The PFRDA's latest initiative introduces the Retirement Income Scheme (RIS) to provide NPS subscribers with flexible periodic payouts during the decumulation phase. According to reports from Mint, at the end of the accumulation phase, an NPS subscriber can withdraw up to 80% of the accumulated corpus as lumpsum. The RIS allows subscribers to select phased withdrawal through two drawdown options, with the objective of optimising periodic payouts and enhancing cash flow predictability while minimising corpus exhaustion risk.
The RIS Steady variant invests NPS subscribers' money across three asset classes: equity, corporate bonds, and government securities. As reported by Mint, at age 60 years, the allocation starts with 35% equity, 10% corporate bonds, and 55% government securities. The equity allocation decreases by 2% annually until reaching 15% at age 70, then decreases by 1% annually until 10% at age 80. Corporate bonds increase by 1% annually until 20% at age 70, remain constant until 20% at age 75, and decrease by 1% annually until 15% at age 80. Government securities allocation increases by 1% annually until reaching 75% at age 80.
The Systematic Payout Rate (SPR) is the default payout option under RIS, calculated based on the subscriber's current age and drawdown end age. According to Mint, for a subscriber exiting at age 60, the SPR starts at 4.00% and increases progressively to 20.00% by age 80. The payout amount is calculated using the SPR applicable to the subscriber's current age on the market value of the drawdown corpus on their birthday. Subscribers can choose monthly, quarterly, or annual payout frequencies, with systematic resetting on their birthday each year.
Under the Systematic Unit Redemption (SUR) option, equal units are redeemed based on the payout frequency over the selected drawdown period. As reported by Mint, using an example of an ₹80 lakh corpus with 8,00,000 units at ₹10 NAV, a subscriber choosing monthly payouts over 25 years would receive 2,666.67 units monthly. The payout amount varies with NAV per unit at redemption time, with higher NAV resulting in higher payouts and lower NAV in lower payouts.
The RIS provides flexibility until age 85, aligning well with current life expectancy of around 72 years. According to Mint, while subscribers receive periodic payments, the remaining corpus continues to grow through investment. However, the scheme may not be sufficient for individuals surviving beyond 85 years, requiring consideration of additional income sources. The drawdown options offer subscribers choice between guaranteed payouts through SPR or market-linked returns through SUR, providing different risk-return profiles for retirement planning.
