PFRDA Allows Loans Against Pension Savings Under NPS

The Pension Fund Regulatory and Development Authority (PFRDA) has notified amendments to the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2025, introducing significant reforms to enhance flexibility for National Pension System (NPS) subscribers, especially in withdrawals, exits, and retirement options.

Major Reform: Loan Against NPS Corpus

Financial Assistance Against Pension Savings

• NPS subscribers can now avail loans from regulated financial institutions by using their NPS account as collateral.
• Lenders are allowed to mark a lien or charge on the individual pension account.

Safeguards

• Lien/charge limited to 25% of the subscriber’s own contribution, in line with partial withdrawal limits.
• Earlier blanket prohibition on pledge or assignment of NPS benefits has been partially relaxed.
• Detailed operational guidelines will be issued separately by PFRDA and record-keeping agencies.

Rationalisation of Partial Withdrawal Rules

Housing

• Partial withdrawal for purchase or construction of a house (if the subscriber does not already own one, except ancestral property) is retained.
• Explicitly clarified as a one-time withdrawal.

Medical Needs

• Scope significantly widened.
• Allowed for medical treatment or hospitalisation of the subscriber, spouse, children, or parents.
• Earlier restriction to a specified list of critical illnesses removed.

Removed Eligible Purposes

• Skill development, re-skilling, and self-development
• Setting up a start-up or own venture

New Eligible Purpose

• Partial withdrawal allowed for settlement of a financial obligation taken from a regulated financial institution against a lien on the NPS account.

Changes in Exit and Withdrawal Structure (Non-Government Sector)

Lock-in and Vesting

• Five-year minimum subscription period removed under the All Citizen Model and Multiple Scheme Framework (MSF).
• Vesting period revised to:
  • 15 years, or
  • Any higher period specified under a scheme, or
  • Till 60 years of age, whichever is earlier.

Lump Sum vs Annuity at Retirement

• Lump sum withdrawal limit increased to 80% of corpus.
• Minimum annuity requirement reduced to 20%, from earlier 40%.

Special Provisions for Smaller Pension Corpus

Corpus up to ₹8 lakh

• Subscriber may opt for:
  • 100% lump sum, or
  • Systematic Lump Sum Withdrawal (SLW), or
  • Systematic Withdrawal Request (SUR), or
  • Other approved options.

Corpus between ₹8 lakh and ₹12 lakh

• Up to ₹6 lakh can be withdrawn as lump sum.
• Remaining amount to be invested in:
  • SUR for a minimum of six years, or
  • Annuity, or
  • Other approved instruments.