The National Pension System (NPS) has introduced a new withdrawal option, the Retirement Income Scheme (RIS), following recent reforms to its landscape.

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NPS recent reforms overview

The National Pension System (NPS) has undergone several reforms recently, including changes to exit, investment norms, and now the withdrawal phase.

PFRDA introduces Retirement Income Scheme

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced the Retirement Income Scheme (RIS) as an option for the 80% lump sum portion.

RIS structured withdrawal plan

RIS includes a structured withdrawal plan and built-in guardrails designed to help retirees make their corpus last longer.

RIS Steady phased withdrawal

'RIS Steady' is the only current variant of the scheme, offering orderly exit and regular payouts via two drawdown options.

RIS Steady drawdown options

RIS Steady offers systematic unit redemption (SUR) and systematic payout rate (SPR), with SPR designated as the default option.

PFRDA purpose for RIS Steady

According to the PFRDA, RIS Steady aims to improve cash flow predictability and corpus longevity, minimizing the risk of funds being exhausted prematurely.

RIS Steady payout duration

Systematic payouts from RIS Steady commence once the accumulation phase concludes and continue until the subscriber reaches age 85.

RIS Steady equity exposure

RIS Steady provides a predefined withdrawal pathway where equity exposure decreases in line with the subscribers’ advancing age.

Pension fund manager selection

Subscribers can choose to remain invested with their accumulation phase pension fund manager or make a switch every two years.

Death benefit in RIS Steady

In the event of a subscriber’s death while systematic withdrawal is active, the lump sum, minus scheduled payouts, will be given to the beneficiaries.

Experts on RIS benefits

Experts state RIS provides retirees with greater flexibility, more stable income, and efficient management of their retirement savings.

SLW vs RIS: Key Differences

RIS is a thoroughly designed scheme with data-backed calculations ensuring corpus longevity, unlike SLW which is primarily a withdrawal method.

Feature	Systematic Lump Sum Withdrawal (SLW)	Retirement Income Scheme (RIS)
Nature	Way to withdraw money	Thoroughly designed scheme with data-backed calculations
Goal	Automated, regular withdrawals determined by subscriber	Ensure retirement corpus lasts long; manage longevity risk
Discipline	Less structured; allows subscriber to decide amount and timing	Aims to bring better discipline to retirement withdrawals

RIS Drawdown Options

Once opting for RIS, subscribers can select either systematic unit redemption (SUR) or systematic payout rate (SPR), with SPR being the default plan.

Ascertaining RIS suitability

While reforms aim to make RIS retiree-friendly, individuals must ascertain its suitability considering complexities and market-linked returns.

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NPS new withdrawal option

The National Pension System (NPS) has introduced a new withdrawal option, the Retirement Income Scheme (RIS), following recent reforms to its landscape.

Made with Rinto — analyse your own content free

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NPS recent reforms overview

The National Pension System (NPS) has undergone several reforms recently, including changes to exit, investment norms, and now the withdrawal phase.

DETL

Existing NPS withdrawal structure

Currently, at least 20% of the corpus must compulsorily purchase an annuity, while the remaining 80% can be a lump sum or systematic lump sum withdrawal (SLW).

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PFRDA introduces Retirement Income Scheme

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced the Retirement Income Scheme (RIS) as an option for the 80% lump sum portion.

DETL

RIS structured withdrawal plan

RIS includes a structured withdrawal plan and built-in guardrails designed to help retirees make their corpus last longer.

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RIS Steady phased withdrawal

'RIS Steady' is the only current variant of the scheme, offering orderly exit and regular payouts via two drawdown options.

DETL

RIS Steady drawdown options

RIS Steady offers systematic unit redemption (SUR) and systematic payout rate (SPR), with SPR designated as the default option.

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PFRDA purpose for RIS Steady

According to the PFRDA, RIS Steady aims to improve cash flow predictability and corpus longevity, minimizing the risk of funds being exhausted prematurely.

DETL

RIS Steady payout duration

Systematic payouts from RIS Steady commence once the accumulation phase concludes and continue until the subscriber reaches age 85.

DETL

RIS Steady equity exposure

RIS Steady provides a predefined withdrawal pathway where equity exposure decreases in line with the subscribers’ advancing age.

DETL

Pension fund manager selection

Subscribers can choose to remain invested with their accumulation phase pension fund manager or make a switch every two years.

DETL

Death benefit in RIS Steady

In the event of a subscriber’s death while systematic withdrawal is active, the lump sum, minus scheduled payouts, will be given to the beneficiaries.

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Experts on RIS benefits

Experts state RIS provides retirees with greater flexibility, more stable income, and efficient management of their retirement savings.

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Vishwajeet Goel on RIS

Vishwajeet Goel from PensionBazaar notes RIS allows systematic pension wealth withdrawal while the remaining corpus stays invested, benefiting from market participation.

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Anuj Kesarwani on longevity risk

Financial adviser Anuj Kesarwani of Zenith Finserve says RIS helps manage living expenses during longer retirement phases, preventing early exhaustion of savings.

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Rajesh Khandagale on corpus growth

Rajesh Khandagale, Senior Vice President (NPS) at KFin Technologies, states that RIS gives money a chance to grow further during retirement.

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SLW vs RIS: Key Differences

RIS is a thoroughly designed scheme with data-backed calculations ensuring corpus longevity, unlike SLW which is primarily a withdrawal method.

Feature	Systematic Lump Sum Withdrawal (SLW)	Retirement Income Scheme (RIS)
Nature	Way to withdraw money	Thoroughly designed scheme with data-backed calculations
Goal	Automated, regular withdrawals determined by subscriber	Ensure retirement corpus lasts long; manage longevity risk
Discipline	Less structured; allows subscriber to decide amount and timing	Aims to bring better discipline to retirement withdrawals

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Sumit Shukla on SLW vs RIS

Sumit Shukla, MD and CEO of Axis Pension, states SLW is a withdrawal method, while RIS is a designed scheme ensuring corpus longevity and managing longevity risk.

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Anuj Kesarwani on withdrawal discipline

Anuj Kesarwani highlights that a major advantage of RIS over SLW is its potential to instill better discipline in retirement withdrawals.

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RIS Drawdown Options

Once opting for RIS, subscribers can select either systematic unit redemption (SUR) or systematic payout rate (SPR), with SPR being the default plan.

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Systematic Unit Redemption (SUR)

In SUR, the number of units withdrawn remains fixed, but monthly income fluctuates as Net Asset Value (NAV) changes with market performance.

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Goel on SUR mechanics

Vishwajeet Goel explains that SUR involves redeeming a fixed number of units, causing payouts and residual corpus to vary with market performance.

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Systematic Payout Rate (SPR)

Under SPR, retirees receive periodic payouts from their corpus based on a pre-defined age-linked payout rate prescribed by the PFRDA.

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SPR calculation and reset

The SPR is fixed for 12 months and is recalculated annually on the subscriber’s birthday, based on the remaining drawdown period until age 85.

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SPR payout rate increase

As the retiree ages, the systematic payout rate gradually increases under the SPR option.

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SPR payout calculation basis

Periodic payouts are calculated on the market value of the remaining retirement corpus at the annual reset date.

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SPR market-linked payouts

Since the corpus remains invested during the drawdown phase, payouts under SPR are market-linked and may fluctuate based on investment performance.

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Ascertaining RIS suitability

While reforms aim to make RIS retiree-friendly, individuals must ascertain its suitability considering complexities and market-linked returns.

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Complexity for some retirees

Some less financially-savvy retirees may find the multitude of options within NPS and RIS overwhelming.

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Kesarwani on NPS/RIS complexity

Anuj Kesarwani notes NPS is already complex with multiple asset classes, annuity, taxation, and withdrawals, and RIS adds another layer.

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Market-linked returns consideration

Risk-averse investors should note that RIS returns are market-linked and not guaranteed, unlike annuities or fixed deposits.

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Khandagale on investor suitability

Rajesh Khandagale states RIS is likely more relevant for investors comfortable with market fluctuations who prefer keeping their corpus invested for higher returns.

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Choice for risk-averse investors

Risk-averse subscribers may prefer guaranteed income options over RIS's market-linked returns.

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Equity exposure limit for high-risk investors

Those willing to take higher risks may find the maximum equity exposure of 35% in RIS inadequate.

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Withdrawal option decision factors

The choice among lump sum withdrawal, RIS Steady, or SLW depends on individual risk appetite, ability to manage withdrawals, objective, and supplementary retirement income sources.