NPS Evolves: From One-Size-Fits-All Pension Product to Flexible Retirement Planning Platform

For years, the National Pension System (NPS) has largely been seen as a retirement savings product with two key attractions — tax benefits during the earning years and a steady pension after retirement. But the pension landscape is quietly changing. A series of reforms introduced by the Pension Fund Regulatory and Development Authority (PFRDA), particularly the Multiple Scheme Framework (MSF), is expanding what NPS can offer, making it less of a one-size-fits-all pension product and more of a flexible retirement planning platform. The biggest example of this shift is the introduction of investment options with up to 100% equity allocation under the MSF. Introduced from October 1, 2025, for non-government subscribers under the All Citizen and Corporate models, the framework allows investors with a long investment horizon to choose more aggressive investment strategies than ever before. Earlier, equity exposure in NPS was capped at 75% under the existing common schemes. The timing of these changes is significant. According to the PPFAS Pension presentation, Indians today are likely to spend 20-25 years in retirement, while inflation averaging around 7% continues to reduce the purchasing power of savings. The presentation also notes that only around 12% of India’s workforce currently has any formal pension coverage, even as rising life expectancy means many people need to prepare financially for life beyond 85 years. These realities are forcing retirement planning to evolve, and NPS appears to be evolving with it. According to Abhishek Goenka, Chief Investment Officer at PPFAS Pension, the role of NPS is gradually expanding beyond its traditional identity as a retirement savings and tax-saving product. Recent reforms, including the introduction of the Multiple Scheme Framework (MSF), higher equity exposure and greater flexibility in exit and withdrawal options, are widening its role during both the accumulation and post-retirement phases. “The focus is no longer just on helping subscribers build a retirement corpus, but also on enabling long-term wealth creation and providing sustainable income throughout retirement,” Goenka said, adding that these reforms reflect a more holistic approach to retirement planning. While the headline-grabbing feature is the option of investing in schemes with up to 100% equity, the more fundamental change lies in how NPS itself is now structured. Before the introduction of MSF, subscribers largely operated within a standard investment framework. They could choose between Active Choice and Auto Choice and decide their allocation across equity, corporate bonds and government securities, but the architecture remained broadly uniform. MSF changes that by introducing the concept of “One PAN, One PRAN, Multiple Schemes.” Instead of relying on a single investment strategy, subscribers can now hold multiple schemes under one NPS account, each managed by different pension fund managers and following different investment strategies, risk profiles and asset allocations. Goenka believes this is the biggest structural reform NPS has witnessed in recent years. “The biggest structural change has been the shift from a ‘one-size-fits-all’ pension product to a more flexible and subscriber-centric retirement solution,” he said. He points out that until the introduction of MSF in October 2025, subscribers could operate only a single investment choice, with every pension fund manager offering the same standardised set of schemes. “MSF broke that ‘single scheme’ design, allowing subscribers to hold multiple schemes with different risk levels, including options with up to 100% equity exposure, within a single account,” Goenka said. Apart from allowing higher equity allocation, the framework also lets subscribers diversify across multiple pension fund managers while combining conservative and aggressive strategies within the same retirement account. Total charges under MSF are capped at 0.30% of assets under management, although the schemes come with a minimum 15-year vesting period, underlining their long-term retirement focus. For younger investors with several decades left before retirement, the reforms offer something NPS had never offered before—a greater degree of personalisation. Rather than following a standard investment path, subscribers can now build a retirement portfolio that better reflects their own risk appetite and long-term financial goals. The introduction of schemes allowing up to 100% equity allocation has understandably grabbed attention, but experts say it should not be viewed as a recommendation for every NPS subscriber to invest entirely in equities. Instead, it represents a significant expansion in investment choice, particularly for younger investors who have a long runway before retirement and can potentially ride out market volatility over time. In fact, the presentation makes it clear that the traditional Common Schemes and the new MSF schemes coexist. Subscribers who prefer a simpler investment approach can continue with the existing structure, while those seeking greater flexibility can opt for MSF. The key difference is that MSF allows subscribers to mix multiple investment strategies and fund managers within the same PRAN, instead of being restricted to a single scheme. This flexibility marks a significant departure from the way NPS was originally designed. Rather than expecting every investor to follow a similar path, the system now acknowledges that retirement planning differs from one individual to another depending on age, income, financial goals and risk appetite. Goenka believes this has fundamentally changed the character of the pension system. “This changed NPS’s basic architecture from a standardised savings scheme into something that behaves more like a customisable investment platform.” That shift is visible not only in the investment choices available during the accumulation phase but also in the reforms introduced for the years after retirement. The evolution of NPS is not limited to giving investors higher equity exposure. Recent changes suggest that PFRDA is increasingly looking at retirement as a phase that needs active financial management rather than a one-time event that begins at the age of 60. Over the past few years, subscribers have been given greater flexibility in how they remain invested and withdraw their retirement savings. For non-government subscribers, the lump-sum withdrawal limit at retirement has been increased to up to 80% of the corpus, subject to applicable conditions, while the remaining amount is used to purchase an annuity. The regulator has also introduced systematic withdrawal options that allow subscribers to receive payouts over time instead of withdrawing the entire eligible amount at once. Another important reform is the proposed Retirement Income Scheme (RIS), which aims to keep a subscriber’s retirement corpus invested even during the payout phase. Under the proposed framework, the remaining corpus can continue to participate in market-linked returns while generating periodic income until the age of 85. Goenka says these changes reflect a broader shift in the philosophy behind NPS. “PFRDA now treating retirement as a 20-30 year phase that needs active management, not a one-time event.” According to him, the focus is no longer confined to helping subscribers accumulate wealth until retirement. “NPS is shifting from being just an accumulation vehicle to becoming a product that also helps manage income, risk, and longevity through retirement itself.” That broader approach is perhaps the biggest takeaway from the recent reforms. While the option of investing in schemes with up to 100% equity has become the headline change, it is only one element of a wider effort to make NPS more adaptable to the changing needs of retirement planning. For investors, the message is not that everyone should move to the highest-equity option. Instead, the reforms provide greater flexibility to align retirement investments with individual goals and risk appetite. Younger subscribers with longer investment horizons may choose to allocate more towards equity, while others can continue with balanced or conservative strategies. Ultimately, the introduction of the Multiple Scheme Framework signals that NPS is gradually moving away from being a standard pension product towards becoming a comprehensive retirement planning platform. The emphasis is no longer only on accumulating a corpus by the time one retires, but also on providing subscribers with the flexibility to build wealth during their working years and manage income through what could be two or even three decades of retirement. This article is based on a presentation shared by PPFAS Pension and insights from an exclusive interaction with Abhishek Goenka, Chief Investment Officer, PPFAS Pension. The information is intended for educational purposes and should not be construed as investment advice. 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