The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new Retirement Income Scheme (RIS) and flexible drawdown options under the National Pension System (NPS), aimed at giving retirees greater control over how they receive their pension corpus after retirement. According to the circular dated May 15, 2026, the framework is designed to make the retirement payout phase more flexible while ensuring continued corpus growth potential and preservation of long-term pension security. The new provisions have been introduced in line with the PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025 and will come into effect after the implementation of necessary system-level and operational requirements. As per the circular, this initiative builds upon existing frameworks established through Circular No. PFRDA/2016/8/PFM/03 dated 04 November 2016, Circular No. PFRDA/2023/30/SUP-CRA/10 dated 27 October 2023, and Circular No. PFRDA/2024/17/PDES/02 dated 01 October 2024.
The circular introduces a dedicated life-cycle investment structure called Retirement Income Schemes (RIS), designed specifically for managing retirement withdrawals under NPS. The flagship variant, RIS Steady, follows a gradual glide path approach for asset allocation, with equity exposure designed to decline with age. As reported by the circular, equity allocation reduces progressively from 35% at age 60 to a floor of 10% by age 75, thereafter maintained at the minimum level up to age 85. The remaining allocation is distributed across debt and government securities, with the structured glide path intended to balance growth potential with capital stability during retirement years. According to the circular, the RIS Steady scheme introduces a gradually declining equity allocation from 35% at age 60 to 10% at age 75 onwards, with subscribers receiving periodic payouts from the lumpsum portion of their accumulated pension wealth through the following drawdown options.
The circular introduces two structured drawdown mechanisms through which subscribers can receive periodic payouts from the non-annuitised portion of their corpus after exit. According to the circular, subscribers may choose to receive payouts on a monthly, quarterly, or annual basis, with drawdown permitted up to age 85 or any age selected at exit. The Systematic Payout Rate (SPR) mechanism calculates payouts as a function of the remaining drawdown period and prevailing market value, with the rate being age-dependent and recalculated annually. The Systematic Unit Redemption (SUR) method involves redeeming units in equal instalments based on chosen frequency, with total accumulated units divided equally across the payout tenure. As per the circular, subscribers of Government and Non-Government Subscribers (NGS) under NPS, who wish to receive systematic payouts from their designated pension corpus, up to maximum age of 85 years can opt for either method. The circular clarifies that drawdown withdrawals will not affect the mandatory annuitisation requirement of 20% or 40% of corpus, thereby preserving the minimum statutory requirement for a life-long pension.
To ensure transparency and informed decision-making, the circular mandates detailed disclosures by Pension Funds, Central Record Keeping Agencies (CRAs), and other intermediaries. As reported by the circular, subscribers must be clearly informed that no guaranteed returns apply under drawdown payouts and all payouts are subject to market risk. The circular mandates illustrative projections of payouts and residual corpus, annual retirement income statements separate from Tier I and Tier II statements, and annual reset notifications for SPR subscribers. Under the SPR option of systematic income drawdown, subscribers will receive a retirement income statement containing reset notifications on every birthday detailing the reset of systematic payouts based on the prevailing market value and new age-based payout rate. The circular also mandates asset rebalancing summaries showing the shift in asset classes (E, C, G) according to declining glide paths, ensuring subscribers receive comprehensive information about their retirement planning options.
In a significant development, PFRDA has eased annuity surrender rules, providing limited emergency exit options for retirees facing medical emergencies or stuck with older annuity contracts. According to the latest circular, annuity surrender is now permitted in cases of critical illness of the annuitant or a family member, as well as for annuity contracts issued before October 24, 2024 that included explicit surrender clauses. This relaxation addresses hardships faced by retirees due to earlier blanket restrictions, with PFRDA acknowledging it had received representations citing difficulties faced by annuitants. However, the regulator clarified that in critical illness cases, annuity service providers will first assess requests based on their internal processes before approving surrender, ensuring proper evaluation of genuine medical emergencies.
