You turn 60 next spring, and the email from your NPS provider has just arrived. Your corpus stands at ₹90 lakh, and the exit window is about to open. Twenty years of contributions are now asking for three decisions at once: how much goes into an annuity, which annuity option to pick, and what to do with the rest. Every number below is illustrative. The decisions aren’t.
How Much Of The Corpus Has To Buy An Annuity?
Begin with the rule, because it has changed over time. At exit, a portion of the NPS corpus typically has to buy an annuity, and the remainder can usually be taken as a lump sum. Under the rules revised in December 2025, non-government subscribers must use at least 20% of the corpus to buy an annuity, and the rest can be taken as a lump sum. The share can differ by type of subscriber, so the first job is a call to the helpline for the exact figure that applies to you on your exit date. A forum post or a relative’s memory won’t count.
While you wait on hold, sketch two cases on ₹90 lakh. Start with the 20% minimum. You’d hand over ₹18 lakh and keep ₹72 lakh. Next, a more cautious 40%: ₹36 lakh handed over, ₹54 lakh kept.
What Income Does Each Split Give?
Take an assumed annuity plan rate of 6%. On ₹18 lakh that pays ₹9,000 a month. The ₹72 lakh lump sum, drawn at 4% a year, adds another ₹24,000. Add the two and you’re living on ₹33,000 a month.
Redo it for the second case. Here ₹36 lakh at 6% pays ₹18,000 a month. The ₹54 lakh, drawn at 4%, brings in ₹18,000. Total: ₹36,000. So the bigger annuity wins, but only by ₹3,000 a month. The two incomes also aren’t the same kind of money. The annuity is fixed for life. The lump sum draw can be adjusted, and it can also run out if returns disappoint. One side of the choice is a sure ₹18,000. The other is access to ₹72 lakh if something goes wrong. Both are reasonable, which is why this is a decision and not a formula.
Annuity in NPS is bought from a provider you pick from the list the system offers. The quote depends on your age, the option you choose and the provider’s rate on the day, so the 6% above is only an assumption.
Which Annuity Option Fits Your Family?
Providers usually offer a few options. Income for life only. Income for life with the purchase price returned to a nominee after you die. A joint version that keeps paying your spouse. Each gives a different monthly amount, and once the policy is issued it generally can’t be changed. The more the provider promises to give back, the smaller the monthly figure.
So the real question is who needs protecting. If your spouse’s own savings are thin, the joint version makes sense. If your children are settled and your spouse has income, life only pays more each month. Whatever you pick, go through the full document twice, and take your time over it.
Where Should The Lump Sum Go?
Suddenly having ₹72 lakh in the bank feels great, and that’s the risky moment. Hold off on spending a rupee until every slice has a purpose. About ₹10 lakh goes into a savings account for medical costs, which only go up as you age. About ₹20 lakh goes into deposits that mature one by one, so a bit of cash turns up each year.
What’s left, about ₹42 lakh, stays invested for growth, and you draw from it on a set schedule, not on impulse. If a relative pitches a business that needs a big check, the same rule holds. Look at it a year later, with the numbers in front of you, and not in the first excited week.
Should You Delay Your Exit Past 60?
Often, within limits. Subscribers can now stay invested up to age 85 and can defer the annuity or lump sum, so ask your provider to confirm in writing how this applies to you. Staying put keeps the money growing. It also keeps the money exposed to the market.
Work through a small test. Say the corpus earns 8% over one more year. That takes ₹90 lakh to roughly ₹97.2 lakh. A 10% fall instead leaves ₹81 lakh. Nobody can tell you which year you’ll get. Deferring helps if you still earn and don’t need the money. It also spares you from selling in a bad year. A fall right before you need the cash does hurt, which is why some people split the exit across two years.
How Do You Compare Quotes?
Not by taking the first one. Ask two or three providers for written quotes on the same amount and the same option. Then set the annuity plans in India you’ve shortlisted side by side. Read the monthly payout, the fine print on the option, and what becomes of the money after your death. Take a gap of only 0.3% in rate. On ₹18 lakh, that’s ₹5,400 a year, or ₹450 a month. Stretch that over twenty years and it’s a real sum.
Who Should Not Take The Maximum Lump Sum?
Someone with no steady income after 60. Someone who has never managed a large sum. Also anyone likely to use money that a spouse depends on to pay off a loan early. A larger annuity keeps these households calmer, even if the monthly figure looks small.
What Should You Sort Out Before Exit Day?
Around six months out, ask the provider for the exact annuity rule and the list of annuity providers, and begin collecting quotes. Write out your monthly spending and test each split against it. Agree on the option with your spouse, and write down where the papers are kept. On exit day you’ll know exactly what you’re signing, and that takes about six months of ordinary evenings.
