What Is the NPS Retirement Income Scheme (RIS)?
The Pension Fund Regulatory and Development Authority (PFRDA) introduced the Retirement Income Scheme (RIS) and Drawdown options under the National Pension System (NPS) on 15 May 2026. This initiative fundamentally changes how retirees can access their accumulated pension wealth.
Until now, NPS subscribers had a binary choice at retirement: withdraw up to 60% of their corpus as a single lump sum, and use the remaining 40% (or 20% in certain cases) to purchase a mandatory annuity for a lifetime pension. The RIS introduces a third path — receiving the withdrawable 60% portion in structured periodic instalments, while keeping the undrawn balance invested and earning market returns.
The mandatory annuity requirement remains completely unchanged. RIS exclusively governs how the 60% lump sum portion is received. The annuity that provides a lifelong pension is unaffected.
Who Is Eligible?
The scheme is available to both Government and Non-Government (NGS) NPS subscribers. Payouts can be scheduled monthly, quarterly, or annually, and continue until the subscriber reaches 85 years of age.
The RIS Steady Investment Strategy: How Your Money Is Managed
Subscribers who opt into RIS are placed on an age-aware asset allocation strategy called RIS Steady, which uses an annual glide path to gradually reduce investment risk as the subscriber ages.
At age 60, equity exposure begins at 35%. This is progressively reduced each year, reaching a floor of 10% by age 75, where it stays until age 85. Simultaneously, the allocation to government securities increases over time, rising from 55% at age 60 to 75% at age 80 and beyond. Corporate bonds peak at 20% between ages 70–75 before easing back to 15% after 80.
The full allocation table is as follows:
| Age | Equity (E) | Corporate Bond (C) | Govt Securities (G) |
| 60 | 35% | 10% | 55% |
| 65 | 25% | 15% | 60% |
| 70 | 15% | 20% | 65% |
| 75 | 10% | 20% | 70% |
| 80+ | 10% | 15% | 75% |
Source: PFRDA Circular, Table I
This rebalancing happens automatically every year on the subscriber’s birthday, based on prevailing market values. Subscribers receive a Retirement Income Statement detailing changes in allocation across asset classes E, C, and G as per the glide path.
Two Drawdown Methods: SPR vs SUR
Subscribers choose between two methods for receiving periodic payouts.
1. Systematic Payout Rate (SPR) — The Default Option
SPR is the default drawdown method. The payout rate is calculated based on the subscriber’s current age and the age at which the drawdown ends (maximum 85). The formula is:
SPR = 1 ÷ (End age − Current age) %
For example, a subscriber opting in at age 60 with a drawdown end age of 85 would have a first-year payout rate of 4% (1 ÷ 25). This rate is applied to the current market value of the corpus to determine the annual payout amount, which is then divided by the chosen frequency (monthly, quarterly, or annually).
The payout amount is reset every year on the subscriber’s birthday based on the portfolio’s market value at that time. Between resets, the periodic payment stays fixed for that year.
A key feature of SPR is that a residual corpus may remain at the end of the drawdown period. The subscriber can either withdraw this as a lump sum or add it to their annuity to enhance their lifetime pension.
2. Systematic Unit Redemption (SUR) — Equal Units Method
Under SUR, total accumulated units are divided equally across the entire drawdown period and chosen payout frequency. The formula is:
Units per payout = Total units ÷ (Drawdown period in years × Annual payout frequency)
The number of units redeemed each period stays constant. However, because the NAV (Net Asset Value) fluctuates with the market, the actual rupee amount the subscriber receives will vary each period. By design, all units are fully redeemed by the end of the drawdown period, leaving no residual corpus.
SPR vs SUR — Key Differences at a Glance
| Feature | SPR | SUR |
| Calculation basis | Age-based payout rate (%) | Fixed unit count |
| Annual reset | Yes — every birthday | No |
| Rupee payout amount | Stable within a year, then resets | Varies with NAV each period |
| Residual corpus at end | Possible — lump sum or add to annuity | Nil — fully exhausted |
| Default option | Yes | No |
Other Important Rules and Flexibilities
Changing your pension fund manager: Subscribers can remain with their existing pension fund or switch to a different one. However, switching is permitted only once every two financial years during the drawdown phase.
Death during the payout phase: If the subscriber passes away while receiving drawdown payments, the remaining balance in the account is paid to the nominated person or legal heir, as per PFRDA (Exit and Withdrawal) Regulations 2015.
Residual corpus options: Under SPR, if money remains at the end of the drawdown period, the subscriber can withdraw it entirely as a lump sum or route it into the annuity to receive a higher monthly pension for life.
Advantages of the NPS Retirement Income Scheme
Continued corpus growth. Money that has not yet been withdrawn stays invested in the market, continuing to earn returns rather than sitting idle after a lump sum withdrawal.
Regular, predictable income. Periodic payouts provide a structured income stream through retirement, reducing the risk of depleting savings too early.
Tax planning flexibility. Receiving smaller periodic amounts rather than one large lump sum can make it easier to manage annual tax liabilities. Consult a tax advisor for specifics under the prevailing Income Tax Act provisions.
Choice and control. Subscribers can select their payout frequency and retain the option to switch pension fund managers periodically.
Lifetime pension remains secure. Since the mandatory annuity is entirely unaffected, the guaranteed lifetime pension continues regardless of any drawdown choices made.
Disadvantages and Risks to Consider
Market risk. Payouts are market-linked and not guaranteed. Poor market performance can reduce the value of the remaining corpus and lower future periodic payments.
Reduced immediate liquidity. Choosing RIS means no large lump sum at age 60. This may be a disadvantage for retirees who need capital for immediate post-retirement expenses such as home renovation, medical costs, or debt clearance.
Complexity. The annual resetting of payouts under SPR and the shifting asset allocation under the glide path require subscribers to stay engaged with how their income is being calculated year to year.
No guaranteed payout amount. PFRDA explicitly mandates that providers clarify there is no assurance on the exact periodic amounts subscribers will receive.
Is RIS Right for You?
RIS suits retirees who do not need a large lump sum immediately at age 60, have other liquid assets or savings for major expenses, and prefer their corpus to keep compounding through retirement rather than being withdrawn all at once.
It may not suit those with significant pending debt or resettlement costs at retirement, or those who are uncomfortable with year-on-year variability in income due to market fluctuations.
Frequently Asked Questions
Can I withdraw the residual money after age 85? Yes. Under SPR, any corpus remaining at the end of the drawdown period can be withdrawn as a lump sum or added to your annuity.
Does RIS affect my annuity or lifetime pension? No. RIS applies only to the 60% withdrawable portion. The mandatory annuity (20% or 40%) is untouched.
Can I change pension fund managers after opting into RIS? Yes, once every two financial years.
What happens to the money if I pass away during the payout phase? The remaining balance is paid to your nominee or legal heir under PFRDA regulations.
Are payouts guaranteed? No. PFRDA requires providers to explicitly state that payout amounts carry market risk and are not assured.
Disclaimer: This article is based on the PFRDA Circular dated 15 May 2026. Tax implications vary based on individual circumstances and prevailing Income Tax Act provisions. Consult a qualified financial advisor before making withdrawal or investment decisions.
