India boasts a burgeoning middle class and a substantial private sector workforce. Private sector workers lack retirement provisions beyond the provident fund, and rely largely on personal savings and investments. With this in mind, the government launched the National Pension System (NPS) in 2004.
Under NPS, subscribers select a pension fund and invest in a diversified basket of equity funds, corporate bonds, government securities, and more until age 60, building a substantial retirement corpus while enjoying tax savings.
In early October 2025, the combined assets under management for NPS and Atal Pension Yojana exceeded Rs16 lakh crore, with subscribers surpassing nine crore. NPS has undergone a significant revamp with various enhancements aimed at accelerating its uptake.
On October 1 2025, the International Day of Older Persons as well as NPS Diwas, the Pension Fund Regulatory and Development Authority (PFRDA) rolled out a Multiple Scheme Framework for non-government sector subscribers. A key shift allows subscribers, uniquely identified by their Permanent Account Number (PAN), to hold and manage multiple schemes within NPS at each Central Record-keeping Agency (CRA).
This marks a major departure from the previous structure, where subscribers were limited to a single investment choice per tier and one CRA. “By enabling multiple schemes under one PAN identity, the framework removes constraints on diversification and provides subscribers with greater scope for aligning their investments with evolving retirement and wealth-building goals,” the PFRDA said.
Another pivotal change permits pension funds to design schemes tailored to specific subscriber profiles. This could include dedicated schemes for corporates with employer co-contributions, self-employed professionals, and even digital economy or platform-based workers. Each scheme must offer moderate and high-risk variants, with pension funds optionally introducing a low-risk option.
Crucially, equity allocation can now reach 100 per cent in the high-risk category. “For subscribers, the Multiple Scheme Framework represents a major expansion of choice and personalisation. It enables them to balance conservative and aggressive strategies within the same Permanent Retirement Account Number (PRAN), plan for different life stages with tailored schemes, and access transparent, low-cost retirement savings products,” said the PFRDA.
This also creates opportunities for pension funds through product innovation and market growth, allowing them to cater to diverse groups and compete on performance and service quality.
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These reforms are transformative, particularly for those with long investment horizons or a higher risk appetite, who can now allocate their entire corpus to equities. It was previously capped at 75 per cent.
The overhaul makes NPS more dynamic and user-friendly, especially for young investors seeking greater control, said Kurian Jose, CEO of Tata Pension Fund Management. It aligns NPS with global pension products offering lifecycle-based or high-equity strategies. “Allowing an option to invest in funds providing 100 per cent equity exposure under the new framework may offer a strong incentive for younger investors who appreciate long-term compounding and can tolerate short-term volatility. For a 25- or 30-year-old, full equity exposure could significantly enhance retirement corpus growth over decades, while regulatory safeguards ensure prudent management and transparency,” said Jose.
Additional changes include a 15-year vesting period for new funds under the framework. Existing scheme subscribers can exit only at 60; but under the new rules, someone starting at 30 could remain invested until 60 or opt to exit after 15 years at age 45.
Proposals under review include permitting lump-sum withdrawals of up to 80 per cent of the accumulated corpus (up from 60 per cent), with the mandatory annuity portion potentially reduced from 40 per cent to 20 per cent. If approved, these would further benefit subscribers, fund managers say.
Currently, 40 per cent must be invested in annuities, limiting liquidity upon withdrawal; higher withdrawals would enhance attractiveness. “NPS plays a vital role in retirement planning and corpus building,” agreed Sachin Jain, managing partner at Scripbox.
However, despite 100 per cent equity now being permissible, caution is advised against diving in headfirst. Equity markets can experience severe volatility, including years of negative or subdued returns. While equities reward over the long term, a balanced mix of equity and debt funds—offering lower risk and steadier returns—is preferable for those averse to high volatility.
“A classic approach would be a blended allocation,” said Jain. He noted that many lag in assessing risk profiles, knowledge, awareness and familiarity. “The biggest enemy for equity investors is volatility,” he said. “A 100 per cent allocation would amplify this significantly. Historically, blended allocations have reduced risk substantially without much compromise on returns.”