NPS Retirement Income Schemes: how RIS Steady and the Systematic Payout Rate drawdown work up to age 85 (PFRDA May 2026)

On 15 May 2026, the Pension Fund Regulatory and Development Authority (PFRDA) issued Circular File No. PFRDA/2026/31/MWnR/01, titled "Introduction of Retirement Income Schemes (RIS) and Drawdown options under the National Pension System (NPS)". Signed by Dr. Alpana Vats, General Manager, the circular and its attached Guidelines create something NPS has never formally offered: a regulated way to draw down the lump-sum portion of a corpus in instalments up to age 85, while the money stays invested on a pre-set glide path.

The circular builds on circulars PFRDA/2016/8/PFM/03 (04 November 2016), PFRDA/2023/30/SUP-CRA/10 (27 October 2023) and PFRDA/2024/17/PDES/02 (01 October 2024), and aligns with the Exit (Amendment) Regulations, 2025 notified on 19 December 2025. The original circular is published on the PFRDA website as a scanned PDF.

Crucially, the circular states that phased withdrawal of the lump-sum portion through drawdown has no impact on the mandatory annuitisation requirement. If your sector requires 20% or 40% of the corpus to buy an annuity, that requirement stands. Drawdown only changes how the remaining lump-sum share reaches your bank account.

The Scheme Explained

Where RIS fits in the 2025 exit framework

Since the 19 December 2025 amendment, the exit split depends on your sector. The table below is taken from npsExit in our rate configuration, which mirrors PFRDA's own before-and-after table in its 19 December 2025 press release.

For both the non-government and government sectors, a corpus above Rs 8 lakh and up to Rs 12 lakh falls in a middle band where the lump sum is capped at Rs 6 lakh, with the balance available through systematic unit redemption. Above Rs 12 lakh, the percentage split in the table applies. The maximum exit age is 85 for all subscribers under the 2025 amendment, which is why the RIS payout horizon runs to 85.

RIS is the vehicle for the lump-sum share above the annuity floor. A non-government subscriber with a Rs 1 crore corpus must annuitise at least Rs 20 lakh (20%) and may take up to Rs 80 lakh (80%) as a lump sum; RIS lets that Rs 80 lakh be paid out monthly, quarterly or annually instead of in one cheque.

Who can use it and when it starts

According to the circular, RIS is available to both Government and Non-Government subscribers. Payout frequency can be monthly, quarterly or annually, and payouts run up to age 85 or up to an earlier age chosen at exit. The scheme is effective from a date PFRDA will notify after system readiness at the Central Recordkeeping Agencies, so as of 20 October 2026 subscribers should check with their CRA whether the option is live before planning around it.

The drawdown option is chosen at account closure, and at that point contributions stop. You may continue with your existing Pension Fund, and a Pension Fund switch is allowed once every two financial years during the drawdown phase.

The RIS Steady glide path

The RIS Steady variant uses a continuously declining annual glide path across three asset classes: equity (E), corporate bonds (C) and Government securities (G). Equity starts at 35% up to age 60, falls by 2 percentage points a year to 15% at 70, then by 1 point a year to a 10% floor at 75, which is held to 85. Corporate bonds start at 10% at 60, rise to 20% across ages 70 to 75, and fall to 15% from 80. G-Secs start at 55% at 60 and rise to 75% from 80 onwards.

The G figures at 70 and 75 follow arithmetically from the stated E and C weights, since the three must total 100%. Rebalancing to the glide path happens once a year on your date of birth. For background on why a declining equity share matters in drawdown, see our glossary entries on rebalancing and the NPS.

The two drawdown options

At closure you choose one of two drawdown methods:

1. Systematic Payout Rate (SPR) is the default. A payout rate is applied to the market value of your RIS holding, and both the rate and the resulting payout are reset once a year on your date of birth based on the prevailing market value.
2. Systematic Unit Redemption (SUR) redeems an equal number of units at each payout, so the rupee amount of each payout moves with the NAV.

Under either option, units are redeemed proportionately across E, C and G, so each payout does not by itself shift the asset mix. Payouts begin the month after processing. The circular's Guidelines prescribe the SPR computation itself; the worked example below uses a plainly labelled illustrative rule rather than the official rate.

What happens at 85 or on death

If a balance remains in an SPR account when the chosen payout period ends, the circular allows two routes: withdraw the residual as a lump sum, or combine it with the deferred annuity component to purchase an annuity. On the subscriber's death during drawdown, the remaining balance is paid out according to the Exit Regulations.

Disclosures and charges

The circular is explicit that RIS carries no guarantee of payouts and is subject to market risk. Any illustrations shown to subscribers are illustrations, not promises. Subscribers receive a separate Retirement Income statement that includes the birthday-reset notification and an asset rebalancing summary. Charges follow the existing NPS charge framework; the circular does not add a new fee layer.

Tax on Withdrawal

RIS changes the payment mechanics. It does not change the Income-tax Act, 1961, and no Finance Act amendment addressing RIS payouts has been identified as of 20 October 2026. The three provisions that matter are summarised below, using the figures in our rate configuration (lumpSumTaxExemptionSection: "10(12A)", lumpSumTaxExemptionCapPct: 60, partialWithdrawal.taxExemptionSection: "10(12B)").

The 60% exemption versus the 80% withdrawal limit

This is the single most important tax point for non-government subscribers. PFRDA raised the lump-sum limit to 80% on 19 December 2025, but section 10(12A) still exempts the closure payment only to the extent it does not exceed 60% of the total amount payable, a cap in force since 1 April 2020. On a Rs 1 crore corpus, that leaves a Rs 20 lakh slice (the gap between 60% and 80%) whose tax treatment is not settled by section 10(12A) itself.

No source we can cite settles whether this slice is taxable or exempt. If you are a non-government subscriber planning to draw more than 60% of your corpus through RIS, confirm the treatment of the excess with a chartered accountant or with guidance on the Income Tax Department portal before you choose your lump-sum percentage.

A second open question is timing. Section 10(12A) speaks of a payment on closure, while RIS pays the lump-sum share in instalments over as many as 25 years. Whether each SPR instalment is treated as part of the closure payment is a question the 15 May 2026 circular, as briefed to us, does not answer, so check before you rely on it.

Slab rates that apply to the annuity

The annuitised portion produces income taxed at slab rates. Under the new regime for FY 2025-26, the slabs in our rate configuration are 0% up to Rs 4 lakh, 5% from Rs 4 lakh to Rs 8 lakh, 10% from Rs 8 lakh to Rs 12 lakh, 15% from Rs 12 lakh to Rs 16 lakh, 20% from Rs 16 lakh to Rs 20 lakh, 25% from Rs 20 lakh to Rs 24 lakh and 30% above Rs 24 lakh. Section 87A gives a rebate of up to Rs 60,000 in the new regime where total income does not exceed Rs 12 lakh, and 4% health and education cess applies on tax plus surcharge.

Compare the post-tax position of an annuity with a self-managed withdrawal plan using our annuity vs SWP calculator.

Worked Drawdown

The set-up

Take a non-government subscriber who exits at 60 with a corpus of Rs 1 crore. The minimum 20% (Rs 20 lakh) buys an annuity. The remaining 80% (Rs 80 lakh) goes into RIS Steady with annual payouts up to age 85, which gives 25 payouts at ages 60 to 84.

Two assumptions are ours, not PFRDA's, and they drive every number below:

• Illustrative payout rule: each year's payout equals the balance divided by the number of years remaining to 85. This mimics the annual reset on market value, but it is not the official SPR formula.
• Illustrative returns: a constant 7% a year in one scenario and 5% a year in the other, applied after each payout. Actual RIS returns will vary year to year, and the declining equity share from 35% to 10% means the portfolio is expected to become more bond-like with age.

Year-by-year illustration on Rs 80 lakh

What the numbers show

Three points stand out. First, the first-year payout is identical at Rs 3,20,000 in both scenarios, because Rs 80 lakh divided by 25 years does not depend on return. The return assumption only shows up from the first birthday reset onwards, which is exactly how an annual market-value reset behaves.

Second, under this rule payouts rise over time: from Rs 3.2 lakh at 60 to Rs 16.2 lakh at 84 at 7%, and to Rs 10.3 lakh at 84 at 5%. Those needing more income in their 60s can choose a shorter payout horizon at exit, which the circular permits.

Third, the gap between scenarios is Rs 49.67 lakh in total payouts (Rs 2.02 crore less Rs 1.53 crore). A 2-percentage-point difference in return over 25 years moves lifetime drawdown income by roughly a third, which is why the circular's "no guarantee" disclosure matters. Run your own corpus, return and horizon through the retirement drawdown calculator.

Adding the annuity and the tax layer

The Rs 20 lakh annuity sits alongside these payouts. Its income depends on the annuity rate and type you buy from an empanelled annuity service provider, so we do not assume a figure; you can model it in the NPS calculator. For tax, remember the earlier caveat: in this example Rs 60 lakh of the Rs 1 crore corpus is within the section 10(12A) 60% exemption ceiling, while the remaining Rs 20 lakh of the lump-sum share sits in the unsettled slice. Confirm both points before you lock in the 80% option.

A government-sector variation

For a government-sector subscriber with the same Rs 1 crore, at least Rs 40 lakh (40%) must buy an annuity, so only Rs 60 lakh enters RIS. Applying the same illustrative rule, every payout and balance in the table above scales by 0.75 (Rs 60 lakh divided by Rs 80 lakh): the first-year payout becomes Rs 2,40,000, and total payouts become about Rs 1.52 crore at 7% and Rs 1.15 crore at 5%.

FAQ

What is the NPS Retirement Income Scheme (RIS)?

RIS is a drawdown facility introduced by PFRDA circular PFRDA/2026/31/MWnR/01 dated 15 May 2026. It lets subscribers receive the lump-sum share of their NPS corpus in monthly, quarterly or annual instalments up to age 85, while the money stays invested on a glide path such as RIS Steady.

Does choosing drawdown reduce the compulsory annuity?

No. The circular states that phased withdrawal through drawdown has no impact on the mandatory annuitisation requirement of 20% of corpus for non-government subscribers or 40% for the government sector.

What is the default drawdown option?

The Systematic Payout Rate (SPR) is the default. The payout rate and amount are reset once a year on your date of birth based on prevailing market value. The alternative, Systematic Unit Redemption, redeems an equal number of units at each payout.

How much equity does RIS Steady hold?

Equity is 35% up to age 60, falls by 2 points a year to 15% at 70, then by 1 point a year to a 10% floor at 75, held to 85. G-Secs rise from 55% to 75%.

Are RIS payouts tax-free?

Not automatically. Section 10(12A) exempts the closure payment only to the extent it does not exceed 60% of the total amount payable. For non-government subscribers taking more than 60%, and for instalment payouts generally, confirm the treatment with a tax adviser, as no Finance Act change addressing RIS has been identified as of 20 October 2026.

Can I change my Pension Fund during drawdown?

Yes. You may continue with your existing Pension Fund at closure, and a Pension Fund switch is permitted once every two financial years while in drawdown.

What happens to the balance if I die before 85?

The circular provides that the remaining balance is paid out according to the PFRDA Exit Regulations. If a balance remains in an SPR account at the end of the chosen period, it can be withdrawn as a lump sum or combined with the deferred annuity component to buy an annuity.

This article explains a regulatory circular and uses illustrative assumptions. It is not investment or tax advice. Figures for exit limits and tax slabs are taken from PFRDA's 19 December 2025 amendment and the FY 2025-26 Income-tax slabs.