For years, many NPS subscribers have viewed retirement as a two-part decision: buy the compulsory annuity and take the balance as a lump sum. That picture is becoming more flexible.
PFRDA has already introduced Retirement Income Schemes, or RIS, which can combine periodic withdrawals with continued market-linked investment after an NPS exit. A fresh interview with the regulator’s chairperson now signals that competition in the annuity market may widen further. The important distinction is that RIS is available under an existing circular, while broader annuity providers and new guarantees remain future possibilities—not rules you should plan around yet.
What has already changed
PFRDA issued its RIS and drawdown circular on 15 May 2026. It directed Annuity Service Providers, or ASPs, to put operational systems in place by 30 September 2026.
RIS is designed for the portion of an NPS corpus that remains available after meeting the mandatory annuity requirement applicable to that subscriber’s exit. It does not abolish compulsory annuitisation.
A subscriber can choose to move some or all of the eligible residual amount into an RIS offered by an ASP. The scheme can continue until the subscriber reaches age 85, although the subscriber may exit earlier and take the available corpus, subject to the scheme conditions.
How the two-part RIS structure works
Inside an RIS, the selected money is divided into two components:
- Drawdown or lump-sum component: this must receive at least 25% of the amount committed to the RIS. The subscriber can retain it or draw from it periodically.
- Investment component: up to 75% can remain invested in a participating market-linked fund chosen from the risk options offered by the provider. Growth is not guaranteed and depends on investment performance.
The official circular permits up to four drawdown requests in a financial year. A withdrawal must be at least 10% of the drawdown corpus and made in multiples of 10%, based on the applicable balance and scheme rules.
The investment component is intended to support continuing income or replenish the drawdown pool over time. But because it is market-linked, the value and future income can rise or fall.
A simple example
Assume that, after meeting the mandatory annuity requirement for your exit, ₹20 lakh remains eligible for lump-sum withdrawal. You decide to place the entire ₹20 lakh in an RIS.
At least ₹5 lakh—25%—would go to the drawdown side. Up to ₹15 lakh could go to the investment side. You could then make permitted withdrawals from the drawdown pool while the investment portion remains exposed to the selected fund.
This is only an illustration of the RIS allocation. Your actual mandatory annuity percentage, eligible residual amount, provider choices, charges and tax treatment depend on the exit rules and your circumstances.
RIS is not a replacement for a pension floor
An annuity transfers longevity risk to an insurer: subject to its terms, payments can continue for life even if you live far longer than expected. RIS leaves more money invested and gives greater access to capital, but the retiree carries more market and withdrawal risk.
Heavy withdrawals in the early years, poor market returns or a long retirement can exhaust a drawdown corpus. A flexible account is useful only when the household has a clear income plan.
Before choosing RIS, identify:
- the minimum monthly income that must never depend on markets;
- how much emergency liquidity you need outside NPS;
- whether your spouse or nominee understands the plan;
- how withdrawals will change after poor market years;
- the provider’s fund options, charges, income rules and servicing process.
What may change next
In a Mint interview published on 9 October 2026 at 9:00 AM IST, PFRDA chairperson Sivasubramanian Ramann said the regulator is examining assured retirement-income approaches and whether annuity products could eventually be offered by pension funds and other entities, rather than only life insurers.
That could increase competition and product variety. However, the chairperson also stated that annuities will remain part of NPS as long as the law requires them. No subscriber should assume today that the mandatory annuity will disappear or that a new guaranteed product is already available.
What happens to the money on death?
Under the RIS circular, a nominee or legal heir can receive the applicable balance in the investment component and the remaining drawdown component, subject to the provider’s scheme and nomination records. This potential for residual wealth is one reason some retirees may prefer combining annuity income with a flexible corpus rather than annuitising more than necessary.
Keep nomination details current and make sure family members know the provider, account information and claim process.
The decision is now about income design
NPS exit planning should no longer begin with “How much lump sum can I withdraw?” Start with three questions instead:
- What part of my monthly spending needs a lifelong income floor?
- What part can tolerate market-linked variability?
- What capital should remain accessible to me and my family?
Annuity, RIS and ordinary lump-sum withdrawal solve different problems. The best mix is not necessarily the one offering the highest first-year income; it is the one that can survive inflation, weak markets, medical costs and a longer-than-expected retirement.
Sources checked on 9 October 2026: PFRDA’s RIS circular dated 15 May 2026; PFRDA Exit and Withdrawal Regulations, last amended 20 July 2026; and the Mint interview published 9 October 2026. General educational information only. Confirm current availability, exit rules, charges and tax treatment with your CRA/ASP or a qualified adviser before acting.