UPSC Prelims Practice Questions — What new NPS withdrawal rules mean for retirement

Q1. Under the PFRDA Act, 2013, the 'Pension Advisory Committee' is best described as:

  • A. A statutory committee constituted by the Authority to advise on regulations, representing the interests of subscribers, employees' associations, intermediaries and industry
  • B. The apex decision-making board that exercises general superintendence and direction over all administrative matters of the Authority
  • C. A committee of Parliament that must ratify every pension regulation before it can be notified
  • D. An inter-ministerial committee empowered to appoint and remove pension fund managers

Q2. Consider the following statements comparing the NPS exit norms before and after the PFRDA (Exits and Withdrawals under NPS) (Amendment) Regulations, 2025: 1. Before the amendment, a non-government subscriber could take a maximum of 60% as lump sum and had to annuitise at least 40%. 2. After the amendment, the mandatory annuity for a non-government subscriber is reduced to 20%, raising the lump-sum ceiling to 80%. 3. The amendment also reduces the government-sector mandatory annuity from 40% to 20%. Which of the statements given above is/are correct?

  1. Before the amendment, a non-government subscriber could take a maximum of 60% as lump sum and had to annuitise at least 40%.
  2. After the amendment, the mandatory annuity for a non-government subscriber is reduced to 20%, raising the lump-sum ceiling to 80%.
  3. The amendment also reduces the government-sector mandatory annuity from 40% to 20%.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q3. The reduction of the mandatory annuitisation requirement to 20% for non-government NPS subscribers was effected through which one of the following instruments?

  • A. The PFRDA (Exits and Withdrawals under NPS) (Amendment) Regulations, 2025 — subordinate legislation under the PFRDA Act, 2013
  • B. A direct amendment to the PFRDA Act, 2013 passed by Parliament
  • C. A Finance Act amendment to the Income-tax Act, 1961
  • D. An executive notification issued by the Department of Financial Services under the NPS Trust deed

Q4. With reference to the corpus-band exit rules under the 2025 NPS withdrawal framework, consider the following: 1. A subscriber whose total corpus is up to ₹8 lakh may withdraw the entire amount as lump sum without buying any annuity. 2. For a corpus between ₹8 lakh and ₹12 lakh, up to ₹6 lakh may be taken as lump sum with the balance through SUR or annuity. 3. For a corpus above ₹12 lakh, a non-government subscriber must annuitise at least 20%. 4. The full-withdrawal facility for a corpus up to ₹8 lakh is available only to government-sector subscribers. Which of the above is/are correctly identified?

  1. A subscriber whose total corpus is up to ₹8 lakh may withdraw the entire amount as lump sum without buying any annuity.
  2. For a corpus between ₹8 lakh and ₹12 lakh, up to ₹6 lakh may be taken as lump sum with the balance through SUR or annuity.
  3. For a corpus above ₹12 lakh, a non-government subscriber must annuitise at least 20%.
  4. The full-withdrawal facility for a corpus up to ₹8 lakh is available only to government-sector subscribers.
  • A. 1, 2 and 3
  • B. 1 and 4 only
  • C. 2, 3 and 4
  • D. 1 and 3 only

Q5. Consider the following pairings of NPS corpus band with the applicable exit rule under the 2025 framework: 1. Corpus up to ₹8 lakh — full lump sum permitted, no compulsory annuity. 2. Corpus ₹8–12 lakh — lump sum capped at ₹6 lakh, with the remainder taken in a staggered manner. 3. Corpus above ₹12 lakh — the entire corpus must be annuitised and no lump sum is permitted. Which of the statements given above is/are correct?

  1. Corpus up to ₹8 lakh — full lump sum permitted, no compulsory annuity.
  2. Corpus ₹8–12 lakh — lump sum capped at ₹6 lakh, with the remainder taken in a staggered manner.
  3. Corpus above ₹12 lakh — the entire corpus must be annuitised and no lump sum is permitted.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q6. Under the 2025 NPS exit framework, 'Systematic Unit Redemption (SUR)' is best described as:

  • A. A staggered drawdown in which the retained balance is redeemed in instalments over a minimum of six years, as an alternative to an immediate lump sum or annuity
  • B. The compulsory purchase of an annuity from an empanelled insurer using 20% of the accumulated corpus
  • C. A one-time redemption of the entire holding of NPS units on the date of exit
  • D. The reinvestment of the mandatory annuity portion into an equity-linked scheme

Q7. With reference to the Systematic Unit Redemption (SUR) option in NPS, consider the following: 1. It allows the retained balance to be drawn down over a minimum period of six years. 2. It is available for the portion of the corpus not taken as an immediate lump sum. 3. It may be combined with the purchase of an annuity in a mix. 4. It guarantees a fixed assured monthly pension backed by the Central Government. Which of the above is/are NOT correct?

  1. It allows the retained balance to be drawn down over a minimum period of six years.
  2. It is available for the portion of the corpus not taken as an immediate lump sum.
  3. It may be combined with the purchase of an annuity in a mix.
  4. It guarantees a fixed assured monthly pension backed by the Central Government.
  • A. 1 and 2
  • B. 3 only
  • C. 4 only
  • D. 2 and 4

Q8. At the level of the Union Government, the National Pension System falls under the administrative purview of which one of the following?

  • A. Department of Financial Services, Ministry of Finance
  • B. Department of Pension and Pensioners' Welfare, Ministry of Personnel
  • C. Department of Economic Affairs, Ministry of Finance
  • D. Ministry of Labour and Employment

Q9. The Pension Fund Regulatory and Development Authority became a full-fledged statutory regulator for India's pension sector upon the enactment of which one of the following laws?

  • A. The Pension Fund Regulatory and Development Authority Act, 2013
  • B. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
  • C. The Insurance Regulatory and Development Authority Act, 1999
  • D. The Government Savings Promotion Act, 1873

Q10. Which one of the following provisions is the primary determinant of the maximum tax-exempt share of the NPS lump sum received on exit?

  • A. Section 10(12A) of the Income-tax Act, which exempts up to 60% of the amount payable on closure or opting out
  • B. Section 80CCD(1B), which allows an additional deduction of ₹50,000 on contributions
  • C. Section 80CCD(2), which allows a deduction for the employer's contribution
  • D. Section 10(10D), which exempts sums received under a life insurance policy

Q11. In the architecture of India's pension and provident schemes, the Atal Pension Yojana (APY) is best described as:

  • A. A PFRDA-administered, Government-guaranteed minimum-pension scheme (₹1,000–₹5,000 per month) for citizens aged 18–40, focused on the unorganised sector
  • B. A defined-benefit provident fund for organised-sector employees administered by the EPFO
  • C. A market-linked, defined-contribution scheme with no guaranteed pension, regulated by SEBI
  • D. A voluntary top-up annuity available only to central government employees under NPS Tier II