That is the backdrop against which the Pension Fund Regulatory and Development Authority (PFRDA) has introduced the Retirement Income Scheme (RIS) under the National Pension System (NPS), offering retirees structured withdrawal options such as Systematic Payout Rate (SPR) and Systematic Unit Redemption (SUR), alongside the existing Systematic Lump Sum Withdrawal (SLW) facility.
The new framework attempts to provide retirees with more flexibility in generating periodic income while allowing a portion of the retirement corpus to remain invested and continue participating in market-linked growth.
Why the new withdrawal framework matters
Traditionally, retirement planning discussions have focused more on accumulation, how much to save and where to invest. However, retirement experts say that the withdrawal phase is equally critical because an unsuitable drawdown strategy can weaken even a well-built corpus.
Ajay Kumar Yadav, CFPCM, Group CEO & CIO, Wise Finserv, a SEBI-registered financial planning, investment advisory, and wealth management company, said the RIS framework addresses a practical gap in retirement planning.
“Retirement planning does not end when a person builds a corpus. In fact, the more difficult part starts after retirement: how to convert that corpus into regular income without exhausting it too early,” he said.
According to Yadav, the new structure recognises that retirees need a balance between regular cash flow, liquidity and long-term growth to combat inflation over extended retirement periods.
“The biggest benefit of RIS is that it brings discipline to the withdrawal phase. And in retirement, discipline is often more important than chasing the highest return,” he added.
What are SPR, SUR and SLW?
The RIS framework currently provides two structured drawdown options, SPR and SUR, while SLW continues as an existing phased withdrawal facility within NPS.
SPR: Systematic Payout Rate
SPR is a formula-based withdrawal mechanism where payouts are determined by applying an age-linked payout rate to the market value of the remaining corpus. The payout amount is recalculated annually.
Pranay Ranjan Dwivedi, MD & CEO, SBI Pension Funds, India’s largest pension fund manager, said the framework offers retirees more structured market-linked income options.
He noted that SPR may appeal to retirees seeking simplicity and sustainability in retirement income planning.
“For many retirees seeking simplicity, regular income and better sustainability of their retirement corpus, SPR may be the preferred option, while the final choice should depend on individual cash-flow requirements and risk appetite,” he added.
SUR: Systematic Unit Redemption
SUR works differently. Instead of fixing the payout amount, it fixes the number of units redeemed periodically. As a result, the actual payout varies depending on the Net Asset Value (NAV) at the time of redemption.
This means retirees can potentially benefit from market upside, though payouts may fluctuate during periods of volatility.
Rajesh Khandagale, Senior Vice President – NPS, KFin Technologies, a financial technology SaaS platform, said SUR may be more suitable for retirees comfortable with market-linked income variability.
“SUR Equal Units may be considered by retirees with higher risk appetite and other income sources, as the payout amount can fluctuate based on NAV,” he said.
SLW: Systematic Lump Sum Withdrawal
SLW allows retirees to stagger withdrawals from the eligible lump-sum portion of the NPS corpus instead of withdrawing it immediately after retirement.
Unlike SPR and SUR, SLW offers greater flexibility because subscribers can decide the withdrawal amount or unit structure. Under the current framework, the facility is available up to age 75, while SPR and SUR can continue up to age 85.
Khandagale said SLW may suit retirees who prefer greater flexibility in planning withdrawals for specific financial needs.
Which option may suit different retirees?
Financial planners say there is no one-size-fits-all solution because retirement needs differ significantly across households.
According to Khandagale, SPR may emerge as the most balanced option for many retirees because it combines regular periodic income, a structured withdrawal formula, market-linked growth potential and better control over corpus longevity up to age 85.
Vikas Seth, CEO, Aditya Birla Sun Life Pension Fund Management, a registered Pension Fund Manager under the Indian National Pension System (NPS), said retirees today have more flexibility than earlier generations.
“Whether it is SPR, SUR or SLW, each approach offers distinct benefits, from creating a steady income stream to enabling continued participation in market growth,” Seth added.
According to Seth, the withdrawal strategy should be aligned with retirement objectives, investment horizon and liquidity requirements.
The importance of managing market risk
One important distinction experts emphasise is that payouts under SPR and SUR are market-linked and not guaranteed like traditional pension income.
To manage volatility, the RIS Steady variant gradually reduces equity exposure with age. Equity allocation starts at 35% at age 60 and gradually declines to 10% by age 75, while exposure to government securities increases over time.
Experts say this glide-path structure attempts to strike a balance between inflation protection in the early retirement years and capital preservation later in life.
Still, planners caution that retirees should avoid relying entirely on market-linked withdrawals for essential living expenses.
Wise Finserv’s Yadav said a blended retirement strategy may often be more practical.
“For many retirees, the ideal approach may not be one single product. It may be a combination of annuity for basic fixed income, RIS for structured market-linked payouts and separate liquid assets for emergency needs,” he said.
Tax and regulatory clarity remains important
While the 60% lump-sum withdrawal component under NPS remains tax-free, experts note that greater clarity may still be required regarding taxation of future market-linked gains if the deferred corpus remains invested under SPR, SUR or SLW for several years after retirement.
This could become an important consideration for retirees evaluating long-term withdrawal strategies.
