Recent changes to the National Pension System introduce flexible withdrawal options, moving away from the traditional 60:40 split, affecting how retirees plan their income and annuities.
Anyone using a simple National Pension System retirement calculator should be wary of treating its answer as a rule. The older, familiar formula of taking 60% as a lump sum and converting 40% into an annuity still applies in some parts of NPS, but it is no longer the whole picture. For non-government subscribers, newer withdrawal options described by Mint allow just 20% of the corpus to be annuitised, with the rest kept inside NPS and drawn down over time rather than taken out all at once.
That matters because many recent Hindi explainers have presented the 60:40 split as if it were universal. The Department of Financial Services still sets out that structure for normal withdrawal at age 60: up to 60% can be taken as a lump sum and at least 40% must buy an annuity, while premature exit generally allows only 20% in cash and requires at least 80% to be annuitised. AajTak, in a same-day explainer, made the important distinction that the 60:40 formula it was using referred to normal retirement for central government employees, and that other NPS models and other exit situations can follow different rules.
On the traditional calculation, the numbers are straightforward but only illustrative. AajTak said that a subscriber retiring with ₹50 lakh could, under the 60:40 structure, take ₹30 lakh immediately and send ₹20 lakh into annuity. At an assumed annuity rate of 7% a year, that would produce about ₹1.40 lakh annually, or roughly ₹11,667 a month. A ₹1 crore corpus under the same assumptions would mean ₹60 lakh in cash, ₹40 lakh in annuity, and an estimated monthly pension of about ₹23,333. The crucial caveat is that those are not promised payouts: the final pension depends on the annuity rate available at retirement and on the type of annuity chosen.
Those annuity choices can materially alter what a retiree, or their family, eventually receives. AajTak noted that some plans continue payments to a spouse after the subscriber’s death, while others may return the purchase price to nominees. That helps explain why two people retiring with the same NPS corpus can end up with different monthly incomes. A higher annuity allocation can lift pension income, but it also leaves less money available upfront.
The bigger shift has come from the new Retirement Income Scheme, or RIS. Mint reported in May 2026 that the mandatory annuity requirement for non-government subscribers had been reduced from 40% to 20%, and that the remaining corpus could stay invested inside a dedicated drawdown structure until age 85. Under that model, a retiree with ₹1 crore could place ₹20 lakh into annuity and leave ₹80 lakh in the scheme. Mint said both of the new drawdown methods start at about ₹26,667 a month on that ₹80 lakh balance: one because a 4% annual withdrawal rate works out to ₹3.2 lakh a year, the other because 8,00,000 units spread across 300 monthly payouts come to 2,666.67 units a month. As adviser Vishal Dhawan told Mint, the aim is to “find balance between beating inflation, while preserving the corpus”.
An earlier PFRDA publication showed why this matters in practice even under the older 60:40 framework. In its November 2024 bulletin, the regulator described systematic lump sum withdrawal, which lets retirees phase out the non-annuity portion instead of removing it in one go. In the worked example, a ₹1 crore corpus was split into ₹40 lakh for annuity and ₹60 lakh for phased withdrawals. With annual withdrawals of ₹6 lakh and an assumed 8% return on the remaining balance, the ₹60 lakh pool still had about ₹35.66 lakh left after 10 years and ₹14.38 lakh after 15 years, even after total withdrawals of ₹90 lakh. The same document said the annuity income on the ₹40 lakh portion could range from about ₹2.85 lakh a year, with return of purchase price, to about ₹3.40 lakh without it, for a 60-year-old subscriber using a joint-life option with a spouse of the same age.
For savers much earlier in their careers, the most important variable is still time. Business Standard Hindi illustrated that with a projection for someone starting at age 25 and investing ₹12,000 a month for 35 years. On its assumptions, total contributions of ₹50.40 lakh and a 10% annual return could grow to about ₹4.10 crore by age 60. Under the traditional split, that would mean roughly ₹2.46 crore as a lump sum and ₹1.64 crore committed to annuity. At an assumed 8% annuity rate, the annual pension would be around ₹13.12 lakh, or just over ₹1.09 lakh a month. The publication also noted that annuity rates tend to sit in a 6% to 8% range, so real-world payouts may be lower or higher depending on product choice and market conditions. It added that younger subscribers can use NPS’s active choice to take higher equity exposure, up to 75%, while auto choice gradually shifts the mix towards safer assets as retirement approaches.
The official NPS Trust calculator underlines why no single article can give a definitive pension number. It asks users to enter not only their current corpus and expected investment return, but also their annuity ratio, assumed annuity rate and desired pension. It then derives the lump sum and projected monthly pension from those inputs. The calculator itself warns that it is for information purposes only and should not be used as the basis for an investment decision. The practical lesson for subscribers is simple: before fixating on a monthly pension estimate, work out which exit rules apply to your version of NPS and whether you want certainty from annuity income, flexibility from drawdown, or a blend of the two. As Dhirendra Kumar told Mint, “There is no one-size-fits-all answer here.”
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
