Major NPS Overhaul: PFRDA Introduces a “Multiple Scheme Framework”
Your NPS, Your Rules: New Framework Gives You More Control. 100% Equity, More Choice: The NPS is Changing
On September 16, 2025, the Pension Fund Regulatory and Development Authority (PFRDA) issued a landmark circular introducing the Multiple Scheme Framework (MSF) for non-government National Pension System (NPS) subscribers. This new framework aims to expand and enhance the NPS, offering greater flexibility and a wider range of investment options. The key changes are designed to provide subscribers with more control over their retirement savings and to align the NPS with global pension system best practices. The new framework will be effective from October 1, 2025, which is also observed as NPS Diwas and the International Day of Older Persons.
Multiple Investment Schemes Under a Single Account
The MSF represents a significant shift from the previous structure, where a subscriber was limited to a single investment choice per tier. Under the new framework, a non-government NPS subscriber can hold multiple schemes under a single Permanent Retirement Account Number (PRAN). This allows for greater investment diversification and the ability to tailor a portfolio to specific life stages and risk appetites. The subscriber’s Permanent Account Number (PAN) will serve as the unique identifier across different Central Recordkeeping Agencies (CRAs).
New Schemes and 100% Equity Allocation
A major highlight of the circular is the permission for Pension Funds (PFs) to launch new, customized schemes. These schemes can be designed for specific groups of subscribers, such as self-employed professionals, digital economy workers (gig workers), and corporate employees. Each new scheme must have at least two risk variants: Moderate and High-risk. The High-risk option is particularly noteworthy as it allows for an equity allocation of up to 100%, a significant increase from the previous cap of 75% for Tier I accounts. Pension Funds also have the discretion to introduce low-risk variants. This change is expected to attract younger investors with a higher risk appetite, allowing them to maximize long-term growth.
Vesting Period and Exit Flexibility
The MSF introduces a new minimum vesting period of 15 years for subscribers who invest in these new schemes. This provides subscribers with the flexibility to exit the scheme after 15 years, even before the traditional retirement age of 60. Subscribers can still choose to remain invested up to age 75. The ability to exit after 15 years, or at normal exit as defined by PFRDA’s Exit Regulations, offers greater liquidity and flexibility. Switching from a new MSF scheme to an existing common scheme is allowed during the vesting period, but switching between two different MSF schemes is only permitted after completing the 15-year vesting period or at the time of normal exit.
New Cost Structure and Transparency
To support the new framework and encourage innovation, the PFRDA has revised the fee structure for these new schemes. The total annual charges will be capped at 0.30% of the Assets Under Management (AUM). An additional incentive of 0.10% will be provided to Pension Funds that attract more than 80% new subscribers to a specific scheme, applicable for three years or until the scheme reaches 50 lakh subscribers, whichever is earlier. To ensure transparency, each new scheme will be benchmarked against relevant market indices, and Pension Funds will be required to publish a standardized “NPS Scheme Essentials” document detailing its objectives, risks, asset allocation, and fees. This move also mandates the use of a risk-o-meter to help subscribers understand the risk level of their investments.
Share your thoughts in comments below whether this step will increase NPS adoption in India or not?