NPS schemes to get new names, risk categories; PFRDA gives pension funds 30 days to comply

In a circular dated August 28, 2026, the regulator laid down timelines and operational requirements for pension funds.

Under the new framework, existing Multiple Scheme Framework (MSF) schemes with an equity allocation mandate spanning more than one prescribed MSF category will have to be modified, restructured or reclassified to fit within a single category. 

Pension Funds have been given 30 days from the date of the circular to submit the modified scheme details to the regulator. Existing MSF schemes will also need to be renamed according to the prescribed naming convention within the same timeline.

The PFRDA has also capped the number of schemes that a pension fund can offer and for launching new schemes, Pension Funds will need prior approval from the PFRDA.

Importantly, the PFRDA has discontinued the distinction between “Common Schemes” and “Multiple Scheme Framework (MSF) Schemes”. Going forward, all schemes under the NPS will be classified and governed under the new standardised framework prescribed by the regulator. 

The circular aims to make the NPS investment options easier for subscribers to understand, including Lifecycle variants, wherever applicable. Pension Funds shall continue to maintain scheme accounts and declare NAVs for the underlying schemes in accordance with the existing regulatory and operational framework.

MSF Scheme Categories

Based on its equity allocation mandate, each MSF plan will be categorised into one of the following groups. Each MSF scheme must have an equity exposure mandate that fits into a certain category. For each NPS Tier account, a pension fund may choose to provide up to two schemes under each category.  

Category	Equity Exposure	Category Code
Aggressive Growth – Very High Risk	80%–100%	A
High Growth – High Risk	60%–80%	B
Balanced Growth – Medium Risk	35%–60%	C
Conservative	10% – 35%	D
Debt (Govt./ Corporate Bonds)	0-10%	E

Every MSF Scheme offered by a Pension Fund shall follow a uniform naming convention to ensure easy identification and comparison across Pension Funds.

The name of each MSF Scheme shall follow this format:

Abbreviation of Pension Fund Name + “NPS” + MSF Category Code + Scheme Name

For schemes under Tier 2, “Tier 2” shall be added at the end of the scheme name.

According to the PFRDA, each scheme name must clearly indicate the relevant category code. The relative equity exposure hierarchy, with Category A representing the highest equity exposure and Category E the lowest, must be clearly disclosed by pension funds.

Every MSF scheme must have the authority’s prior approval. When a pension fund wants to start a new scheme, it must provide the information, documents, declarations, and undertakings as may be specified by the PFRDA.

Every MSF plan must adhere to the PFRDA’s NPS investment guidelines. Subject to the rules regulating contributions, withdrawals, and exits under the current regulatory framework, MSF Schemes will be accessible to all eligible subscribers under Tier I and Tier II Accounts.

Every scheme must show a Risk-o-meter in the format that the PFRDA specifies.

For each MSF Scheme, each Pension Fund is required to create and keep an NPS Scheme Essentials Document in the format specified by the PFRDA and as periodically modified by the Authority.

In case an MSF scheme is wound up, subscribers shall be given the option to choose another scheme. Subscribers who do not exercise this option shall be migrated to the Life Cycle 50 – Moderate (10E/55Y) Scheme of the same Pension Fund under Tier I.

Scheme selection framework

To facilitate informed investment decisions, all subscriber-facing interfaces, including CRA platforms and other onboarding channels, shall follow a uniform sequence for presenting and selecting investment schemes.

a. Type of Scheme (MSF/Lifecycle based/ Active choice/ NPS Sanchay/ 4A) 

b. Category of the MSF Scheme/Lifecycle funds/ Asset allocation in case of Active choice 

c. Selection of the Pension Fund

According to PFRDA, before choosing a pension fund, all of the schemes offered by the different pension funds within the chosen category must be shown together with the following information so that the subscriber may compare the different schemes:

a. Scheme Name; 

b. Pension Fund Name; 

c. Date of Launch 

d. Historical Returns; 

e. Benchmark & comparative benchmark returns; 

f. Applicable Charges; 

g. Riskometer; 

h. Assets under Management (AUM) as on the last day of the previous month; and 

i. Such other information as may be specified by the Authority from time to time.

The pension fund and the related scheme will then be chosen by the subscriber. The available schemes authorised by the PFRDA will be displayed when the subscriber chooses 4A Schemes. Platforms owned and run by PoPs may show the schemes provided by the Pension Fund (s) linked to that PoP for the aim of onboarding subscribers.

Change of scheme and/or pension fund 

A subscriber may have more than one scheme under a single PRAN, which is unique to a CRA. A subscriber may only have one Active Choice or Lifecycle-based Scheme active at a time under the same PRAN. 

Investments in multiple MSF schemes may be held simultaneously by a subscriber.

A subscriber may modify their investment plan, pension fund, or any combination of the two up to two times per account. In order to determine the limit for each fiscal year, a request including any of the aforementioned adjustments at a time will be considered a single request. 

Subject to the aforementioned conditions, the subscriber may choose to switch between the MSF, Lifecycle, Active, and Sanchay Schemes. The vesting term and any other applicable conditions regulating the account will remain unaffected by such a change in scheme, and they will continue to be determined from the account’s original opening date.

If a subscriber has chosen more than one scheme, they will be able to merge one scheme into the target scheme. The applicable terms of the chosen scheme, such as those pertaining to vesting, charges, partial withdrawals, change of scheme, and other relevant features or conditions, will thereafter apply to the investment thus merged. As a result, the subscriber will be subject to the chosen scheme’s eligibility requirements and limitations with regard to the merged investment.

Pension Funds may offer value-added services, either directly or in partnership with other service providers, in accordance with the applicable regulatory framework. These services may include income payout solutions, annuity-related services, succession planning and other retirement planning solutions.

Such services shall be offered only after making appropriate disclosures to subscribers and shall remain the responsibility of the Pension Fund. These services shall be optional and shall not change the investment objective or risk profile of the Scheme.

Each scheme shall be benchmarked against relevant market indices to ensure transparent performance disclosure, as per PFRDA.

What is the importance of operationalising the framework for classification and presentation of Schemes under the NPS?

The framework brings greater standardisation, consistency and transparency to how NPS schemes are classified and presented. By streamlining scheme categories, standardising naming conventions and requiring disclosures such as a Risk-o-Meter, benchmark and Scheme Essentials Document, it makes the NPS investment landscape easier to understand and compare.

“For subscribers, the framework should make it simpler to evaluate and choose NPS schemes. Clear information on the scheme’s objective, target segment, asset allocation, risk level, benchmark, charges and other key features will enable subscribers to make more informed investment decisions and compare schemes more effectively,” said Vishwajeet Goel, Head of Pensionbazaar. 

The circular specifies a maximum of two change-of-scheme/Pension Fund requests per financial year per PRAN. It does not state that the limit resets separately for each MSF scheme held under the same PRAN. Therefore, subscribers should treat the limit as applying at the PRAN level, unless PFRDA/CRAs subsequently provide a different operational clarification.

“Higher equity exposure naturally comes with greater market volatility, so Category A schemes will require Pension Funds to manage risk through portfolio diversification, liquidity management, and disciplined investment strategies,” stated Goel. 

Importantly, the higher equity allocation is an investment choice for subscribers, rather than a promise of higher returns; investors should select their allocation based on their risk appetite and retirement horizon.

Disclaimer: This article is for informational purposes only and should not be construed as investment, financial, tax, or legal advice. Any illustrations, examples, or return projections used in this article are for explanatory purposes only and do not guarantee actual investment outcomes. The views and opinions expressed by experts quoted in this article are their own and should not be considered investment recommendations. Readers should consult a qualified professional before making any financial decisions. 

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