NPS withdrawal norms: Greater fund access comes with onus to manage risk
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar cautioned that premature NPS exits still require most of the corpus to be annuitised, so that route should be used sparingly. He said systematic unit redemption is meant for investors who can take more risk, carries market risk, and is not for risk-averse retirees.
What Abhishek Kumar said
Should I exit NPS early now that the five-year lock-in has gone?
Under the NPS rules as revised in late 2025, leaving before 15 years in the scheme or before age 60 still counted as a premature exit. In that case 80 per cent of the corpus had to go into an annuity, with only 20 per cent paid out as a lump sum. I suggest using this route sparingly, because such heavy compulsory annuitisation sharply limits your access to the money and can disrupt long-term wealth building.
Who is systematic unit redemption in NPS meant for?
Systematic unit redemption lets you draw down your lump sum in stages while the rest stays invested. It offers the chance of capital growth, defers tax and gives you income you can adjust, yet it is exposed to market risk and there is no certainty the corpus will last your lifetime. In my view it suits retirees with a higher risk appetite who want income that beats inflation; risk-averse retirees should stay away from it.
How does systematic unit redemption compare with buying an annuity?
An annuity removes the risk that you outlive your savings, because it keeps paying for life. With systematic unit redemption you stay exposed to market swings, and there is a real chance of running through the corpus too early. So the choice comes down to whether you value lifelong certainty of income or the flexibility of staying invested.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on retirement
The article explains recent NPS changes: a larger lump-sum withdrawal at 60, a lower mandatory annuity share, the option to stay invested until 85 and removal of the five-year lock-in. It weighs the added flexibility against the risks of mismanaging savings, inflation and longevity, and compares systematic unit redemption with annuities.
Publisher source
NPS withdrawal norms: Greater fund access comes with onus to manage risk