The National Pension System (NPS) may become more adaptable for retirees in the coming years. In a move aimed at improving post-retirement income management, the Pension Fund Regulatory and Development Authority (PFRDA) has introduced Retirement Income Schemes (RIS) and drawdown options that allow subscribers to access regular payouts without fully withdrawing their pension corpus, helping it continue to appreciate over time.
In a circular released on May 15, 2026, the regulator formally introduced the new framework.
Under the drawdown option, NPS subscribers will be able to access periodic payments from their lump sum corpus at intervals such as every month, quarter or year, while continuing to receive compulsory annuity payouts.
Retirement Income Schemes (RIS)
According to the PFRDA, the new payout-focused life-cycle option under the NPS has been named the Retirement Income Scheme (RIS). The scheme will allow subscribers to withdraw a portion of their pension savings in phases via drawdown options without affecting the statutory annuitisation norms. The regulator clarified that the requirement to allocate at least 20% or 40% of the corpus towards annuity plans will continue as before.
"However, these withdrawals will have no impact on the mandatory annuitisation requirement of 20% or 40% of the corpus. This ensures that the minimum statutory requirement for a life-long pension remains intact," the PFRDA circular read.
Drawdown Options
Under the new framework, periodic withdrawals from the lump sum portion of accumulated pension savings can be accessed through two routes: the default Systematic Payout Rate (SPR) and the equal-units-based Systematic Unit Redemption (SUR). Subscribers will need to make their choice when closing the pension account, marking the end of fresh contributions.
According to the PFRDA, the drawdown options will apply to both Government and Non-Government Subscribers (NGS) under the National Pension System. Retirees will be able to opt for monthly, quarterly or annual payouts up to the age of 85, depending on the withdrawal plan chosen at the time of exiting the scheme. Subscribers will also have the flexibility to continue with their current pension fund, while fund switching will be allowed once in two financial years.
The SPR mechanism will calculate payouts based on the subscriber's age and the selected drawdown tenure. PFRDA said the payout amount will undergo an annual revision on the subscriber's date of birth, depending on the market-linked value of the drawdown corpus at that time.
For instance, an individual exiting the NPS at 60 and opting for payouts until 85 will initially receive a 4% payout rate, with the percentage increasing progressively as the subscriber ages.
The SUR-Equal Units facility will distribute withdrawals uniformly by redeeming the total unit balance in equal portions throughout the drawdown period. PFRDA explained that a subscriber holding an Rs 80 lakh corpus at a NAV of 10 and opting for monthly payouts over 25 years would witness monthly redemption of around 2,666.67 units.
Benefits
The new framework signals the regulator's growing focus on balancing retirement security with financial flexibility. Policymakers have expressed concerns that many retirees either deplete their savings rapidly after retirement or park too much money in traditional annuities that typically deliver limited returns.
By permitting staggered withdrawals while keeping part of the corpus invested, the PFRDA aims to offer a more dynamic retirement income model.
The revised framework may benefit retirees by delivering more predictable retirement income, helping preserve purchasing power through market-linked growth, and reducing the risk of exhausting savings too early.
However, the continued investment exposure means pension payouts will remain vulnerable to market volatility. Subscribers choosing the drawdown option may continue with their current pension fund manager, with the flexibility to change once every two financial years.
The scheme can continue up to the age of 85 or a lower age chosen at the time of retirement.
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