For non-government National Pension System (NPS) subscribers, one question comes up repeatedly: “Can I take my money out fully when I want?” The reality is more layered than a simple yes or no. NPS is designed to balance freedom with structure. While it does allow a lump-sum withdrawal, it often requires part of the savings to be converted into an annuity that provides a regular pension.
This mix of choice and compulsion is what creates confusion, but once you understand the cut-offs and order of rules, the system becomes far easier to navigate.
What Happens When You Exit At 60
At the official retirement age of 60, NPS follows a clear framework. Subscribers are allowed to withdraw up to 60 per cent of their total corpus as a lump sum. The remaining minimum 40 per cent must be used to purchase an annuity, which then pays a pension over time. While the annuity income is taxed as per your income slab, the lump-sum withdrawal at retirement is generally tax-free under current rules. For most subscribers with a sizeable balance, this is the default outcome.
The Small Corpus Rule That Offers Full Flexibility
Greater flexibility kicks in when the accumulated amount is modest. If your total NPS corpus at age 60 is Rs 5 lakh or less, you can withdraw the entire amount in one go. In this scenario, buying an annuity is not mandatory. The reasoning is practical; forcing a small sum into an annuity would result in a pension too insignificant to be useful. Similar logic applies to early exits as well.
Exiting Before 60: Tighter Restrictions Apply
Premature exit is where many subscribers feel constrained. If you choose to exit NPS before turning 60 and your corpus exceeds Rs 2.5 lakh, you are required to annuitise at least 80 per cent of the amount. Only up to 20 per cent can be taken as a lump sum. However, if the corpus is Rs 2.5 lakh or less, full withdrawal is permitted even on early exit. In short, leaving early usually means less cash in hand unless your savings are relatively small.
In Case Of Death, The Rules Are Straightforward
If an NPS subscriber passes away, the process is simpler. The entire accumulated corpus is paid to the nominee or legal heirs as a lump sum. There is no requirement to purchase an annuity, ensuring immediate liquidity for the family during a difficult time.
You Can Also Delay Withdrawal After 60
Another often-overlooked feature is deferment. Even after turning 60, you can postpone both lump-sum withdrawal and annuity purchase until age 75. This option can help those who continue working or want to plan withdrawals more strategically. Keep in mind that the corpus remains market-linked during this period, meaning its value can fluctuate.
