PFRDA Introduces Retirement Income Schemes and New Drawdown Options Under NPS

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced Retirement Income Schemes (RIS) and new drawdown options under the National Pension System (NPS), aimed at giving subscribers more flexibility in receiving pension payouts after retirement.

The initiative has been introduced in line with the amended NPS exit and withdrawal regulations and seeks to provide periodic income options while allowing the retirement corpus to continue participating in market-linked growth.

Flexible Periodic Payments Up to Age 85

Under the new framework, both Government and Non-Government NPS subscribers can choose to receive payouts from their accumulated pension wealth on a monthly, quarterly, or annual basis. Payments can continue up to the age of 85 or as selected by the subscriber at the time of NPS exit.

PFRDA clarified that these phased withdrawals will not affect the mandatory annuity purchase requirement of 20% or 40% of the pension corpus, depending on the applicable category. The minimum requirement for life-long pension through annuity therefore remains unchanged.

New Retirement Income Scheme: RIS Steady

The new payout framework introduces a dedicated life-cycle scheme called Retirement Income Scheme (RIS).

Initially, one option named RIS Steady has been introduced. Under this model:

• Equity exposure starts at 35% at age 60
• Equity allocation gradually reduces every year
• Equity exposure reaches 10% at age 75
• The allocation then remains fixed up to age 85

The purpose of this glide path is to maintain cash flow stability while reducing the risk of early depletion of retirement savings.

Two Drawdown Options Available

Subscribers can select one of the following drawdown methods while closing the pension account:

1. Systematic Payout Rate (SPR) – Default Option
Under this option, payout amounts are calculated based on age and the market value of the drawdown corpus. The payout amount will be reset every year on the subscriber’s birthday.

2. Systematic Unit Redemption (SUR) – Equal Units
Under this method, pension units are redeemed in equal instalments over the selected drawdown period.

Once a drawdown option is chosen and the account is moved into payout mode, fresh NPS contributions will stop.

Other Key Features

The guidelines also provide several operational provisions:

• Existing pension funds can continue after opting for drawdown
• Subscribers can change their pension fund once every two financial years
• Periodic payouts begin from the month following successful processing of the request
• Asset rebalancing will take place based on age and market value of the corpus
• Existing charges applicable to such schemes will continue

Rules in Case of Subscriber Death

If a subscriber using the drawdown facility dies during the payout phase, the remaining balance in the account will be handled as per existing NPS exit and withdrawal regulations.

Residual Corpus Options

Under the SPR option, some residual corpus may remain after the drawdown period ends. Subscribers will have two choices:

• Withdraw the remaining amount as a lump sum
• Use the residual amount with annuity funds (where applicable) for annuity purchase as per regulations

Mandatory Disclosures for Subscribers

Pension Funds and Central Record Keeping Agencies will be required to provide disclosures and information to subscribers, including:

• No guarantee or assurance on periodic payouts
• Payouts remain subject to market risks
• Online calculators or simulators for benefit estimation and residual corpus projections
• Separate Retirement Income Statements
• Annual payout reset notifications for SPR subscribers
• Asset rebalancing summaries

The guidelines will come into force from a date to be notified by PFRDA after implementation of the required system and operational framework.

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