NPS Sanchay's default setting could cost you Rs 29 lakh

For a 25-year-old contributing Rs 2,000 a month, the setting will shrink your retirement corpus and cut your monthly pension by Rs 6,300 for life

nps-sanchay-s-default-setting-could-cost-you-rs-29-lakh Aditya Roy/AI-Generated Image

Summary: NPS Sanchay was designed to be simple. The default it puts you on delivers that promise. What it doesn't tell you is that one tap away sits an alternative. And on the same Rs 2,000 monthly contribution, the gap at retirement is Rs 29 lakh and Rs 6,300 less every month, for life.

NPS Sanchay is designed to be simple, and it is. But simple and optimal are not the same thing.

The default investment plan it puts you on delivers far less than the alternative sitting one tap away. On a Rs 2,000 monthly contribution, that gap is Rs 29 lakh at retirement and Rs 6,300 less every month in pension, for life.

NPS Sanchay: What the default actually invests in

NPS Sanchay is a simplified version of the National Pension System, launched on May 6, 2026 for citizens aged 18 to 85. It was designed for India's informal workforce, like painters, autorickshaw drivers, small-shop owners, people who would otherwise have no pension at all. The simplification is genuine. Enrolment requires no investment decisions.

By default, the money is invested in line with the Government Sector investment pattern, the same allocation that applies to central government employees' compulsory NPS contributions. In the Government Sector pattern, contributions are not represented by a single pension fund manager alone; they have historically been managed across public-sector pension fund managers such as SBI Pension Fund, LIC Pension Fund and UTI Retirement Solutions. For illustration, we use SBI Pension Fund’s CG Scheme as a representative proxy for this investment pattern.

Here is what that pattern looks like in practice through one large representative scheme. SBI Pension Fund’s CG Scheme held the following as of April 30, 2026:

Asset class	% of portfolio
Government securities	50.20%
Corporate bonds and debt instruments	23.30%
Equity and related investments	23.00%
Short-term debt and cash	3.50%
Source: SBI Pension Fund, Portfolio Statement as of April 30, 2026.

Three quarters of every rupee sits in fixed income. Equity gets just under a quarter. This produces steady, low-volatility returns but misses the long-run growth that equity delivers over a 35-year horizon.

A subscriber can change this after enrolling, through the NPS app or any Point of Presence. The default is only for those who never switch.

What 17 years of real NPS data shows

Three alternatives were compared against the default.

Active Choice with 75 per cent equity is the most equity-heavy allocation an NPS subscriber can legally hold. A 2022 PFRDA circular allows subscribers to maintain that 75 per cent allocation all the way to retirement, with no mandatory reduction as they age.

Auto Choice LC75 is a hands-off option that holds 75 per cent in equity until age 35, then gradually reduces equity exposure each year, reaching 15 per cent by age 55. Think of it as a SIP that automatically becomes more conservative as retirement approaches.

Rs 100 invested in May 2009 in each option, left untouched:

Option	Value today	Multiplier	Annual return (May 2009 – Apr 2026)
NPS Sanchay default	Rs 443	4.4x	9.20%
Auto Choice LC75	Rs 522	5.2x	10.30%
Active Choice, 75% equity	Rs 548	5.5x	10.60%
Source: SBI Pension Fund month-end NAVs. Active Choice and LC75 are synthetic portfolios constructed by blending Scheme E, C and G NAVs at stated weights, with monthly rebalancing.

The annual return gap looks modest, about 1.4 percentage points between the default and Active Choice. Over 17 years, that gap has already cost a Rs 100 investor Rs 105. Over 35 years, it compounds harder.

What a real contributor has earned

A subscriber who put in Rs 2,000 a month from May 2009 to April 2026, a total of Rs 4.08 lakh, would today have:

Option	Corpus in April 2026
Total invested	Rs 4.08 lakh
NPS Sanchay default	Rs 8.89 lakh
Auto Choice LC75	Rs 10.85 lakh
Active Choice, 75% equity	Rs 11.30 lakh

The default has produced Rs 2.4 lakh less than the equity-led alternative on actual pension fund manager history. No projection. No assumed rate. This is what already happened.

The 35-year projection

For a 25-year-old enrolling in NPS Sanchay today, the retirement horizon is 35 years. Applying the trailing 15-year CAGR for each option to a monthly contribution of Rs 2,000 produces the corpus at age 60.

PFRDA's Exits and Withdrawals Amendment Regulations, 2025 (notified in December 2025) reduced the mandatory annuity portion for non-government NPS subscribers from 40 per cent to 20 per cent. A subscriber can now take up to 80 per cent of the corpus as a lumpsum at retirement. However, income-tax exemption under Section 10(12A) of the Income Tax Act remains capped at 60 per cent of the corpus. Anything between 60 and 80 per cent taken as a lumpsum is taxable as regular income.

The tax-efficient choice for most subscribers is therefore to take 60 per cent of the corpus as a tax-free lumpsum and use the remaining 40 per cent to buy an annuity. Applying an annuity yield of around 6.5 per cent to that 40 per cent slice produces the monthly pension:

Option	Corpus at 60	Tax-free lump sum (60%)	Monthly pension
NPS Sanchay default	Rs 52.3 lakh	Rs 31.4 lakh	Rs 11,327
Auto Choice LC75	Rs 75 lakh	Rs 45 lakh	Rs 16,251
Active Choice, 75% equity	Rs 81.4 lakh	Rs 48.8 lakh	Rs 17,639
Monthly pension assumes 40 per cent of corpus annuitised at 6.5 per cent annual yield. Past returns are not a forecast and actual annuity rates at retirement will differ.

That is the cost of the default: Rs 17 lakh less in tax-free lumpsum and Rs 6,300 less every month in pension, for life, on the same Rs 2,000 monthly contribution.

Subscribers can now take up to 80 per cent as a lumpsum under new PFRDA rules. That reduces the pension further across all options but leaves the gap between the default and equity-led choices unchanged.

What to do

NPS Sanchay was designed for the worker who would otherwise enrol in nothing. A subscriber earning 9.2 per cent on contributions in the default is far better off than one who never joined. PFRDA's decision to remove the choice barrier at enrolment is sound.

The argument here is not against Sanchay. It is against staying on the default after you are in.

After enrolling, log into the NPS app or visit a Point of Presence. Switch to Auto Choice LC75 if you are not comfortable picking your own asset mix. Switch to Active Choice with 75 per cent equity if you are willing to accept short-term market swings for better long-term growth. You can hold that 75 per cent equity allocation all the way to retirement.
If you are enrolling someone else, a parent, a spouse, a household worker, make the same switch at enrolment, not later.

Also read: NPS investor? Don’t make this mistake

This article was originally published on May 12, 2026.

Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.

For grievances: [email protected]