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

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.

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.