The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a new Retirement Income Scheme (RIS) and fresh drawdown options under the National Pension System (NPS) aimed at giving subscribers greater flexibility in managing their retirement payouts. 

The new framework, announced through a circular issued on May 15 seeks to address one of the biggest concerns among retirees — how to systematically withdraw pension savings after retirement while still allowing the remaining corpus to continue generating returns. The move is being viewed as a key step towards making the NPS more retirement-friendly by combining flexibility, systematic income generation, and long-term capital protection for retirees. 

How users can opt for phased withdrawals from pension corpus 

Under the new RIS, subscribers can now opt for phased withdrawals from their pension corpus instead of taking out large lump sum at once. According to PFRDA, the framework allows subscribers to choose different drawdown options depending on their retirement income needs. 

Importantly, the regulator clarified that the new withdrawal system will not alter the mandatory annuitisation rules under NPS. Subscribers will still have to invest the minimum prescribed portion of their retirement corpus into annuity products to ensure lifelong pension income. Depending on the subscriber category, this mandatory annuity allocation remains at either 20% or 40% of the corpus. 

What is RIS Steady? 

A key feature of the new framework is the launch of RIS Steady, a retirement-focused fund specifically designed for the payout phase after retirement. The fund follows a “glide path” investment strategy, where exposure to equities gradually declines with age to reduce market risk for senior citizens while maintaining some growth potential. 

What is the model? 

Under this model, subscribers at the age of 60 will have 35% exposure to equities, 10% allocation to corporate bonds, and 55% invested in government securities. As subscribers grow older, the equity exposure steadily declines. By the age of 75, the equity allocation falls to 10% and remains at that level till the age of 85, with higher allocations shifting toward safer government securities. 

The regulator has also introduced structured drawdown options to make retirement withdrawals more predictable. One of the key options is the Systematic Unit Redemption (SUR) facility, under which a subscriber’s total pension units are divided evenly across the selected payout period. A fixed number of units are redeemed periodically, regardless of changes in the net asset value (NAV), helping create a steady stream of income. 

Who can avail the new NPS drawdown facility? 

The drawdown facility will be available to both government and non-government subscribers under NPS. Subscribers can choose to receive payouts monthly, quarterly or annually, depending on their preferences and financial requirements. 

The payout period can continue until the subscriber reaches 85 years of age or for any shorter duration selected at the time of exiting the pension system. 

PFRDA also said subscribers opting for the drawdown facility can continue with their existing pension fund manager and will have the flexibility to switch pension fund managers once every two financial years.