Your NPS Just Got an Upgrade. Here’s How Your Retirement Income Changes.
For years, NPS had a problem nobody talked about openly.
You spent decades building a retirement corpus – disciplined, patient, consistent. Then the day you turned 60, the government told you: take 60% of it. Do whatever you want. The remaining 40%? That gets converted into an annuity. A fixed, locked-in monthly income. No flexibility, no exit.
For a lot of retirees, that annuity income barely kept up with inflation.
That’s the problem PFRDA just tried to fix.
What changed
Starting 2026, NPS subscribers have a new option called the Retirement Income Scheme – RIS. It lets you keep your corpus inside the NPS even after retirement, and withdraw from it gradually over time instead of pulling it all out at once.
Two options, both worth understanding
| Option 1: SPR – Systematic Payout Rate | Option 2: SUR – Systematic Unit Redemption | |
|---|---|---|
| What you fix | A fixed rupee amount every month, like a salary | A fixed number of units redeemed each month |
| Monthly income | Predictable – the rupee amount is what’s fixed | Varies with the NAV that day |
| At 60 (₹80 lakh corpus) | ||
| What you get | ~₹26,667/month (4% rate) | 2,666 units/month – cash value moves with the market |
| How it ages | Payout rate rises with age – 4% at 60 to 7.5% by 80, because that’s when you need it most | Corpus lasts longer in bull markets – each unit is worth more before it’s redeemed |
SPR vs SUR: how your monthly income behaves
Illustrative, age 60 to 80 – actual SUR values move with the market
Why this matters more than it sounds
Here’s the quiet compounding problem with the old system. When you bought an annuity at 60, you locked in an income based on interest rates at that moment. If rates were low in 2024, you were stuck with a low payout for the rest of your life.
What the old rule did to your corpus at 60
Mandatory annuity vs the new Retirement Income Scheme
|
Old way: forced split The 40% bought an annuity at whatever rate applied on your retirement day – locked for life. |
New way: RIS The annuity floor stays (20% or 40% by sector). The rest can go into RIS – drawn down on your terms until age 85. |
|
The old way: mandatory annuity
Income locked to interest rates on the day you retire. No reset. No adjustment. Die with money left over? The insurance company keeps it. |
The new way: RIS
Your money stays in the market, continues to grow (or shrink), and you draw from it on your own terms. Die with money left over? The residual corpus goes to your nominee. |
The catch
In a poor market scenario, both options deliver less than what looks good on paper. PFRDA ran simulations across good, average, and poor market conditions – and the range in monthly payouts is wide, based on the market conditions.
|
If NPS is all you have
No other income, no pension, no rental yield – certainty is worth paying for. Annuities, for all their rigidity, give you that. The old mandatory annuity route might still be the safer call. |
If you have other income
A spouse’s pension, a rental, dividends – RIS becomes genuinely compelling. You’re not depending on it entirely, so you can afford the variability. |
One more thing: the tax angle
The broader picture on retirement assets also shifted post-Budget 2024. Where you put the corpus you withdraw should be mapped too – the tax rules around it have changed.
12.5% LTCG Long-term capital gains on equity mutual funds and ETFs, for holdings over 12 months. |
No indexation benefits Debt mutual funds don’t get indexation benefits anymore. |
Slab rates Listed bonds are now taxed at your income slab rate. |
What you do with your non-annuitized NPS corpus – how you invest it, rebalance it, and withdraw from it – will have tax implications that compound over 20–25 years.
The bottom line
NPS is no longer just a savings vehicle that hands you an annuity and waves goodbye. It’s becoming an actual retirement management system – one that asks you to be an active participant in how your corpus works for you.
Tools to try
Run the numbers yourself.
Free calculators that go with this issue. Built for Indian rules (rupees, inflation, tax regime).
- PPF Calculator India – Public Provident Fund Maturity
Calculate 15-year PPF maturity at the current government rate. Tax-free interest, ₹1.5L annual cap, eligible under Section 80C. For Indian investors.
- Senior Citizen Savings Scheme (SCSS) Calculator India
Senior Citizens Savings Scheme calculator: 5-year quarterly payouts at the current government rate, ₹30L cap, Section 80C-eligible. For retirees.
- Crorepati Calculator – ₹1 Crore SIP Target India
How much monthly SIP do you need to reach ₹1 crore, or any target? Backsolves the SIP for Indian equity, debt and hybrid funds at your expected return.
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