NPS because this is still one of its biggest selling points.
Under the old tax regime, you can claim up to ₹2 lakh in deductions:
- ₹1.5 lakh under Section 80C
- Another ₹50,000 exclusively for NPS under Section 80CCD(1B)
- Plus, employer contributions up to 14% of basic salary
Important note on withdrawal taxation: While PFRDA now allows you to withdraw up to 80% as a lump sum, current income tax laws still provide that only 60% of your total corpus is tax-free upon exit. The extra 20% (between 60% and 80%) might be taxable until the income tax rules are updated to match these new limits.
Individual contribution deductions are only available under the old tax regime. However, employer contributions under Section 80CCD(2) work under both tax regimes.
What Should You Do Now?
If you're in Scheme A:
Decide before December 25th whether you want to switch to Scheme C, E, or G.
If you're close to retirement:
Remember that while you can withdraw 80%, only 60% will be tax-free until tax laws are updated. Plan your post-retirement income keeping this in mind.
If you haven't started yet:
You can now open an NPS account online with Integrated easily. Our team can help you understand which scheme mix works for your age and risk appetite.
Note: Calculate your tax benefits under both old and new regimes to see what works best for you.
Conclusion
These December 2025 changes make NPS more flexible and subscriber-friendly. The removal of the 5-year lock-in for private sector employees, higher lump-sum withdrawal limits, and extended investment age all give you more control.
Whether you're just starting your career or nearing retirement, it's worth reviewing how these changes affect your situation. At Integrated, we're here to help you understand these updates and figure out the best retirement strategy for your goals.
Disclaimer: This blog is for educational and informational purposes only and should not be considered financial advice. Tax benefits are subject to applicable laws and may change.