The Pension Fund Regulatory and Development Authority (PFRDA) has introduced Retirement Income Schemes (RIS) under the National Pension System (NPS) to offer subscribers flexible, periodic payout options during their post-retirement years. This regulatory shift allows retirees to keep their tax-free lump sum invested in market-linked schemes for continued growth while drawing regular income. Additionally, the regulator has extended the maximum age for maintaining NPS accounts from 75 to 85 years, enhancing long-term compounding benefits for both government and non-government subscribers.
The New Payout Framework: Retirement Income Schemes (RIS)
The Pension Fund Regulatory and Development Authority (PFRDA) has introduced the Retirement Income Schemes (RIS) to reform the post-retirement withdrawal phase of the National Pension System (NPS). Under the traditional NPS regulations, when subscribers reach superannuation or the age of 60, they are permitted to withdraw up to 60% of their accumulated pension corpus as a tax-free lump sum. The remaining 40% of the corpus must be utilized to purchase an annuity plan from an authorized insurance provider, which ensures a lifelong, regular pension.
The newly introduced RIS framework targets the decumulation phase, which is the period during which retirees withdraw their accumulated savings. Instead of mandating subscribers to withdraw the entire 60% lump sum in a single payout, the RIS allows this portion to remain invested in the pension fund. This mechanism supports capital appreciation through continued market exposure while providing retirees with structured, periodic payouts. The new guidelines do not alter the statutory 40% mandatory annuity purchase, ensuring that the basic life pension remains unaffected.
To manage the pension sector in India, the government initially set up the PFRDA as an interim body in August 2003. The authority attained full statutory status under the PFRDA Act, 2013, which came into force on February 1, 2014. Operating under the Department of Financial Services within the Ministry of Finance, the regulator is headquartered in New Delhi and is led by Chairperson Sivasubramanian Ramann. The NPS itself was launched on January 1, 2004, for government sector employees and was subsequently extended to all Indian citizens on a voluntary basis on May 1, 2009.
Key Payout Options: Systematic Payout Rate vs. Systematic Unit Redemption
Subscribers who choose the RIS drawdown facility are provided with two primary payout methodologies to receive their periodic income, which can be distributed monthly, quarterly, or annually. These options allow individuals to align their withdrawals with their cash flow requirements and tolerance for market fluctuations.
Systematic Payout Rate (SPR)
The Systematic Payout Rate (SPR) serves as the default option under the new framework. This method determines the annual payout rate using a formula based on the current age of the subscriber and the selected drawdown end age, which is capped at 85 years. The calculation is expressed as 1 divided by the difference between the drawdown end age and the current age of the subscriber.
For example, if a subscriber begins withdrawals at age 65 and chooses the default end age of 85, the annual withdrawal rate for that year will be 5% of the remaining corpus, calculated as 1 divided by 20. To account for changes in the total corpus value and the advancing age of the subscriber, the payout rate and the resulting payout amount are reset annually on the subscriber’s birthday.
Systematic Unit Redemption (SUR)
The Systematic Unit Redemption (SUR) methodology offers a unit-based approach similar to a systematic withdrawal plan in mutual funds. Under this method, a fixed number of units are redeemed at each payout interval, regardless of market movements. The system determines the number of units to be redeemed by dividing the total number of units held at the start of the drawdown by the total number of payout intervals chosen for the duration.
Unlike the SPR option, the monetary value of the payout under SUR is not fixed. The final amount received by the subscriber fluctuates based on the daily Net Asset Value (NAV) of the underlying pension fund schemes at the time of redemption. This method is preferred by subscribers who want to keep the volume of unit liquidation constant while letting the market dictate the payout value.
The “RIS Steady” Lifecycle Investment Strategy
To manage market risks during the payout phase while ensuring the remaining corpus continues to grow, the regulator has introduced a dedicated lifecycle fund called RIS Steady (Balanced). This option acts as the default investment choice for subscribers who opt for the RIS framework. It utilizes a structured, annual glide path that automatically shifts funds from riskier equities to safer debt instruments as the subscriber grows older, balancing capital preservation with growth potential.
The equity allocation under the RIS Steady option starts at a maximum of 35% at age 60. Over the subsequent fifteen years, this equity portion is gradually reduced on each birthday of the subscriber. By the time the subscriber reaches the age of 75, the equity exposure reaches a minimum floor of 10%. This 10% equity level is maintained constant from age 75 until the account is closed, which can be up to the age of 85. The remaining portion of the portfolio is allocated to fixed-income instruments like government securities and corporate debt.
The following table outlines the asset allocation glide path under the RIS Steady framework:
| Subscriber Age | Maximum Equity Exposure | Minimum Debt and Fixed Income Exposure | Asset Management Mechanism |
|---|---|---|---|
| 60 Years | 35% | 65% | Initial asset allocation at exit |
| 61 to 74 Years | Gradually reducing annually | Gradually increasing annually | Automated annual rebalancing on birthday |
| 75 to 85 Years | 10% (Floor) | 90% | Maintained constant until account closure |
To execute this strategy, the pension fund manager automatically rebalances the portfolio annually on the subscriber’s birthday. This rebalancing is calculated based on the prevailing market value of the remaining drawdown corpus, protecting retirees from sudden market shocks while leaving a small portion in equities to hedge against inflation.
Extension of Maximum Investment Age to 85
In addition to launching the RIS framework, the PFRDA has extended the maximum age limit for maintaining an NPS account from 75 years to 85 years. This extension applies uniformly to both government and non-government sector subscribers, providing them with an additional decade to keep their pension funds invested. Previously, subscribers were required to close their accounts or initiate final lump-sum withdrawals upon reaching the age of 75.
This change was introduced under the PFRDA (Exits and Withdrawals under NPS) Amendment Regulations, 2025. The extension allows subscribers to benefit from compound interest over a longer investment horizon. It also provides a wider window for systematic withdrawals, helping retirees manage their finances in accordance with rising life expectancies. While the exit age limit has been raised to 85 years, the maximum age for entry into the NPS remains unchanged at 70 years. If any corpus remains in the account when the subscriber reaches 85, or in the event of the subscriber’s death, the residual amount is transferred to the designated nominee.
Key Takeaways
- The Pension Fund Regulatory and Development Authority (PFRDA) was established as a statutory body on February 1, 2014, under the PFRDA Act, 2013, and is headquartered in New Delhi.
- PFRDA launched Retirement Income Schemes (RIS) in May 2026 to facilitate flexible periodic payouts for the 60% tax-free lump sum portion of the National Pension System (NPS) corpus.
- The Systematic Payout Rate (SPR) is the default withdrawal method under RIS and calculates payouts using the formula: 1 divided by the difference between the drawdown end age and the subscriber’s current age.
- Under the Systematic Unit Redemption (SUR) method, subscribers receive periodic payouts through a fixed number of unit redemptions, with the final value fluctuating based on the daily Net Asset Value (NAV).
- The RIS Steady (Balanced) lifecycle option automatically manages investment risk by reducing equity exposure from 35% at age 60 to a floor of 10% by age 75, maintaining it until age 85.
- The maximum age for maintaining an NPS account has been extended from 75 to 85 years under the PFRDA (Exits and Withdrawals under NPS) Amendment Regulations, 2025, while the maximum entry age remains 70 years.
