NPS Sanchay does the first step. The second is yours

The default is the right place to start. After three years, one switch delivers 30 per cent more pension for life.

nps-sanchay-does-the-first-step-the-second-is-yours Aditya Roy/AI-Generated Image

Summary: NPS Sanchay removes the one barrier that kept most informal workers out of the pension system. The default it puts them on is the right place to start. It is the wrong place to stay and most people will never move. Here's the decision that changes that.

NPS Sanchay is the most significant act of pension democratisation in India in years. For roughly 90 per cent of Indian workers, painters, autorickshaw drivers, small-shop owners, food delivery riders and daily-wage hands, formal pension coverage has been theoretical until now. The friction of choosing a fund manager, an asset class and an investment style kept most informal workers out.

Sanchay removes that friction. A subscriber walks into a Point of Presence, completes KYC, makes a Rs 500 contribution, and is in the pension system. No asset allocation decision. No fund manager comparison. For someone who would otherwise hold no pension at all, the Sanchay default is a clear gain. Not a compromise. A gain.

Why the default is the right place to begin

The Sanchay default invests in the Government Sector pattern: roughly three-quarters in fixed income, one quarter in equity, with caps set by PFRDA.

For a first-time pension subscriber, this conservative tilt is the right starting place. Three reasons.

The first year is about the habit, not the return. A subscriber who learns to contribute Rs 2,000 every month, or Rs 500, has solved the hardest problem in personal finance. A conservative default that does not lose money in year one reinforces the habit. A volatile equity default that drops 15 per cent in the first correction can break it.

Stability builds trust. Informal-sector workers have been burned by chit funds and unregulated deposit schemes. Sanchay's default delivers steady, visible, regulated growth. That visibility is what brings the subscriber back in years two and three.

The early cost of conservatism is small. Over three years, the gap between the default and an equity-led allocation is a few thousand rupees on a Rs 2,000 contribution. Over 35 years, the gap is enormous. The first three years are the cheap years to be conservative.

PFRDA has made the right call on the default. The mistake is staying in it.

The three-year rule

After three years of disciplined contribution, take charge of the second decision. By year four, the subscriber has proved three things:

The contribution is sustainable. Three years of Rs 2,000 a month amounts to Rs 72,000 in accumulated savings. The household has adjusted.
The corpus is real. A statement, a NAV, a number that grows every month.
The system works. The money is safe. The PoP responds. The app shows the balance.

That confidence is the foundation for the second decision: changing the investment option from the default to something built for the next 30-plus years.

What changes when you take charge

We compared three paths on 17 years of real NPS scheme NAVs, from May 2009 to April 2026:

The Sanchay default: SBI Pension Fund's Central Government Scheme.
Auto Choice LC75: dynamic glidepath, 75 per cent equity until age 35, tapering with age, rebalanced monthly.
Active Choice, 75 per cent equity, 10 per cent corporate bonds and 15 per cent G-sec: rebalanced monthly. PFRDA's 2022 circular allows this 75 per cent weight to be held to age 60 without mandatory tapering.

Rs 100 invested in May 2009:

Option	Value, April 2026	Annual return
NPS Sanchay default	Rs 443	9.20%
Auto Choice LC75	Rs 522	10.30%
Active Choice, 75% equity	Rs 548	10.60%
Source: SBI Pension Fund month-end NAVs. LC75 and Active Choice are synthetic portfolios constructed by blending the NAVs of Schemes E, C and G at the stated weights.

A Rs 2,000 monthly contribution from May 2009 to April 2026 (Rs 4.08 lakh invested):

Option	Corpus, 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

Project the trailing 15-year CAGR forward, 9.0 per cent for the default, 10.2 for LC75, 10.5 for Active 75, on a 25-year-old contributing Rs 2,000 a month for 35 years. Take 60 per cent as a tax-free lump sum at age 60. Annuitise the remaining 40 per cent at an approximate 6.5 per cent

Option	Corpus at 60	Tax-free lump sum	Monthly pension	Today's rupee pension
NPS Sanchay default	Rs 52.3 lakh	Rs 31.4 lakh	Rs 11,327	Rs 2,054
Auto Choice LC75	Rs 75.0 lakh	Rs 45.0 lakh	Rs 16,251	Rs 2,946
Active Choice, 75% equity	Rs 81.4 lakh	Rs 48.8 lakh	Rs 17,639	Rs 3,197
Today's rupee pension restates the 2061 figure in April 2026 purchasing power at 5 per cent annual CPI.

Moving from the default to LC75 unlocks roughly Rs 4,900 extra in monthly pension, about 30 per cent more pension for the same Rs 2,000 contribution. The proportion is more important than the rupee number. Whether measured in 2061 rupees or today’s purchasing power, the equity-led path delivers about a third more pension than the default, every month, for life. The 30 per cent gap is robust to most reasonable variations in returns, annuity rates and inflation. The exact rupee figures are not.

How to take charge

After three years of contributing, log in to the NPS app or visit any Point of Presence. Two routes:

Auto Choice LC75. App > Investment Choice > Auto Choice > Aggressive. The system rebalances equity downward as you age. No further decisions needed.

Active Choice, 75 per cent equity, 10 per cent corporate bonds and 15 per cent G-sec: App > Investment Choice > Active Choice > set equity 75, G-sec 25. PFRDA's 2022 circular allows this weight to be held to age 60.

A subscriber on Rs 500 a month faces the same 30 per cent pension gap on a smaller base. The relative case for switching is identical.

Why most people will not and why you should

Across countries with auto-enrolment defaults, the US 401(k), the UK NEST and Sweden’s premium pension, between 70 and 80 per cent of subscribers stay in whatever default they are placed in, for the life of the account. Defaults stick.

PFRDA has built the on-ramp. PFRDA cannot make the second decision for the subscriber. The three-year mark is a clean, memorable cue: at the end of year three, change the investment option. Calendar it. Tell the family member who helped enrol you. Tell yourself.

The deeper point

Saving is not the same as being well off.

A worker who contributes Rs 2,000 a month for 35 years and stays in the default saves Rs 8.4 lakh of their own money and watches it grow to Rs 52 lakh. In today’s purchasing power, that is roughly Rs 9.5 lakh, a few years of frugal living, not a lifetime of comfort.

The same worker, in an equity-led allocation after the third year, ends with a corpus that buys roughly half again as much in real terms. The difference is the long-run premium that equity delivers over fixed income, which a worker who chooses to participate in it can claim over 30-plus years.

Sanchay handles the first decision: get in, build the habit, accumulate. The second decides whether the worker retires comfortably or merely retires. PFRDA cannot make it for them.

Three years in, walk through it.

Sidebar: The 60 versus 80 per cent question

PFRDA’s Exits and Withdrawals Amendment Regulations, 2025 (notified December 2025) cut the mandatory annuity portion for non-government NPS subscribers from 40 to 20 per cent. A subscriber can now take up to 80 per cent of the corpus as a lump sum at retirement.

Income-tax exemption under Section 10(12A) remains capped at 60 per cent. Anything between 60 and 80 per cent taken as a lump sum is taxable as ordinary income. The tax-efficient choice is to take 60 per cent as a tax-free lump sum and annuitise the remaining 40 per cent, as the tables above reflect. Taking the full 80 per cent yields a smaller monthly pension across all three options; the gap between the default and the alternatives stays the same.

Also read: New NPS: More freedom, less annuity, bigger retirement role

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.

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