When the NPS regulator PFRDA announced on 12th Dec 2025 that the mandatory annuity requirement for non-government subscribers had been reduced from 40% to 20%, I also assumed that the minimum 15-year lock-in period applied to all such subscribers.
Since our article – NPS reduces annuity requirement to 20% – should you open an NPS account? – Several readers had expressed doubt about whether the 15-year exit rule applies to corporate NPS subscribers.
They are right. I missed an important clause in the circular linked above.
The circular said “Non-Government Sector Subscriber” means any subscriber under the National Pension System other than a Government sector subscriber”
It then went on to say
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“4. Exit from the National Pension System for non-government sector subscribers. – (a) where a subscriber exercises the choice of exit upon having subscribed to the National Pension System for a period not less than fifteen years or such other higher period stipulated in accordance with the provisions of such scheme, or upon attaining the age of sixty years; or upon superannuation or retirement in accordance with the terms and conditions applicable to such subscriber by virtue of his employment, then at least twenty percent of the accumulated pension wealth of such subscriber shall be mandatorily utilized for purchase of annuity providing
for a monthly or any other periodical pension, and the balance of the accumulated pension wealth shall be paid to the subscriber in a lump sum or through periodic payouts in the form of systematic lump sum withdrawal, systematic unit redemption or in accordance with other options approved by the Authority.
So I assumed the 15-year exit applies to corporate NPS as well. However, right at the start of the circular, there is a clause that says
““Exit” for the purpose of these regulations shall mean the following:
ii) having subscribed to a pension scheme for a period of not less than fifteen years or such other higher period stipulated in accordance with provisions of such scheme, but shall not apply to a scheme subscribed to on account of employment of any nature
This implies that, while the 20% minimum annuity rule applies to corporate NPS, the exit clause remains as before: retirement or superannuation.
To simplify, if the accumulated corpus is greater than Rs. 12 lakhs, up to 80% of the corpus can be withdrawn* and 20% annuitised, provided
- The government or corporate subscriber reaches retirement age
- All-citizen model subscribers stay in the scheme for at least 15 years.
- Or upon physical incapacitation as per regulation 4(1)(d)
* For withdrawal options, see NPS reduces annuity requirement to 20% – should you open an NPS account?
Now the most important question is: can I have corporate NPS for a few years, then switch to the all-citizens model (after quitting), and then exit after 15Y? For example, stay salaried for 14Y, switch to the all-citizens model for a year, and exit.
My understanding (I could be wrong, or future circulars may change this) is that this seems like a valid strategy. Howeve one should not bank on this while choosing NPS.
Based on this revised understanding, we recommend choosing NPS only if you wish to be a corporate employee all your working life.
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