India’s pension regulator, the Pension Fund Regulatory and Development Authority (PFRDA), has approved rules allowing fund managers to offer tailored National Pension System (NPS) schemes. Subscribers can now choose 100% equity portfolios, giving flexibility to align investments with retirement and wealth-building goals. The order will come into effect on 1 October.
Under the Multiple Scheme Framework (MSF), NPS subscribers can hold and manage several investment schemes using their Permanent Retirement Account Number (PRAN). Earlier, they could select only one scheme per tier with a single central record-keeping agency (CRA) , which restricted their investment diversification options.
Fund managers are now able to create schemes tailored to specific groups, such as self-employed professionals, digital platform workers, and corporate employees. Certain schemes will include employer co-contributions, enabling more personalised retirement planning that aligns with each subscriber’s distinct financial needs.
Each scheme can offer two variants: moderate and high-risk, with high-risk allowing up to 100% equity allocation. Fund managers may also provide low-risk options. Schemes will have a minimum 15-year vesting period, with the option to exit at 60 or retirement.
Sriram Iyer, MD and CEO of HDFC Pension, said that under the current rules, NPS subscribers can withdraw 60% of their corpus at age 60. Under the new MSF, if a subscriber starts at 30, they can withdraw 60% after 15 years, with the rest in annuities or extend until 75.
Under the MSF, subscribers can also withdraw 60% of their corpus tax-free after 15 years or at age 60. Previously, only 20% could be withdrawn before 60, with the remaining amount annuitised, providing significantly greater liquidity and flexibility.
Pension fund managers (PFMs) can now charge up to 30 basis points, plus 10 additional points if schemes attract over 80% of new subscribers. Current fees range between 3 and 9 basis points, giving PFMs greater ability to invest in distribution.
Experts see MSF as a major NPS reform. While it provides fund managers with innovation flexibility and subscribers with personalisation options, they emphasise the need for financial advice and regulatory safeguards to avoid mis-selling and ensure informed decision-making.
