Retirement Income Scheme in NPS: Regular Income While Your Corpus Stays Invested
Most people reach retirement and face a choice they were never quite prepared for: take the lump sum, or lock everything into an annuity. The retirement income scheme changes that entirely. The RIS in NPS is a structured drawdown option that lets your lump-sum eligible corpus stay invested within the National Pension System while you draw regular payouts from it. A third path, in other words.
What Is the Retirement Income Scheme in NPS?
The Retirement Income Scheme in NPS is a drawdown framework through which subscribers receive periodic income while their remaining lump-sum eligible corpus continues earning market-linked returns inside NPS. It sits alongside, not instead of, the mandatory annuity.
Here is what that means in practical terms. At retirement, part of your corpus goes towards purchasing a National Pension Scheme Annuity. The RIS scheme applies to the remaining lump-sum eligible balance. Rather than taking it all at once, you leave it invested in the RIS Steady fund and draw payouts up to an age of your choosing, subject to a maximum of 85 years.
Why Was RIS Introduced Under NPS?
RIS builds on frameworks already established through PFRDA’s circulars of November 2016, October 2023 and October 2024, and is issued in line with the PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025.
PFRDA’s stated objective is to optimise periodic payouts during the decumulation phase through a lifecycle fund built specifically for that stage, enhancing cashflow predictability and corpus longevity while minimising the risk of the corpus running out before the drawdown period ends. The corpus stays invested while payouts come to you on a schedule, with the asset mix shifting automatically towards stability as you age.
The RIS in NPS offers a combination of benefits that neither a lump sum nor a fixed annuity alone can provide:
- Corpus stays invested: The lump-sum eligible balance remains in market-linked assets inside NPS.
- Regular income without the annuity lock-in: You receive structured periodic payouts without committing the entire eligible balance to a fixed annuity product.
- Automatic risk reduction: The RIS Steady fund uses a declining equity glide path, 35% equity at age 60, reducing to 10% by age 75, so the allocation shifts towards stability via Gsec and Corporate Bonds (less volatile) as you age.
- Payouts can grow with the corpus: Under SPR, the payout is applied to the prevailing market value of the drawdown corpus at each annual reset, so the amount can rise if the corpus has grown. It can equally fall if the corpus has declined.
- Statutory pension stays intact: PFRDA has confirmed that phased withdrawals under RIS have no impact on the mandatory annuitisation requirement, so the minimum statutory provision for a lifelong pension remains protected.
- Pension fund flexibility: Subscribers opting for a drawdown option may continue with their existing pension fund, and may switch pension funds once in every two financial years.
- Corpus passes on in the event of demise: If a subscriber passes away during the payout phase, the balance remaining in the account, after accounting for any payouts already scheduled, is paid out in accordance with the PFRDA (Exits and Withdrawals under the National Pension System) Regulations, 2015, as amended from time to time.
The process is straightforward once you understand the sequence. Here is how a subscriber moves from NPS exit to receiving regular income under the retirement income scheme:
Step 1: Exit from NPS at Retirement
At the point of retirement, typically at age 60, the NPS Tier I account closes to fresh contributions. Rather than navigating external Central Recordkeeping Agency (CRA) websites, you can initiate your entire exit and RIS setup seamlessly through the HDFC Pension digital portal. This provides a unified, single-window experience.
Step 2: Mandatory Annuity Portion Is Set Aside
The prescribed minimum portion of the corpus is earmarked for purchasing an NPS Annuity from a PFRDA-empaneled insurer. By managing your exit through HDFC Pension, you can smoothly route this portion to trusted providers like HDFC Life. The minimum annuity requirement is 20% for non-government subscribers and 40% for government employees. PFRDA has clarified that phased withdrawals under RIS have no impact on this mandatory annuitisation requirement, so the minimum statutory provision for a lifelong pension remains intact.
Subscribers whose total corpus falls at or below the threshold prescribed under the PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025 are exempt from the mandatory annuity requirement and may withdraw the entire corpus.
Step 3: Remaining Corpus Moves to RIS
The subscriber chooses the RIS scheme for the remaining balance. This money is invested in RIS Steady, currently the only variant available under the Retirement Income Schemes, which is designed for the decumulation phase rather than for accumulation alone.
Step 4: Subscriber Receives Periodic Payouts
Payouts begin from the month following successful processing of the drawdown request, at the chosen frequency of monthly, quarterly or annual, based on whichever drawdown option the subscriber has selected (SPR or SUR–Equal Units). Units are redeemed from each asset class in proportion to the wealth held in that class, so a payout does not disturb the fund’s allocation. Payouts continue until the drawdown end age chosen by the subscriber, subject to a maximum of 85 years.
Step 5: Annual Reset and Rebalancing
Two things happen on the subscriber’s date of birth. For SPR subscribers, the payout rate and payout amount are reset against the prevailing market value of the drawdown corpus and the updated age-based rate. Separately, the fund’s assets are rebalanced to the E, C and G weights prescribed for the subscriber’s new age band. PFRDA requires subscribers to receive a Retirement Income statement, distinct from Tier I and Tier II statements, carrying both the reset notification and an asset rebalancing summary.
Step 6: Residual Corpus at the End of the Drawdown Period
Under SPR, some balance may remain when the drawdown period ends, because each year’s payout is a percentage of the corpus as it stands on that birthday. PFRDA calls this the residual corpus, and the subscriber may either withdraw it entirely as a lump sum, or combine it with the annuity component, if the annuity was deferred, to purchase an annuity in line with the PFRDA (Exits and Withdrawals under the NPS) (Amendment) Regulations, 2025. PFRDA has directed pension funds and CRAs to make a residual corpus projection available through a calculator or simulator so subscribers can model this before choosing a drawdown option.
The retirement income scheme offers two ways to draw down the corpus. Both are market-linked, meaning neither offers guaranteed income.
Option 1: Systematic Payout Rate (SPR)
SPR is the default drawdown option. The payout rate is set annually using the formula SPR = 1 ÷ (Drawdown End Age − Current Age), expressed as a percentage, where current age is rounded down to the nearest whole year. The amount actually received at each interval is then calculated as Systematic Payout = (SPR ÷ n) × market value of the drawdown corpus on the subscriber’s date of birth, where n is 12 for monthly, 4 for quarterly and 1 for annual payouts. If the birthday falls on a non-working day, the corpus is valued on the next business day.
If the chosen drawdown end age is 85, the rate at age 60 works out to exactly 4%. On an RIS-eligible corpus of ₹1 crore, that translates to roughly ₹4 lakh per year, or around ₹33,000 per month. At 61 the rate resets to 4.17%, at 70 it is 6.67%, and at 75 it reaches 10.00%. The rate rises each year because fewer years remain in the drawdown period, but it applies to whatever the corpus is worth on that birthday, so the rupee payout can move in either direction.
Option 2: Systematic Unit Redemption (SUR)
SUR–Equal Units works on units rather than rates. The corpus is converted into units at the start of drawdown, and the same number of units is redeemed at each payout interval, calculated as Units per payout = Total units at start ÷ (Drawdown period in years × Payout frequency). PFRDA’s illustration takes a corpus of ₹80 lakh at an NAV of ₹10.0000, giving 8,00,000 units. For a subscriber exiting at 60 with a 25 year drawdown period and monthly payouts, that works out to 8,00,000 ÷ (25 × 12), or 2,666.67 units redeemed every month.
The unit count stays constant but the rupee value does not. The value of each payout varies with the NAV at the time of redemption, higher when the NAV is up and lower when the NAV falls.
The table below maps the key differences:
Parameter | SPR | SUR |
Payout basis | Age-linked rate × current corpus value | Fixed units redeemed; rupee value varies with NAV |
Payout amount | Resets annually on birthday | Varies at each payout date |
Default option | Yes | No, subscriber must select |
Income predictability | More structured; rate-based with annual reset | Variable, tracks NAV at each interval |
Residual corpus | Balance may remain at the end of the drawdown period, with defined options for handling it | Full unit balance is liquidated across the drawdown period by design |
Best for | Subscribers wanting age-appropriate, structured drawdown | Those comfortable with NAV-linked income variability |
The corpus under the RIS in NPS is invested in the RIS Steady Fund.
Asset Allocation Under RIS Steady
The RIS Steady fund uses a continuously declining annual glide path:
Age Band | Equity | Corp. Bonds (C) | Govt. Securities (G) |
Up to 60 | 35% | 10% | 55% |
61–70 | Declines 2%/yr (33% → 15%) | Rises 1%/yr (11% → 20%) | Rises 1%/yr (56% → 65%) |
71–75 | Declines 1%/yr (14% → 10%) | 20% (fixed) | Rises 1%/yr (66% → 70%) |
76–79 | 10% (fixed) | Declines 1%/yr (19% → 16%) | Rises 1%/yr (71% → 74%) |
80 and above | 10% | 15% | 75% |
The higher equity weighting at 60 supports corpus growth in the early retirement years. The step-down to a floor of 10% by age 75 reduces the fund’s vulnerability to sharp market corrections later.
Government NPS and Non-Government NPS subscribers who wish to receive systematic payouts from their designated pension corpus, up to a maximum age of 85 years, are eligible for the retirement income scheme. Subscribers opting for a drawdown option may continue with their existing pension fund, and may switch pension funds once in every two financial years.
The scheme works well for subscribers who:
- Do not need immediate access to the full lump-sum corpus at retirement
- Want the balance to remain invested and potentially grow beyond retirement
- Prefer a structured income stream alongside their annuity income
- Are comfortable with market-linked payouts rather than a guaranteed fixed pension
Payout Frequency Under RIS
Subscribers choose how often they receive payouts under the retirement income scheme. Three frequencies are available, and in each case payouts commence from the month following successful processing of the drawdown request.
Monthly Payout
The most frequent option. Monthly payouts create a salary-like income stream, useful for subscribers who rely on this income for regular living expenses alongside their annuity pension.
Quarterly Payout
A middle-ground option for those with other regular income sources who prefer fewer, larger disbursements for planned expenses.
Annual Payout
Best suited to subscribers using the RIS corpus for larger, occasional expenses rather than day-to-day costs. A larger balance stays invested between payouts, though returns remain market-linked and are not assured.
Tax treatment is governed by the Income Tax Act, 2025, and applies independently of the PFRDA rules on annuitisation.
Under Schedule II of that Act, a payment from the National Pension System Trust on closure of the account or on opting out of the pension scheme is excluded from total income only to the extent it does not exceed 60% of the total amount payable at that time. Any portion beyond that ceiling is includible in income and taxed at the applicable slab rate. This 60% ceiling is the general rule for every NPS closure or opt-out. It is not a feature specific to small corpuses, and it applies regardless of whether the mandatory annuity requirement was triggered.
Amounts applied to purchase an annuity plan in the same tax year are not treated as received at all, so the annuitised portion does not attract this charge.
Retirement Income Scheme and Annuity: How Do They Work Together?
The RIS scheme and the annuity are complementary, not competing. The annuity delivers guaranteed, lifelong income from a PFRDA-empaneled insurer. The retirement income scheme delivers periodic payouts from a market-linked fund.
Together, they create a layered income structure in retirement. The annuity covers baseline, non-negotiable expenses. The RIS provides supplementary income that may grow over time.
PFRDA requires pension funds and CRAs to disclose that there is no guarantee or assurance in respect of the periodic payouts and that payouts are subject to market risk.
Past performance is not indicative of future results; NPS returns are market-linked.
A few practical points worth understanding before opting in:
- The drawdown option is chosen at NPS account closure
Subscribers may continue with their existing pension fund after opting for a drawdown option, and may switch pension funds once in every two financial years. The circular does not address switching between SPR and SUR after drawdown has commenced; check pfrda.org.in for any subsequent notification on this.
- Payouts are market-linked, not guaranteed
PFRDA has explicitly stated that no fixed payout is assured under either SPR or SUR.
- Treatment of the corpus on demise follows the 2015 Regulations
RIS does not create a separate succession mechanism. If the subscriber passes away during the payout phase, the balance remaining in the account, after accounting for scheduled payments, is settled under the PFRDA (Exits and Withdrawals under the NPS) Regulations, 2015. This differs from a single-life annuity, where payments generally cease on the annuitant’s death unless a return-of-purchase-price or joint-life variant was chosen.
- The annuity obligation is separate
RIS applies only to the lump-sum eligible portion. The mandatory annuity requirement is unaffected.
- Tax treatment of RIS payouts awaits clarification
The Income Tax Act, 2025 exempts payments from the NPS Trust on closure or opt-out up to 60% of the total amount payable. How this ceiling applies to periodic payouts drawn over a multi-year drawdown period has not yet been clarified. Professional tax advice is recommended.
- Charges apply as per the existing framework
PFRDA has stated that charges under RIS will be governed by the existing framework applicable to such schemes.
- Implementation is subject to PFRDA notification
The scheme becomes operational once PFRDA confirms system readiness and the necessary operational framework is in place.
Why Choose HDFC Pension for NPS Retirement Planning?
HDFC Pension Fund Management Limited, formerly known as HDFC Pension Management Company Limited, is a PFRDA-registered pension fund manager (PF Reg No: PFRDA/PF/2021/004). HDFC Pension provides online subscriber tools, portfolio disclosures, and support across the NPS lifecycle, from account opening through retirement and the drawdown phase.
To explore how the retirement income scheme fits your retirement plan, or to use the NPS Calculator to model your corpus at retirement, visit hdfcpension.com.
Frequently Asked Questions About Retirement Income Scheme in NPS
What Is RIS in NPS?
RIS in NPS is a structured drawdown framework that enables subscribers to receive periodic payouts from the lump-sum eligible corpus while the balance stays invested within NPS.
What Is Systematic Payout Rate in RIS?
SPR is the default drawdown option under the retirement income scheme. The rate is calculated as 1 ÷ (Drawdown End Age − Current Age) and reset annually on the subscriber’s birthday, then applied to the prevailing market value of the drawdown corpus to determine the payout.
What Is Systematic Unit Redemption in RIS?
SUR–Equal Units converts the corpus into units and redeems an equal number at each payout interval, calculated as total units at start divided by drawdown period multiplied by payout frequency. The rupee value of each payout varies with the NAV at the time of redemption.
Can I Receive Monthly Income Through RIS?
Yes. Subscribers can choose monthly, quarterly, or annual payout frequencies under both SPR and SUR.
When Do Payouts Start?
From the month following successful processing of the drawdown request.
Is RIS the Same as Annuity?
No. An annuity provides guaranteed, lifelong income from a PFRDA-empaneled insurer. The retirement income scheme keeps the lump-sum eligible corpus in market-linked assets and provides non-guaranteed periodic payouts up to the drawdown end age chosen by the subscriber, subject to a maximum of 85 years. RIS also has no effect on the mandatory annuitisation requirement, which continues to apply separately.
Does the Corpus Remain Invested Under RIS?
Yes, in the RIS Steady fund, a lifecycle fund with a declining equity glide path from 35% at age 60 to a floor of 10% at age 75, held constant thereafter until age 85.
Are Returns Guaranteed Under RIS?
No. PFRDA has explicitly stated that there is no guarantee or assurance of fixed payouts under either SPR or SUR. Payout amounts depend on market performance and corpus value at each payout date.
Who Should Consider the Retirement Income Scheme?
The retirement income scheme suits subscribers who do not need the full lump-sum corpus immediately at retirement, want continued growth within NPS, and prefer structured periodic payouts alongside their annuity rather than managing a large lump sum independently.