The National Pension System (NPS), which became available for the non-government sector in 2009, has evolved over the last 16 years, and today it is considered one of the most reliable retirement investment options. The government has kept transforming the scheme over the years to cater to the needs of the wider masses by presenting it to them as a market-linked, flexible, and tax-friendly retirement plan.
Especially over the last 10 years, the NPS has undergone massive changes in terms of exposure to market instruments, taxation norms and withdrawal rules. One major change that has recently been brought is the introduction of the Unified Pension Scheme (UPS). The UPS, however, is only for central government employees, except for the Indian armed forces.
Now, the NPS will further undergo some critical changes, with some to be implemented from October 1, 2025. The most important of these are allowing 100% equity investment and the introduction of the Multiple Scheme Framework (MSF).
Furthermore, the Pension Fund Regulatory and Development Authority (PFRDA) has issued draft proposals to simplify withdrawal and exit rules.
Many important features related to NPS are set to change in the coming months. Let’s find out—
Changes to be implemented from October 1, 2025
100% equity investment option for non-government subscribers
Until now, there was a limit on equity investments in the NPS, but from October 1, 2025, non-government sector subscribers will be allowed to invest up to 100% in equity under the Multiple Scheme Framework (MSF). This means that those who are keen to have even greater exposure in the stock market and want higher returns over the long term can tweak their investment strategy by parking their entire funds in equity options.
However, this will also carry risks, as equity markets are highly volatile.
What is Multiple Scheme Framework (MSF)?
Previously, investors could only hold one scheme under a single PRAN (Permanent Retirement Account Number). Under the new rules, a Multiple Scheme Framework is being introduced. This means that you can now run schemes from different Central Record Keeping Agencies (CRAs) simultaneously under a single PRAN. This will provide investors with more choice and flexibility.
Other proposed changes: Exit and withdrawal rules
The PFRDA recently released a draft that proposes simplifying and providing more flexibility in the exit rules.
NPS exit facility after 15 years for non-government subscribers
Previously, the option to exit NPS was generally available only after superannuation (age 60) or after a longer period. According to the proposal, investors will be able to exit after completing 15 years. This change will be a relief for those who may need money in the interim.
Lump sum withdrawal and partial exit
The pension fund regulatory body has also recommended increasing the lump sum withdrawal limit. Partial withdrawals will also be made easier so that investors can withdraw funds for needs such as education, medical treatment, and home construction, as per one of the proposals.
Major changes NPS has seen in the last one year
The retirement scheme has seen a slew of changes over the last one year. As discussed above, one change i.e. UPS is not related to the private sector employees and it has been brought exclusively for the central government employees, except armed forces, who were continuously demanding from the government to restore the Old Pension Scheme (OPS).
The UPS, however, has so far failed to attract employees to switch from the existing NPS scheme and in view of the sluggish response, the government has offered some flexibility in norms. For example, there will be a one-time switch facility. Employees enrolled in UPS have been given a one-time opportunity to return to NPS if they wish.
Summing up…
The NPS has come a long way since it was opened to non-government sectors. Changes such as 100% equity investment and a multiple scheme framework from October 1, 2025, will align it with market dynamics. Proposed relaxations in exit and withdrawal rules will provide greater confidence and relief to investors and make the scheme more popular.