There’s some big news you need to know about if you’re a private sector employee or self-employed professional who’s been diligently saving or planning for retirement through the National Pension System (NPS).
Starting October 1, 2025, the Pension Fund Regulatory and Development Authority (PFRDA) rolled out major reforms aimed at giving more flexibility, higher return potential, and personalised retirement options, all under a new framework called Multiple Scheme Framework (MSF).
Let’s break it all down.
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Buckle up. Here we go!
What is the Multiple Scheme Framework (MSF)?
Remember how NPS used to work? You’d open your account, get a PRAN (Permanent Retirement Account Number), pick a pension fund manager, and choose between different investment options based on equity exposure. Simple, but somewhat limited.
The MSF changes this fundamentally. Now, Pension Fund Managers (PFM) can launch entirely new schemes designed for specific types of people, like freelancers, gig workers, corporate employees, or self-employed professionals.
And here’s the kicker: you can invest in multiple schemes simultaneously.
Previously, you were stuck with one investment choice per Tier (Tier I or Tier II) under one CRA (Central Record-keeping Agency). Now, you can diversify across different schemes, each with its own investment strategy and risk profile.
The Changes in NPS That Are NOW LIVE
1. 100% Equity Exposure in NPS is Now Possible
For years, the biggest complaint from young, aggressive NPS investors was the hard cap on equity exposure. Under the default Auto Choice option, equity exposure was capped at 75% and tapered down as you aged. Even if you opted for the Active Choice, the maximum equity limit was still 75%.
The New Rule:
Under the new MSF, PFMs can now launch new, customised schemes that allow investment of up to 100% in equity.
- PFMs must offer at least two variants: Moderate-risk and High-risk.
- The High-risk variant is the one that can provide up to 100% equity exposure.
- PFMs can also optionally offer a low-risk variant.
Why This Matters: If you are in your 20s or 30s, your retirement is decades away. A higher equity allocation means greater potential for compounding wealth, which is the most powerful tool in finance.
This move aligns NPS with global best practices and makes it a serious contender against mutual funds for long-term equity exposure.
2. You Can Invest in Multiple NPS Schemes Under One Account
Before MSF, your NPS journey was a one-way street with one PFM and one investment strategy per Tier (Tier I or Tier II). If you had a PRAN, you could choose one scheme and one PFM for your Tier I contributions. That’s it.
The New Rule:
The new framework is built on your PAN (Permanent Account Number). Your PAN becomes your super-ID. Under a single PAN, you can now hold and manage multiple schemes offered by the Pension Fund Managers.
For example, you could invest in:
- A “High-Growth” scheme from Pension Fund A that invests 100% in equities.
- A “Balanced Advantage” scheme from Pension Fund B that dynamically manages debt and equity.
- The existing “Common Schemes” (the old options) continue unchanged.
This flexibility allows you to tailor your investments based on life stages, professional profile (e.g., self-employed vs. corporate employee), and individual risk appetite, all within your single retirement portfolio.
3. The New Schemes Come With a Lock-in (Vesting Period)
While the new MSF schemes offer high flexibility and high potential returns, they come with a crucial condition to reinforce their purpose as retirement products: a Vesting Period.
The New Rule:
New schemes introduced under MSF will have a minimum vesting period of 15 years. You can only switch or exit at age 60, retirement, or after completing 15 years, whichever applies first.
Why This Matters: This ensures that investors who access the high-risk, high-return 100% equity option commit for the long term, preventing them from treating it like a short-term product. It forces the discipline needed for compounding to work its magic.
4. Tailor-Made NPS Schemes for Different Personas
Pension Funds are now encouraged to design schemes for specific “personas.” This means products are no longer one-size-fits-all. Expect to see schemes designed for:
- Digital Economy Workers: Think gig workers, platform-based earners (like delivery or ride-sharing partners).
- Self-Employed Professionals: Entrepreneurs, consultants, doctors, CAs, and freelancers.
- Corporate Employees: Schemes that make it easier to manage employer and employee contributions.
Again, each scheme category must offer at least two variants: moderate risk and high risk. Fund managers can also introduce low-risk variants if they choose.
This persona-based approach means the scheme can be designed keeping in mind the income patterns, risk appetite, and retirement goals of specific professional groups.
5. Simplified Switching Rules
The PFRDA has also clarified how you can move your money around in this new multi-scheme environment:
- Switching to Common Schemes: During the initial 15-year vesting period, you are permitted to switch your accumulated corpus from an MSF scheme to the existing Common Schemes (the traditional E, C, G asset classes).
- Switching Between MSF Schemes: You can only switch your corpus between the new MSF schemes (e.g., from a High-risk MSF scheme to a Moderate-risk MSF scheme) after the minimum vesting period of 15 years is complete, or at the time of normal exit.
Why this restriction? PFRDA wants to prevent excessive churning and ensure that investors commit to their chosen strategy for a reasonable period.
6. NPS Fund’s Expense Ratio is Increased (But it’s Still Low)
NPS has always boasted one of the lowest expense ratios globally. The PFRDA has kept this principle intact, but with a slight increase to encourage innovation from Pension Fund Managers.
The total annual Fund Management Charge (FMC) for the new MSF schemes is capped at 0.30% of the Assets Under Management (AUM).
There’s an incentive for Pension Funds: If over 80% of the new scheme’s subscribers are new to NPS, the fund can charge an extra 0.10% as an incentive. This incentive lasts for three years or until the scheme gets 50 lakh subscribers, whichever comes first. This is to encourage them to expand the NPS family.
Note: Custodian, CRA, and NPS Trust charges will be extra, as per existing norms.
7. Better Visibility and Reporting
Under the new framework, you’ll get consolidated reporting through your PAN. You can track:
- Individual scheme performance
- Aggregate holdings across all schemes
- Detailed breakup of contributions and returns
If you have accounts with multiple CRAs, you can access everything through the Account Aggregator System using your PAN. Your designated CRA will also provide you with an annual statement covering all your NPS investments.
8. Clearer Labels and Better Information
To avoid confusion with other financial products, every new scheme must have “NPS” in its name and a clear objective (e.g., “NPS Wealth Builder”).
They must also provide a simple document called “NPS Scheme Essentials” that lays out all the details, such as risks, costs and benchmarks, in plain English.
Why Did PFRDA Introduce MSF?
The PFRDA said it wanted to:
- Offer greater flexibility and personalisation.
- Encourage long-term wealth creation through equity.
- Bring global best practices to India’s pension system.
- Attract more participation from the private and self-employed sectors.
It’s essentially a move to make NPS more competitive with mutual funds while maintaining a strong retirement focus.
When Will These New NPS Changes Take Effect?
All MSF-related changes were rolled out on October 1, 2025.
So, PFMs and CRAs have started to build the systems, and you’ll start seeing new MSF schemes open for investment soon.
What Hasn’t Changed in NPS?
It’s important to understand that the existing NPS schemes, now collectively called “Common Schemes”, continue as before. Nothing changes for investors who are happy with the current structure.
The MSF is purely an addition, not a replacement. You’re not forced to move to the new schemes. They’re just additional options for those who want more flexibility and personalisation.
And that’s not all. PFRDA has also released an exposure draft proposing another set of sweeping changes, like reducing the mandatory annuity, increasing the maximum age limit, and allowing more partial withdrawals. These aren’t yet final, but could reshape NPS for non-government subscribers soon. We will discuss these proposed changes next week.
Note: All these changes are for private sector employees or self-employed professional investors. These do not apply to government employees.
Final Thoughts
The Multiple Scheme Framework represents PFRDA’s attempt to make NPS more flexible, personalised, and competitive.
By allowing 100% equity exposure, persona-based schemes, and multiple investment options, they’re essentially saying: “We trust you to make informed decisions about your retirement.”
However, remember that more choices also mean more responsibility. A 100% equity scheme with a 15-year lock-in isn’t for everyone. It requires discipline, risk appetite, and a long-term perspective.
As with any investment decision, consider your age, risk profile, existing portfolio, and retirement goals before jumping into these new schemes. And if you’re unsure, there’s no shame in sticking with the tried-and-tested Common Schemes that have served NPS subscribers well so far.
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Still Curious?
If you are like us, who likes to analyse a little more or check out content in different formats, well you are in luck. Below you can find some suitable content we found.
Freefincal – NPS Multiple Scheme Framework – What you need to know (Blog)
ET Money – New NPS Rules: Retirement Planning Just Got Easier, Flexible & More Rewarding (YT Video)
Note: We don’t have any affiliation with them. We are sharing links only for educational purposes. The opinions expressed by them belong solely to them and do not reflect the views of Vrid.
