NPS gets an upgrade with 100% equity option. What changes?

Summary: NPS has undergone substantial changes with an entirely new framework now in place. From complete equity investment options to shorter lock-ins and multiple pension schemes, the new framework could change how you build your retirement savings. Here’s what these changes mean for you.

The National Pension System (NPS) is seeing a major shake-up. From October 1, a new framework comes into effect for non-government subscribers that includes sweeping changes: a separate set of schemes alongside the existing ones, long-awaited flexibility especially around equity exposure, diversification and vesting period. Here’s a clear breakdown of what’s changed, what’s new and what may be coming next.

You can now hold multiple pension schemes

Until now, NPS subscribers could hold just one investment option per tier under one central record-keeping agency (CRA) such as Protean, CAMS and KFintech. That was restrictive since you had to choose a single strategy. Pension funds, too, could offer only one scheme per asset class.

The new Multiple Scheme Framework (MSF) changes this. Now, your PAN will be the unique identifier, and you can hold multiple pension schemes with different permanent retirement account numbers (PRAN) across CRAs.

This means you can now split your savings between aggressive and conservative schemes, tailoring investments for different life stages.

You can now invest in 100 per cent equity under new schemes

The NPS’s old schemes, now referred to as ‘common schemes’, cap equity exposure at 75 per cent under the Active route. The new framework, however, allows pension funds to launch new schemes with up to 100 per cent exposure to equities.

Pension funds are required to launch the new schemes in two risk-based variants—moderate and high. The high-risk option allows full equity exposure. They can also launch low-risk schemes at their discretion. 

The 100 per cent equity option could appeal to younger investors with a long investment horizon who want more growth from equities.

New schemes can be tailored by age and occupation

Pension funds now have the flexibility to tailor schemes by the age and occupation of subscribers. For instance, they can customise the new schemes for self-employed professionals, gig-economy workers or corporate employees.

This allows for more customised retirement solutions suited to specific needs. 

Vesting period gets shorter

The common schemes (existing ones) allow normal exit at the age of 60. That is a long lock-in, even if you start young.

The new schemes have a minimum vesting period of 15 years. This means if you start investing at 30, you can exit at 45, instead of waiting until 60.

This change makes the NPS more appealing for those who want long-term savings but don’t want to be locked in all the way till retirement.

The big proposal on exit rules

Alongside the new framework, the pension regulator (PFRDA) also floated a draft proposal on September 16, 2025, that could significantly improve exit flexibility in the NPS.

• More lump sum, less annuity: The proposal is to increase the lump sum withdrawal limit to 80 per cent of the corpus on normal exit (on retirement or at the age of 60) from the current 60 per cent, reducing the mandatory annuity portion from 40 to 20 per cent. If implemented, investors would be able to withdraw a larger portion of their savings and commit a smaller share to annuities.
• Extension of entry and exit age: Currently, subscribers can open an NPS account only up to age 70 and have to exit by 75. The new proposal seeks to raise the entry age to 85 and allow continuation till then. 

The bottom line

As stakeholders comply with the new framework, the NPS will become a more flexible and adaptable retirement vehicle. Investors will be able to diversify across multiple schemes, take higher equity exposure if their goals and risk appetite allow and select plans tailored to their needs. Further, early exit is possible after a 15-year vesting period, giving subscribers more control over their long-term savings.

Meanwhile, the draft proposals on exit rules, potentially reducing the mandatory annuity and extending the joining age, are under consideration, and if implemented, could further expand flexibility.

Retirement is one goal. What about the rest?

The new NPS rules give you more choice than ever — higher equity, shorter lock-ins, multiple schemes. But choice without clarity can be confusing. Retirement is just one of your goals. What about your child’s education, a house, or building long-term wealth?

That’s where Value Research Fund Advisor helps. It builds goal-based portfolios tailored to your needs, so you know exactly which funds to pick and how to stay on track.

Explore Fund Advisor

Also read: Best NPS fund manager in last 10 years

This article was originally published on October 01, 2025.