The Pension Fund Regulatory and Development Authority (PFRDA) is exploring a new option for the National Pension System (NPS) that could provide subscribers with a guaranteed monthly payout after retirement.
This move aims to make NPS a more attractive and reliable retirement plan.
Currently, NPS is a market-linked investment scheme, which means returns depend on market performance.
At retirement, subscribers can use 40% of their corpus to buy an annuity and withdraw 60% as a lump sum.
An assured payout would work differently, providing a steady monthly income, similar to schemes like Atal Pension Yojana (APY), Unified Pension Scheme (UPS), and Employee Provident Fund (EPF).
Expert Committee Formed to Shape the Framework
PFRDA has set up a 15-member high-level committee to design the rules for this assured payout option.
The committee will be chaired by Dr M S Sahoo, former Chairperson of the Insolvency and Bankruptcy Board of India, and includes experts from law, finance, insurance, actuarial science, capital markets, and academia.
According to Rohitaashv Sinha, a legal expert quoted by Moneycontrol, forming this committee shows a forward-looking approach.
If properly structured with clear legal rules, solvency norms, and transparent disclosures, an assured payout can reduce longevity risk and provide subscribers with secure retirement income.
Objectives of the NPS Assured Payout Committee
The committee has been tasked with several key objectives:
Framework Development: Drafting rules for assured pension payouts based on PFRDA’s consultation paper from September 30, 2025.
Smooth Transition: Making it easy for subscribers to move from the accumulation phase to the pension payout phase.
Market-Based Assurance: Exploring enforceable mechanisms, like novation and settlement, to guarantee payouts while staying linked to market performance.
Operational Design: Defining rules on lock-in periods, withdrawal limits, pricing, and fees for service providers.
Risk and Legal Oversight: Setting capital and solvency norms and reviewing tax treatment for payouts without exiting NPS.
Consumer Protection: Creating standard disclosures to prevent mis-selling and clearly explain the difference between assured and market-linked returns.
If implemented, this assured payout option could make NPS a more secure and predictable retirement solution for millions of subscribers across India, combining the benefits of market-linked growth with guaranteed monthly income.