If you’ve invested in the National Pension System (NPS) or are planning to start soon, there’s some big news for you. The Pension Fund Regulatory and Development Authority (PFRDA) has announced a complete makeover of NPS — bringing in more flexibility, shorter lock-ins, and multiple investment options.
Let’s break it down in simple terms so you know exactly what’s changing and how it helps you.
What’s Changing?
Earlier, fund managers could launch only one scheme per asset class — equity, debt, or government securities. Now, under the new framework, they can offer multiple tailored schemes, designed for different types of investors.
That means you’ll have more choices — whether you prefer high-risk, high-return equity exposure or safer debt-oriented portfolios.
Other key changes include:
- 100% equity portfolios are now allowed (earlier it was capped at 75%).
- Subscribers can invest in multiple schemes (instead of just one per fund manager).
- Existing NPS schemes will be known as ‘common schemes’.
New Structure
The PFRDA now allows schemes to be customized based on age, occupation, or segment. For example, there could be a special fund for women nearing retirement or a low-risk option for conservative investors.
This flexibility means NPS can now adapt better to your life stage and financial goals.
Specifications in Detail
- Fund managers can mix equity, debt, and government securities more freely.
- There can be low-risk or high-risk variants under one umbrella.
- Risk profiling will now depend on your income and socio-economic factors.
- Extra benefits may be offered for an additional cost.
Simply put, NPS is becoming more dynamic and personalized.
Early Exit Rules Simplified
Here’s one of the most exciting parts — early exit is now easier.
Under the new Multiple Scheme Framework (MSF), you can withdraw after just 15 years of vesting, compared to the earlier requirement of waiting till age 60.
Example:
If you start investing at 30 and have ₹50 lakh by 45:
- In the old (common) scheme: You could withdraw only 20% lump sum; 80% had to go into annuity.
- Under the new MSF: You can take 40% lump sum and put 60% into annuity.
This is a great option for those who might want early retirement or financial flexibility before 60.
Big Bang Proposals
The PFRDA has also proposed several new benefits that could make NPS even more attractive:
| Particulars | Current | Proposed |
|---|---|---|
| Normal Exit | 60% lump sum, 40% annuity | 80% lump sum, 20% annuity |
| Small Corpus Exit | Up to ₹5 lakh full withdrawal | Up to ₹12 lakh full withdrawal |
| Premature Withdrawal | Up to ₹2.5 lakh | Up to ₹4 lakh |
| Joining Age | Up to 70 years | Up to 75 years |
| Partial Withdrawals | Up to 25% | Based on actual corpus value |
| Withdrawal Frequency | 3 times | 6 times before retirement |
| Loan Against NPS | Not allowed | Allowed |
This means you can now withdraw more, access funds more often, and even take a loan against your NPS if needed — a major shift from the earlier restrictions.
A Handy Tip
Of the 80% you withdraw at normal exit, only 60% is tax-free. The rest (20%) will be taxed based on your income slab. However, under Section 10(12A) of the Income Tax Act, you still enjoy a 60% tax-free withdrawal, which is quite generous for long-term investors.
Why This Makeover Matters
This overhaul makes NPS far more flexible, investor-friendly, and future-ready. Whether you’re a young professional starting your career or nearing retirement, you now have:
- More control over your investments
- Easier exit routes
- Broader choices in fund styles and risk levels
It’s a big step toward making NPS not just a pension plan but a customizable long-term wealth tool.
Final Thoughts
The PFRDA’s latest move aims to make retirement planning simpler and more rewarding. By introducing multiple schemes, flexible exits, and tailored portfolios, NPS is now much more aligned with real-life financial goals.
If you haven’t explored NPS yet, this might be the perfect time to take a fresh look.
