The Pension Fund Regulatory and Development Authority (PFRDA) has issued fresh guidelines revising how corporate employers and employees under the National Pension System (NPS) can decide on pension funds and investment choices, according to a circular.
This circular – which provides greater clarity on joint contribution structures and emphasises mutual agreements, employee consultation, and long-term investment planning – has been issued as a partial modification to the circular issued on 12th September, 2025. Now before moving further, let’s understand what the corporate NPS is and how it functions.
The corporate NPS model allows employers to extend NPS benefits to their employees. Both the employer and employee can contribute to the employee’s NPS account, helping build a retirement corpus with market-linked returns.
Under the corporate model, companies can choose between two contribution structures — joint contribution, where both employer and employee contribute, or employer-only contribution, where only the company contributes.
Employees also have the flexibility to make additional voluntary contributions and select among various pension funds and investment schemes based on their risk appetite.
There is also an option of employee-independent option available under the corporate NPS model. Under this, employees can contribute to NPS on their own, with or without employer participation
PFRDA revises provisions for investment choices under the corporate model
In its latest circular dated November 7, 2025 (Circular No: PFRDA/2025/20/PDES/03), the PFRDA has revised provisions for exercising choices of Pension Funds and Investment Choices for corporate subscribers.
The pension fund regulator noted that “there have been certain apprehensions among few corporate sector employers on selection of Pension Fund and Asset Allocation for investment for their employees especially under joint contribution structure”.
To address these concerns, the PFRDA stated that decisions on choosing pension funds and investment schemes must now be made through a formal and mutual agreement between the management and employees.
Mutual agreement and annual review
According to the circular, “The decision of pension fund made initially shall be reviewed by the employer on an annual basis”. Any change in the pension fund should be based on the pre-determined conditions of the mutual agreement and the long-term performance of the fund.
The PFRDA emphasised that pension investments are long-term in nature and should not be influenced by short-term market movements. It added, “decisions that have an impact on wealth-generating products of long-term nature… are not usually driven by impulses connected to short-term savings”.
The circular also underlined that financial education and consultation with employees should be a hallmark of the mutual agreement process.
Employees can make voluntary investments
In addition to employer-employee contribution structures, the circular clarified that employees can make voluntary contributions to schemes offered under the Multiple Scheme Framework (MSF) within NPS.
It added that mutual agreements should allow for sufficient choice of schemes so that the risk appetite of different employees can be accommodated.
Grievance redressal mechanism and operational guidelines
For grievance redressal, the circular stated that “the first level of grievance shall be lodged by an employee with the HR department of the corporate and can only escalate the grievance upon proof of inaction by the HR department.”
Further, corporates can choose to let employees independently select their investment schemes or pension funds “without reference to any mutual agreement.”
Employers must also engage with the Points of Presence (PoPs) for NPS services as per the duties and responsibilities under Regulation 15 of the PFRDA (Points of Presence) Regulations, 2018.
PoPs are directed to communicate the mutual agreement details to the Central Recordkeeping Agencies (CRAs) through proper channels. The circular clearly stated, “CRAs shall not undertake any changes in the system without the instructions issued by the Employer.”
Why this change matters
The new circular aims to bring greater transparency and flexibility to corporate NPS management. By mandating mutual agreement and annual reviews, PFRDA wants to ensure that employees’ retirement savings are managed responsibly while giving corporates a structured process to handle pension fund choices.
