Widely read:
Anand Kumar
Summary: NPS just added a third retirement option that didn't exist before. It isn't an annuity. It isn't a lumpsum. And for the right subscriber, it solves the problem that neither of those ever could.
For 17 years, the practical choice for NPS subscribers retiring at 60 came down to two routes. Take the 60 per cent lumpsum in cash. Or buy an annuity at 6 or 7 per cent for life. Most chose the first. Most found a 25-year retirement on a single cheque harder than expected.
A 2023 facility (SLW) let subscribers phase the lumpsum into instalments, but on whatever fund mix they already held, and at a rate they had to set themselves.
On May 15, 2026, PFRDA went further. The Retirement Income Scheme (RIS) lets you leave the 60 per cent lumpsum inside NPS, invested in a dedicated lifecycle fund called RIS Steady, and draw it down in monthly, quarterly or annual instalments until age 85. The asset mix glides from 35 per cent equity at 60 to 10 per cent at 75, then holds at 10 per cent until 85. Rebalancing happens on the subscriber's birthday. The residual, if any, goes to the nominee. The mandatory annuity portion is untouched.
Two ways to draw the money
Systematic Payout Rate (SPR) is the default. Rate-based, governed by one formula: payout rate = 1 ÷ (85 − current age). The rate applies to the corpus value on the subscriber's birthday and locks for 12 months.
|
Age
|
Payout rate |
| 60 | 4.0% |
| 65 | 5.0% |
| 70 | 6.7% |
| 75 | 10.0% |
| 80 | 20.0% |
| 82 | 33.3% |
| 83 | 50.0% |
| 84 | 100.0% |
Systematic Unit Redemption (SUR). Unit-based. The unit balance is divided by total payouts. A Rs 80 lakh corpus over 25 years, with monthly redemptions of 2,666.67 units. The rupee value moves with the NAV.
SPR smooths the percentage. SUR smooths the unit count. Both consume the corpus by the drawdown end age.
The trade-off against an annuity
A Rs 60 lakh corpus at a typical 6.5 per cent NPS annuity rate pays Rs 32,500 a month for life. The same Rs 60 lakh in RIS at the 4 per cent starting rate pays Rs 20,000 a month, but the corpus continues to earn, the payout can rise, and the residual goes to the nominee. Annuity: higher initially, fixed for life. RIS: variable, growing, inheritable.
What can go wrong
PFRDA is explicit: no guarantee, market risk, and residual is uncertain. Two further points: the circular does not flag. SPR back-loads aggressively; at the 100 per cent rate, the 84 fully consumes the corpus by 85, leaving a subscriber who lives longer with only the annuity income. And once you exercise a drawdown option, fresh NPS contributions stop. The corpus you start with is the corpus you draw from.
Who it fits, and what to do
RIS fits subscribers who have a meaningful lumpsum (Rs 30 lakh and above), other steady income, a tolerance for variable payouts, and an interest in legacy. It does not fit subscribers whose only retirement income is NPS, or who cannot live with payouts that move with markets.
The operational date is yet to be notified—expected in the next few months. While you wait: pull your NPS corpus from the CRA portal, compare annuity rates on the NPS Trust site, and be honest about your tolerance for variability. The Indian NPS subscriber finally has the toolkit that retirees in mature pension systems have had for years. For the right subscriber, it solves the problem the annuity never could: how to keep the corpus working through retirement.
Also read:
I opened an NPS for the tax break. How do I get out?
How to revive your dormant NPS account
This article was originally published on May 19, 2026.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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