NPS Introduces Retirement Income Schemes for Phased Payouts

The Pension Fund Regulatory and Development Authority (PFRDA) introduced Retirement Income Schemes (RIS) for National Pension System (NPS) subscribers on May 15, 2026. These schemes are designed to help retirees receive regular payouts from the designated portion of their NPS corpus that is available for phased withdrawals, enhancing post-retirement financial management.

For NPS subscribers, retirement planning involves not just building a corpus but also converting it into a steady income. Under existing NPS exit rules, a specified portion of the corpus—either 20% or 40%, depending on the applicable regulations—must be used to purchase an annuity, which provides a regular pension. The remaining portion of the corpus can then be withdrawn. The new RIS provides a structured way for subscribers to draw regular income from this remaining portion, offering an alternative to a simple lump-sum withdrawal and effectively creating two sources of retirement income: the mandatory annuity and regular RIS payouts.

Under RIS, subscribers have the flexibility to choose the frequency of their payouts, opting for monthly, quarterly, or annual disbursements. These payouts can continue until the age of 85, or for a shorter period selected by the subscriber at the time of NPS exit. The primary objective of RIS is to help retirees manage their cash flow effectively during retirement while ensuring that the remaining corpus continues to be invested. This scheme is available to both government and non-government NPS subscribers who wish to receive phased payouts from their designated pension corpus.

It is crucial to understand that RIS does not replace the existing mandatory annuity requirement; the 20% or 40% portion will still be allocated for annuity purchase. The amount of income received under RIS is not fixed, as it depends on factors such as the corpus available for payout, the chosen payout option, and the market value of the corpus at the time of calculation. The designated NPS corpus under RIS continues to be invested using a life-cycle approach, where asset allocation adjusts with the subscriber's age. For instance, the RIS Steady variant invests 35% in equity, 10% in corporate debt, and 55% in government securities at age 60. The equity exposure gradually decreases with age, falling to 25% at 65, 15% at 70, and 10% from age 75 onwards, with a corresponding increase in debt and government securities, aiming to reduce risk during retirement years.

What to watch: How these new schemes simplify retirement income planning for subscribers.

Editor's note: review unavailable