NPS new rules from Oct 1: PFRDA launches Multiple Scheme Framework for private sector subscribers

From October 1, 2025, the National Pension System (NPS) will undergo a major reform with the launch of the Multiple Scheme Framework (MSF) for non-government sector subscribers. The move, announced by the Pension Fund Regulatory and Development Authority (PFRDA) on September 16, aims to give private sector employees, self-employed professionals, entrepreneurs and gig workers more choice, flexibility and personalization in their retirement savings.

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What is the Multiple Scheme Framework?

Until now, an NPS subscriber could operate only one scheme per tier with one CRA (Central Recordkeeping Agency). The new framework changes this.

• Subscribers, identified through PAN, can now hold and manage multiple schemes under the same PRAN across CRAs.

• Existing schemes will continue unchanged but will now be called Common Schemes.

• New schemes introduced under Section 20(2) of the PFRDA Act will fall under MSF and require PFRDA’s prior approval.

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Key Features of MSF

• Multiple schemes per subscriber: Greater scope for diversification and goal-based planning.

• Persona-based design: Pension Funds (PFs) can launch schemes tailored for digital workers, professionals or corporate employees.

• Risk options: Each scheme must offer Moderate and High-risk variants; High-risk schemes can invest up to 100% in equity. Low-risk options are optional.

• Unified reporting: Consolidated account statements through CRAs, linked by PAN, with access via the Account Aggregator system.

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Charges and Incentives

• Charges capped at 0.30% of AUM annually for PFs.

• Additional 0.10% incentive for PFs if at least 80% of subscribers are new NPS enrolments.

• Incentive valid for three years or until a scheme reaches 50 lakh subscribers, whichever comes first.

• CRA, custodian and NPS Trust charges remain separate.

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Exit and Switching Rules

• Minimum vesting period: 15 years (with exit allowed at age 60 or on retirement).

• During vesting: Switching allowed only from MSF schemes to Common Schemes, not between MSF schemes.

• After vesting/at exit: Subscribers can move freely across MSF and Common Schemes.

• Exit and annuitization will continue under existing PFRDA Exit & Withdrawal Regulations.

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Scheme Naming and Transparency

• All schemes must carry “NPS” in their name along with the scheme objective (e.g., NPS Growth, NPS Pension).

• PFs must publish a standardized “NPS Scheme Essentials” document covering scheme objectives, asset allocation, risks, fees, vesting, exit rules and fund manager details.

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Oversight and Compliance

• PFRDA approval mandatory for every new MSF scheme.

• Risk-o-meter required for all schemes, with reclassification alignment within six months.

• PFs must maintain audit trails and guard against mis-selling.

• Performance will be benchmarked against relevant indices.

• PFRDA and NPS Trust will review schemes every 12 months in addition to existing monitoring.

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Subscriber Communication

• PFs will be provided demographic data of their investors for targeted communication.

• Both PF and CRA communication channels will operate in parallel to keep subscribers informed.

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Winding Up of Schemes

• If a scheme is closed, subscribers can choose to move to any Common or MSF scheme.

• If no choice is made, funds will automatically shift to Tier I Auto Choice LC 50 of the same PF.

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Tax Benefits

• Tax treatment under the Income Tax Act, 1961 remains unchanged for contributions and withdrawals.

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Who Will Benefit?

The framework is designed for:

• Private sector employees with or without employer contributions

• Self-employed professionals and entrepreneurs

• Gig economy workers such as platform-based service providers

• Corporate subscribers seeking co-contribution flexibility

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When it starts

The new framework will come into force from October 1, 2025, coinciding with the International Day of Older Persons and NPS Diwas.

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Bottom line

The Multiple Scheme Framework represents a major expansion of choice and personalization in the NPS. While it offers greater flexibility and product innovation, subscribers must carefully study scheme documents and understand vesting, switching and fee structures before investing.