NPS Unleashed: 100% Equity Option Coming for Your Retirement Fund! Big Changes Ahead!

Personal Finance

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Updated on 13 Nov 2025, 09:34 am

The National Pension System (NPS) is set to undergo significant changes, offering greater flexibility to non-government subscribers. From October 1, 2025, these individuals will be able to invest up to 100 percent of their funds in equities through a new 'Multiple Scheme Framework', managed under their existing Permanent Retirement Account Number (PRAN). This marks a substantial departure from previous equity caps and provides a higher-growth avenue for savers with a long investment horizon, though it also entails higher risk.

Younger investors with decades until retirement might find this higher equity allocation beneficial for potential long-term capital appreciation. Conversely, those nearing retirement may prefer a more balanced approach to mitigate short-term market volatility impacting their withdrawal amounts. It is crucial to remember that NPS remains a market-linked investment regulated by the Pension Fund Regulatory and Development Authority (PFRDA), not a guaranteed return scheme.

Alongside investment flexibility, the PFRDA is actively considering enhancements to withdrawal mechanisms. Proposed ideas include phased, inflation-aware withdrawals before mandatory annuity purchases, or the option to split the accumulated fund into a safe base and a growth component. These proposals signal a direction towards more practical retirement income planning but are subject to final regulatory approval.

Discussions around tax treatment are also aimed at ensuring NPS remains competitive with other pension schemes. The goal is to reduce tax arbitrage opportunities for lump-sum withdrawals and premature exits, thereby simplifying choices for subscribers.

Impact: This reform is expected to increase the appeal of NPS for long-term investors seeking higher returns, potentially leading to increased flows into equity markets. It empowers individuals to tailor their retirement investments more closely to their risk appetite and time horizon. Rating: 7/10.

Difficult terms: National Pension System (NPS): A voluntary, market-linked pension-cum-investment scheme regulated by PFRDA. PRAN (Permanent Retirement Account Number): A unique identification number issued to each NPS subscriber. Equity: Represents ownership in a company, typically in the form of stocks or shares. Annuity: A financial product that pays out a fixed stream of income over a period, commonly used for retirement income. Corpus: The total accumulated sum of money saved or invested. PFRDA (Pension Fund Regulatory and Development Authority): The statutory body responsible for regulating and developing the pension sector in India.